Many people romanticize the idea of paying off their home mortgage early so they can enjoy their home in retirement, but when it comes to the later years of life, a big house can actually be too much to handle. If you’ve started to consider a smaller home and are wondering why it might be a good decision for you and yours, here are a few things you may want to consider.
It’s Much Easier To Maintain
It is often the idea of the palatial estate with a pool that homeowners get excited about, but when it comes to reality, the larger the home, the harder it is going to be to take care of and maintain. If you don’t have a maid or a butler, a smaller home will enable you to spend a lot more of your free time doing things that you love instead of being bound to a house that is full of repairs and maintenance that needs to be completed.
Save On The Big Home Bills
One of the worries associated with getting older is having the ability to maintain your lifestyle in old age, and a smaller home can actually alleviate many of the high costs that go along with having an oversized home. A smaller home will not only minimize your insurance and taxes, it can also positively impact the amount you pay each month for heating and electricity, so you’ll notice the savings right off the bat.
The Freedom Of A Downsized Lifestyle
One of the best things about downsizing to a smaller home is the huge sense of responsibility that can be left in the dust. Instead of being held back by all of the stuff required to fill a big house, a small home means there is less to worry about. This may mean you’ll have the option to go on longer vacations or can even relocate to a hot climate for the summer months, and you’ll only need someone to come by and water the plants every once in a while!
There are plenty of people that decide to downsize later in life since it can actually be a great way to save money and have a lot more freedom. If you’re considering your smaller home options and are curious about what’s available on the market, you may want to contact one of our real estate professionals for more information.
Traditionally, getting a mortgage requires you to have a level of income appropriate to the size of home that you’re buying. But for a lot of low-income and minority borrowers, a simple measure of one person’s income isn’t an accurate measure of whether or not that person can afford a home.
Now, with the Home Ready mortgage from Fannie Mae, multigenerational and extended households can have easy access to mortgage funds. How does the Home Ready mortgage work? Here’s what you need to know.
Flexible Down Payment Requirements Make Home Ownership More Accessible
Traditional mortgages require you to pay 20% of the home price upfront in the form of a down payment, or 5% if you register for Private Mortgage Insurance. And although 5% is a small down payment, it’s still a significant sum of money for a lot of low-income borrowers. But now, with the Home Ready mortgage, qualified borrowers can access financing with as little as 3% down, making it easier to become a homeowner.
Non-Borrower Household Income Is Now Counted As Income
Another big change that the Home Ready mortgage introduces is that lenders may now count all household income when determining affordability criteria (but not qualifying income). There’s no minimum requirement for funds to come directly from the primary borrower, which means that non-borrower members of the household can have their income counted when determining whether a mortgage is affordable. It’s also possible to use non-occupant borrower income – for instance, the income of a borrower’s parent – to be counted as income.
For extended and multigenerational households, this means mortgages are much more affordable as all household income can now be counted as eligible.
Eligibility Requirements: Who Can Qualify For A Home Ready Mortgage?
Home Ready mortgages come with certain eligibility criteria attached that homeowners will need to meet. In order to be eligible, a household must be below a certain percentage level of area median income (AMI) – that is, a household must fall somewhere in the lower half of their area’s income scale.
For properties that are located in “low-income census tracts”, there is no income limit. For properties in high-minority areas and designated disaster areas, borrowers at or below 100% of AMI can access Home Ready financing. And in all other census areas, borrowers can access financing if their annual household income is no greater than 80% of AMI.
With the cost of rent going up across the board and becoming even less affordable in metropolitan centers, it’s never been a better time to seriously consider home ownership. While the price of a home and all the associated costs can certainly seem like a tight squeeze after years of renting, here are some reasons you may want to consider giving up your rental and springing for a home instead.
It’s An Automatic Savings
It’s a sure bet that the money you spend on rent is going down the drain as soon as the month is over, but investing your money into a home each month means that you’re actually putting it into something tangible that you can profit from later on. While there are no certainties that the price of your home will improve, there’s a good chance you’ll stand to make a bit of money in the end that will easily offset the cost of insurance and property taxes involved in buying a home.
The Insecurity Of Apartment Living
With apartments being bought up all the time and torn down to make way for new developments, it’s always a possibility that the day may come when your home won’t be your home anymore. The good thing about using your purchasing power to invest in a home is that it gives you the freedom of feeling like you really have something that belongs to you, and you probably won’t have to worry as much about your loud next door neighbors or a landlord that never completes the required maintenance on your apartment.
You Can Consider A Roommate
An apartment often means a smaller amount of space, but it’s possible that a home purchase may provide you with a little bit of extra room and a place for a renter who can help with the monthly bills. Whether you decide on a friend, relative or someone you don’t know, this can be a great way to make home purchasing a little bit more economical and still provide you with the equity you’ll need to make it a worthwhile, long term investment.
With rent becoming less affordable in so many cities, the idea of purchasing a home is becoming a more tenable reality for many people. If you’re interested in what is out there and are curious about your own possibilities for home ownership, you may want to contact one of our local real estate professionals for more information.
Last week’s scheduled economic news included reports on construction spending and several labor-related reports along with weekly reports on mortgage rates and new jobless claims. The details:
Construction Spending Higher in December
U.S. construction spending rose by 0.10 percent in December for a seasonally adjusted annual total of $1.12 trillion. The Commerce Department reported that construction firms spent 10.5 percent more than in 2014.Residential construction spending totaled $416.8 billion for 2015, which was 12.60 percent higher than in 2015.
Higher construction spending can be a double-edged sword, as it can indicate that builders are stepping up construction or that they are paying higher prices for labor and supplies. Builders have consistently cited labor shortages and slim supplies of buildable land as concerns. Short supplies of available homes impacted housing markets in 2015. Low inventories of homes drive up home prices and impact affordability for first-time buyers; these conditions eventually slow housing markets with fewer qualified buyers and home sales.
Fed Benchmarks Show Mixed Readings
The Federal Reserve consistently cites its goals of achieving maximum employment and an inflation rate of 2.00 percent as benchmarks for its decision to raise or not raise the target federal funds rate. National unemployment reached a new low of 4.90 percent in January against expectations of 5.00 percent and December’s reading of 5.00 percent. Inflation held steady with no increase in January; this offsets the good news concerning unemployment. Lower oil prices are holding inflation well below the Fed’s desired rate of 2.00 percent.
Mortgage Rates Fall, Jobless Claims Rise
Freddie Mac reported lower average rates across the board. The average rate for a 30-year fixed rate mortgage fell by seven basis points to 3.72 percent; the corresponding rate for 15 year mortgages fell six basis points to 3.01 percent and the average rate for a5/1 adjustable rate mortgage dropped five basis points to2.85 percent. Average discount points were 0.60, 0.50 and 0.40 percent respectively.
Weekly jobless claims rose to 285,000 new claims against expectations of 280,000 new claims and the prior week’s reading of 277,000 new jobless claims. While rising jobless claims could suggest a slowing jobs market, the low unemployment rate suggests otherwise.
Non-Farm Payrolls, ADP Payrolls Fall
According to the Bureau of Labor Statistics, non-farm payrolls added 151,000 jobs in January as compared to expectations of 180,000 jobs added and December’s reading of 262,000 jobs added in December. Analysts said that January’s reading is further evidence that a long-running decline in new jobless claims has ended.
ADP payrolls were also lower in January with 205,000 new jobs posted as compared to December’s reading of 267,000 private sector jobs added. Holiday hiring likely impacted higher readings in December, but time will tell if declining job growth is trending.
Next week’s economic reports include data on job openings, consumer sentiment and Fed Chair Janet Yellen’s Congressional testimony.
The real estate market and all the things involved in selling a home can seem complicated, and it can be very hard to know which tips to trust. While there’s plenty of great advice to go around from many knowledgeable sources, here are some of the best tips from home sellers who have made a successful sale.
Research Your Local Agents
When considering an agent that will meet your home-selling needs, it can be tempting to go with someone familiar or recommended through a friend who seems like a safe bet. However, it’s important to do your research and find an agent who has a number of “Sold” homes under their belt. Create a list of agents you’re impressed by and take note of their sales and agent fees, and keep in mind that you may want to lean towards an agent who has expertise in your neighborhood.
Get A Second Opinion On Price
Before you have an agent appraise the value of your home, it’s worthwhile doing some research on your end to determine the approximate value of your property. Once you’ve arrived at a figure, bring in the agents you’ve selected to appraise the value of your property. If one price is significantly higher than the other, it may be a red flag that an agent is trying to win over your business, regardless of whether the sale price is reasonable. In this case, you will want to choose the agent that provides the most appropriate appraisal.
Be House Ready At All Times
Having potential buyers view your home will certainly make the idea of selling it real, so make sure that it is ready for viewing at any time. If a potential buyer cannot view your property or has to work around your schedule constantly to arrange viewings, there’s a pretty good chance that you may lose out on some good home offers. Instead of missing out, provide a set of keys to your real estate agent so they can show people around your home when you’re not around. This should automatically increase the likelihood of an offer on your home.
Heading into the real estate market can be a matter of trepidation if you’re not sure what to do, but by researching your agents and being prepared you’ll increase your chances of success. If you’re almost ready to put your home on the market, you may want to contact one of our local real estate professionals for more information.
The cooler months of winter might seem like the perfect time to hibernate into the house, but it’s actually a great time to consider ramping up your home for improvements. If you’re thinking of selling come the spring, here’s why winter is the perfect time to get started on home renovations.
Flexible Scheduling And Availability
Many people are not interested in renovating their home during the winter months, so it can actually be an ideal time of year to make plans with a contractor to do some work. Since many renovations that occur on the outside of the home are likely to take place during spring or summer, it can be easier to schedule renovations for your home’s interior when it’s colder.
Pre-Planning Your Project
Since contractors can have more free time in the winter months, it’s a good time to contact them to discuss, decide and plan exactly what needs to be done in your home. With the workload of many contractors ramping up in the springtime, there’s a good chance their meeting schedule may be congested and the planning and renovation implementation will take much longer.
Get Ahead of Higher Prices
With the holiday season in swing, there are many sales on common home items from appliances to windows and cabinets. Since manufacturers will be trying to get excess stock off the floor before year’s end, it can be a great time to purchase products for instant money savings. With the new stock filling the stores in spring, there will be a higher premium to pay for all of the newly marketed products.
A Good Time For The Market
Spring is one of the most popular times of year to put a home on the market. With so many people considering a home purchase among their yearly plans, the milder season is an ideal time to get out and go house shopping. In order to have your home ready to show for the spring, you’ll need to have the renovations complete so your house will be market ready when the potential buyers are out.
If you’re readying your house for the springtime real estate market, it’s a good idea to get started on renovations now so you can save money on materials and schedule ample time with your contractor. If you happen to be considering your options for spring sale, you may want to contact your local real estate agent for more information.
Buying a home isn’t cheap. But if you’re determined to become a homeowner, the FHA home loan program can help. This loan program, ideal for first-time buyers with low incomes, can help you to build your credit and make home ownership a reality.
So why should you consider an FHA loan? Here are just a few ways you’ll benefit from these government-backed mortgages.
You Can Get Approved With Just 3.5% Down
Traditional mortgage lenders typically require you to pay 20% down on your mortgage, or 5% if you have good credit and agree to pay mortgage insurance premiums. But for a lot of younger people with lots of debt and low incomes, even a 5% down payment is an unrealistic burden. With an FHA loan, you can be approved for a mortgage with a down payment as low as 3.5% – which means a $200,000 home can be yours for as little as $7,000 down.
You Can Get A Loan Even With A High Debt-To-Income Ratio
Standard mortgages are difficult to get if you have a high debt-to-income ratio. Typically, lenders will want to see that your mortgage costs will consume no more than 28% of your income, and your total payments toward debts from all sources will be no more than 36% of your income. But with an FHA loan, you can get a mortgage with a 29/41 ratio.
You Can Qualify With A Low Credit Score
If you have a credit score under 700, you’ll pay higher interest rates on typical mortgages – and if it’s below 660, you may not get approved at all. But with an FHA mortgage, you can get approved for a 3.5% down payment with a credit score as low as 580 – or lower, if you agree to a 10% down payment.
FHA Closing Cost Regulations Are Better For Low-Income Buyers
FHA loans have different closing cost regulations than traditional mortgages. With an FHA loan, you can bundle closing costs into the mortgage or even use gift funds for 100% of the closing costs. That means home ownership is more accessible for people with lower incomes.
An FHA Loan Can Help You Find A Good Home
With most mortgages, you’re free to buy any home you wish as long as you stay within a set price range. But with an FHA loan, any home you buy must be habitable, sanitary, and safe – otherwise the FHA won’t approve your loan. That means using an FHA loan will ensure you get a good home.
Buying a home with an FHA loan is a great way to become a homeowner if a traditional mortgage isn’t an option for you. Call your local mortgage professional to learn more.
When delving into the world of real estate and investment property, there are many terms that will come up that require further explanation. Whether you’ve never heard the phrase ‘home equity’ before or you have a little familiarity, here are the ins and out of what it means and how this asset can help your financial outlook.
All About Home Equity
Essentially, home equity refers to your portion of the value of your home, and the amount of this figure is important because it is included among your assets when determining your net worth. If this sounds confusing, think of it this way: if you have completely paid off the cost of your home, the value of your home equity is this total amount. Of course, because most people seek a lender to borrow money from when they purchase a home, their home equity would consist of their down payment and whatever amount they’ve paid down on the mortgage since purchase.
An Example Of Home Equity
To provide further clarification, let’s use the example of a house that has been purchased for $300,000. In the case that a down payment of 20% has been provided at the time of purchase, the equity in the home would be $60,000. Since this amount is the percentage and cost of the house that’s been paid down, this is the amount of the house that is actually owned and this will be figured among an individual’s assets.
How Home Equity Works
As you pay the amount that you owe on your home each month, you are paying off your total debt and thereby increasing your equity. Since this amount of money is considered an asset that belongs to you, it can be used down the road to buy another home or invest in other important things like education or retirement. While paying off the amount owed on a home is a considerable investment, if the value of your home increases, this means that you’ll still owe the same on it but your home equity will have automatically increased.
As an asset that is part of your financial net worth and can be used down the road to fund other investments, home equity is a very useful term to know when it comes to purchasing a home. If you’re on the market for a home and are considering your options, you may want to contact one of our local real estate professionals for more information.
Last week’s economic events included S&P Case-Shiller’s home price indexes, reports on new and pending home sales and the Fed’s FOMC statement. The details:
Case-Shiller Reports Fast Paced Home Price Growth
According to S&P Case-Shiller Home Price Indexes, U.S. home prices grew at their fastest pace in 16 months in November. Portland, Oregon led the charge with home prices increasing 11.10 percent year-over-year followed by San Francisco, California at 11.0 percent; Denver, Colorado posted a year-over-year gain of 10.90 percent. 14 cities posted home price gains while four cities posted declines in home prices and two cities posted no change on a month-to-month basis.
David M. Blitzer, chairman of the S&P Index Committee, noted that slumping oil prices and a strong dollar were posing challenges to domestic and international homebuyers. In spite of high demand, the supply of available homes continued to drive home prices up in most cities in the S&P Case-Shiller 20-City Home Price Index.
In related news, the Commerce Department reported that sales of new homes jumped to a year-over-year reading of 544,000 new home sales as compared to November’s upwardly revised reading of 491,000 new homes sold and expectations of a year-over-year reading of 506,000 new homes sold as of December. The December 2015 reading was 9.90 percent higher than for December 2014.
Analysts cited a shortage of new homes for driving sales; builders are facing obstacles in hiring and finding suitable land for development. Some builders were said to be targeting high-end buyers which leaves a shortage of homes available for first-time and mid-range home buyers.
The National Association of Realtors® reported a minor gain in pending home sales in December. Pending home sales gauge future closings and mortgage activity. December’s pending sales reading was higher by 0.10 percent month-to-month and posted a year-over-year gain of 4.50 percent. December’s gain represented the 16th consecutive monthly gain for pending home sales. Analysts had expected a month-to-month gain of 1 percent, but high demand and a slim supply of affordable homes are leaving would-be buyers on the sidelines.
Fed Holds Off on Raising Rate; Mortgage Rates Lower
The Federal Reserve announced its decision not to raise its target federal funds rate on Wednesday; Freddie Mac reported lower average mortgage rates on Thursday. The average rate for a 30-year fixed rate mortgage dropped by two basis points to 3.79 percent; the average rate for a 15-year fixed rate mortgage fell 3 basis points to 3.07 percent. The average rate for a 5/1 adjustable rate mortgage were lower by one basis point at 2.90 percent. Discount points were unchanged at 0.6, 0.5 and 0.5 percent respectively.
This week’s scheduled economic news includes reports on construction spending, ADP payrolls, Non-Farm payrolls and the national unemployment rate.
According to statement issued at the conclusion of today’s Federal Open Market Committee meeting, committee members decided against raising the target federal funds rate. Mixed economic conditions, slower economic growth in the 4th quarter and low inflation contributed to the decision against raising rates. The target federal funds rate was raised in December to a range of 0.25 to 1.59 percent after remaining at 0.00 to 0.25 percent for several years. While rising fed rates were expected to cause a hike in mortgage rates, mortgage rates fell after December’s rate hike.
Committee Cites Mixed Data in Decision
While labor conditions and housing markets continue to improve, FOMC members said that further improvement in labor markets and achieving the medium term goal of inflation influenced the committee’s decision not to raise rates. The Federal Reserve has a dual goal of achieving maximum employment and 2 percent inflation. While labor conditions continue to improve, the Committee wants to see further improvement. The inflation rate has stubbornly stayed below 2 percent and lower energy and non-energy import prices caused the inflation rate to fall further in recent weeks. The Fed also downgraded its reading of household spending and business investment growth from “strong” to “moderate.”
FOMC members consider global economic and financial conditions as well as trends and developing news affecting domestic economic and financial developments. Wednesday’s statement emphasized that constant monitoring and analysis of financial and economic readings are significant in monetary policy decisions. Analysts noted that recent economic developments including slowing economic growth in the US and China, along with resulting turbulence in financial markets likely contributed to the Fed’s decision not to raise the federal funds rate.
FOMC Says Policy Decisions to Remain “Accommodative”
Members of the FOMC do not expect marked economic improvement in the short term and said that they expect Fed monetary policy to remain accommodative “for some time.” This suggests that rapid rate hikes are not likely to occur in the near future; the Fed’s commitment to gradual rate increases is expected promote further improvements in labor markets and hold down borrowing rates for consumer credit and mortgages.
The Committee’s vote not to increase rates was unanimous. The next FOMC meeting is set for March 15 and 16. In the meantime, Fed Chair and FOMC Chair Janet Yellen is slated to testify before Congress about the economic outlook on February 10 and 11.