5 Reasons Why Owning a Home Makes Sense Financially

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If you have noticed by Instagram or Facebook posts, then I am here to reassure you that the American Dream of homeownership is alive and well. The personal reasons to own a home differ for each buyer, but there are many basic similarities.

Eric Belsky is the Managing Director of the Joint Center of Housing Studies (JCHS) at Harvard University. He authored a paper on homeownership titled – The Dream Lives On: The Future of Homeownership in America. In his paper, Belsky reveals five financial reasons why people should consider buying a home.

Here are the five reasons, each followed by an excerpt from the study: 

1) Housing is typically the one leveraged investment available.

“Few households are interested in borrowing money to buy stocks and bonds and few lenders are willing to lend them the money. As a result, homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. Even a hefty 20 percent down payment results in a leverage factor of five so that every percentage point rise in the value of the home is a 5 percent return on their equity. With many buyers putting 10 percent or less down, their leverage factor is 10 or more.”

2) You’re paying for housing whether you own or rent.

“Homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord.” 

3) Owning is usually a form of “forced savings.”

“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”

4) There are substantial tax benefits to owning.

“Homeowners are able to deduct mortgage interest and property taxes from income…On top of all this, capital gains up to $250,000 are excluded from income for single filers and up to $500,000 for married couples if they sell their homes for a gain.”

5) Owning is a hedge against inflation.

“Housing costs and rents have tended over most time periods to go up at or higher than the rate of inflation, making owning an attractive proposition. 

Bottom Line

Homeownership makes sense for many Americans for an assortment of social and family reasons. It also makes sense financially. If you are considering a purchase this year, contact me so we can evaluate your ability to do so.

How Does Housing Help Build Family Wealth?

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What’s the best thing about owning a home? Making money while you sleep and who wouldn’t love that? June is National Homeownership and we will celebrate the good things about homeownership.

As the economy continues to improve, more and more Americans are seeing their personal financial situations also improving. Instead of just getting by, many are now beginning to save and find other ways to build their net worth. One way to dramatically increase their family wealth is through the acquisition of real estate.

For example, let’s assume a young couple purchased and closed on a $250,000 home in January. What will that home be worth five years down the road? 

Pulsenomics surveys a nationwide panel of over one hundred economists, real estate experts and investment & market strategists every quarter. They ask them to project how residential prices will appreciate over the next five years. According to their latest survey, here is how much value that $250,000 house will gain in the coming years.

How Does Housing Help Build Family Wealth? | Keeping Current Matters

Over a five-year period, that homeowner can build their home equity to over $40,000. And, in many cases, home equity is large portion of a family’s overall net worth.

Bottom Line

If you are looking to better your family’s long-term financial situation, buying your dream home might be a great option.

4 Reasons to Move Up to Your Dream Home This Spring/Summer

4 Reasons to Move up

 

Spring is in full force; the summer months are right around the corner. If you are debating moving up to your dream home, here are four great reasons to consider listing your current home and moving up to your dream home now, instead of waiting.

1. Buyer Demand is High & Inventory is Low

Recent numbers show that buyer demand is at the highest peak experienced in years, and inventory for sale is at a 2-3 month supply, which is still markedly lower than the 6 months needed for a historically normal market.

Demand in many markets is far exceeding the supply, and more properties in March sold in less than 30 days (42%) than in any month since last July.

Listing your home today can greatly increase exposure to buyers who are out in force and ready to act.

2. Prices Will Continue to Rise

CoreLogic recently released their latest Home Price Index in which they predict that national home values will appreciate by 5.3% by this time next year.

The bottom in home prices has come and gone. Home values will continue to appreciate for years. Waiting for your current home’s value to increase before selling could price you out of your new home if you aren’t careful.

3. Mortgage Interest Rates Are Still Near Record Lows

Interest rates have remained below 4% for some time now and are substantially lower than the rate previous generations paid when getting a mortgage.

The Mortgage Bankers Association, Fannie Mae, Freddie Mac & the National Association of Realtors are in unison projecting that rates will rise over the next 12 months.

An increase in rates will impact YOUR monthly mortgage payment. Even an increase of half a percentage point can put a dent in your family’s net worth. Whether you are moving up or buying your first home, your housing expense will be more a year from now if a mortgage is necessary to purchase your home.

4. It’s Time to Move On with Your Life

The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise. But, what if they weren’t? Would you wait?

Look at the actual reason you are buying and decide whether it is worth waiting. Have you always wanted to live in a certain neighborhood? Would a climate change be just what the doctor ordered? Would you like to be closer to your family?

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Bottom Line

If the right thing for you and your family is to move up to the home of your dreams this year, buying sooner rather than later could lead to substantial savings. For more information about what your home could sell for today, contact New Avenue Realty at Keller Williams Dallas Preston Road at 972-813-9788 or atfowler@kw.com. #YourNewAvenueAwaitsYou #SelltheThrone #CrowningHomeowners

Are We Behind the Foreclosure Scene?

That’s the question in America. According to the video below, foreclosure rates are at its lowest that it’s been since the recession in 2009. What does this mean?

 

It means that rates may not be as low as they are now. It means no low bids on homes that are priced right. In the DFW market, foreclosures are few and far in between (in Denton and Collin Counties today, there are 33 active foreclosures). One thing that most buyers ask me is, can you send me foreclosures? They are listed on the market and the reason you may think it is not is because there aren’t many. Plus, if there is a foreclosure it does not mean they are extremely cheap. The deals that you are looking for are gone. As much as I hate to say this because we all love a deal, right? You missed the boat on a deal for a home. That boat sailed in 2008-2011.

A great deal would be when you and the seller can agree to a price and it appraises for that price or higher. For your sake as a buyer, higher means a lot more for you. It means that you have some equity in the home on closing day (Equity = market/appraised value – loan value). Be competitive and ready to make a great deal. I counsel my buyers by letting them know that you should submit every offer as if there are multiple offers because you won’t always get a second chance. Your first offer should be your highest and best.  Now if you are looking to have tens of thousands dollars off the list price, bring all cash to the table and that’s a different conversation. Cash rules, remember that if you don’t remember anything else I say. Is it all cash at the end of the day? Yes but that person won’t have loan contingencies, closing costs needed, and can close in a week or two. My advice to home shoppers will be to bring your A-game. We’ll need it to make it to the finish line.

Single in the City?

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I ran across this topic today as I was browsing through articles and it hit me that I was supposed to deliver a blog post about this very topic on Valentine’s Day.  So today’s blog is dedicated to those who are single in the city and think that homeownership is for married couples.

Realtor.com’s article, “More Single Female Buyers on the Hunt” discusses that women today aren’t waiting for prince charming. The timeframe for meeting Mr. Right, getting married, and having kids is a further stretch of a timeline than in the earlier decades of women. Today’s women are buying their own homes in the time-being. Once Mr. Right does come along, you could sell your property and make profit to purchase the marital home.

Let’s start with the stats of New Avenue Realty. Majority of my clients are either millenials, single, or both. I say that by saying you don’t have to be a certain age to purchase a home nor do you have to be married. I talk to a lot of my single girlfriends who feel they are going to wait until they are married until they purchase a home. Purchasing a home is a form of wealth-building. As my banker once told me, “it is basically you moving your assets from one place to another.”

Did you know there many types of homes that you could purchase? If you’re one of the ones who are used to someone else caring for the property, opt for a townhome or condo.  The community association fees typically pay for the common areas and the upkeep of the community. In some areas, cable, water, and sewer may be included. There are tons of options besides a home and a yard. Visit newavenuerealty.com to find the hottest homes whether they are condos, townhomes, or houses in DFW.

 

 

What is a Pre-Approval and Why Do I Need One?

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On a daily basis, I get emails, calls, and maybe texts from people wanting to go see homes or inquire about them. As an agent I give the basic information about a home but I know that person may have more questions about a specific home. When you are calling and inquiring about something, you are highly interested in it.

One question that leaves a lot of people baffled is the “Have you talked to a mortgage professional to see how much you could afford?” At times, the answer is no and when they find the right house they will speak to one.

That isn’t how it works especially in the Dallas – Fort Worth market. Homes sell in a day or two and the the buyer that was accepted usually has a pre-approval.

What is a pre-approval?

A pre-approval is a letter or serious content from a buyer and their lender. It shows the seller that you are a serious buyer and can afford to make an offer on their home at the agreed upon price.  With a pre-approval, the lender verifies the your information and documentation to determine exactly how much it would be willing to lend to that borrower. The documentation includes your credit report, last two federal tax returns, paycheck stubs, two months of bank statements on all accounts (checking/savings, 401K, IRA, other stocks and bonds), last two years of W-2s.

This isn’t a loan commitment but it does speed you up with the underwriting and mortgage loan process. This is in place to have your i’s dotted and your t’s crossed. You don’t want to look at homes that you love only to find out you cannot afford it.

Difference between pre-qualification and pre-approval.

A mortgage pre-qualification can be useful as an estimate of how much you can afford to spend on your home, but a pre-approval is much more valuable because this means the lender has actually checked your credit and verified your documentation to approve a specific loan amount (usually for a particular time period such as 90 days). Final loan approval occurs when you have an appraisal done and the loan is applied to a particular property. (Investopedia)

Gives you a chance to form a timeline and fix errors or issues on credit. 

Getting pre-approved before you shop for a loan also allows buyers time to fix unexpected errors on their credit reports. Don’t wait until your lease is up or when the landlord decides to sell the home before you start looking into getting pre-approved. Give yourself at least a few month’s advantage. The lender will be able to tell you what you need to do to qualify and what to work on.

 

Overall a pre-approval helps you stay in your lane on your affordability. Lenders will give you a pre-approval based on your income and debts. However, other things that are not reported on your credit report such as child care, tithing, money borrowed from your uncle, cable, car/life insurance, etc, are not being calculated into your pre-approval. This is where you do a sit down and work out how much you can afford to pay each month. If you know realistically, you can only afford $1200/month in mortgage, ask your lender to give you a pre-approval based on that amount (if your pre-approval is estimating a higher mortgage payment).

Pre-approvals show that you are a serious buyer looking to purchase a home in the near future. It’s okay to look at homes but make sure you have your finances in order to be able to be considered to purchase the property that you love. In this Dallas market, it may only be available today. That may be your one time only.

 

 

For more information about the Dallas – Fort Worth real estate market, contact me at atfowler@newavenuerealty.com or 972.813.9788. 

 

Can I Buy a Home and Sell My Current One at the Same Time?

Question of the day right. The simple answer to this question is “yes”. You are able to sell your current home and purchase your next one at the same time. One of the main reasons of moving up is the equity that may be in your home. The chart below notes what homeowners think is their equity value compared to what is their equity value. February2016-29

So are you wondering what you need to do to buy your next home and sell your current home? Well I have you covered in this week’s Tuesday Tip.

 

 

Your new avenue awaits you……Let’s Find it!

Find your new home at NewAvenueRealty.com or move-updallas.com.

 

 

Do’s and Don’ts…..Do YOU know?

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Today I am combining my blog post with my Tuesday tip because these tips needed to be in one place. The topic for today is the “do’s and don’ts” of home buying.

Every one has heard that you can do this and you can do that but before you do something in particular, talk to the lender. There are so many interesting stories that I can tell you about when it comes to real estate and why things happen. Here are a few do’s:

DO pay your bills on time. You are asking a lender to loan you thousands of dollars guaranteeing that you will pay them back. They only thing that is attesting to your payment history is your credit report. 

DO know where you stand financially. Do you know you budget and how much you can really afford? Yes your total income may be $100K but when you include all debts, is it financially reasonably to purchase the home with a $2500 mortgage. Better yet, does your credit help those claims? Home buying is there for you to struggle to make the payment just to have an asset. Lenders look at the overall credit picture and you must look at your whole financial picture too. Do you have bills that you pay that doesn’t show on the credit report like cell phone bill, daycare costs, tithes, charitable contributions, etc? 

Now on to the don’ts.

DON’T QUIT YOUR JOB. I know you really dislike Susie and the rest of the staff. Which one do you want more? The house or a new job? Just put a time limit on how long you can deal with Susie and the rest of the staff until you make your home purchase. 

DON’T DEPOSIT YOUR MATTRESS MONEY. Yes, Grandma Jane still hides her savings under the mattress so you developed that habit. Now you have maybe $1,000 or 2 under the mattress. You need it for your down payment or closing costs. When purchasing a home, you need a paper trail. You won’t be able to be use these funds because there is no paper trail on where it came from. I’ve actually had a client do this. Thankfully we were able to get the seller to pay the closing costs he needed. But that’s an FYI. Start “seasoning” your money into an account months before purchasing your home. Plus, it may be safe to have it in an account instead of your home. That’s just my opinion though. 

One of my trusted lender partners do a great job discussing the do’s and don’ts of buying a home. Check out the video below from Mortgage Express.

 

Now that you know what to do to get started, you can contact the lender to get started and be crowned a homeowner in your new home!

 

 

Your new avenue awaits you….let’s find it here. #CrowningHomeowners

9 Ways to Fund Your Down Payment

9 Ways to Fund

 

You’ve come to the realization that you are done renting. You hate driving through the broken gate into your apartment complex and you aren’t feeling the property management anymore? Okay that may have been my own personal struggle but I know plenty of people thinking the same.

Example: You pay $1000 a month in rent. That is yearly amount of $12,000 (yes in reality that is what you are paying). Guess what? When it is tax time, you cannot write any of that off and that is just $12,000 out of your pocket for a place that you don’t own and have to ask permission to paint the wall. How fun is that?

Now you’re at the point of “I want to own my home and live my life on the edge.” The scenario may not play out like that but you’re at the point where you want to own your own home. You want the granite countertops, stones on the outside of the home, inviting entry-way, and my beloved favorite: media room.

You know you can get approved for a mortgage. You know you have excellent credit and a stable job. The fear is the down payment. How do I purchase my home without having the funds to do so? Don’t I need 20%? Well I am here to break down what you need and how to gain those down payment funds.

How much will the downpayment be?

This answer really depends on what type of mortgage loan works best for you. For a FHA loan, you will be required to put down 3.5% of the sales price. For a conventional loan, that amount would be 5%. 

Example: If a home is $250,000, for a FHA loan you will need a downpayment of $8,750. On that same home with a conventional loan, that the downpayment would be $12,500.

Does that make you feel a little better?

I don’t have that amount saved. What do I do now? 

Did you know that there are numerous resources to help with the downpayment. Here are 8 ways to fund your downpayment.

  1. Check Your Savings Account
    • Now you may have checked here first and realized that was the obvious first option for the downpayment but that is mostly the first start and lenders are going to want to see some savings in your account.
  2. Tap your IRA
    • If you’re looking to buy your first home, let the Internal Revenue Service help. Tax laws allow you to use up to $10,000 in IRA funds as a down payment if you’ve never owned a house. If you’re married and you both are first-time buyers, you each can pull from your retirement accounts, meaning a potential $20,000 down payment. Even better is the IRS definition of first-time home buyer. Technically, you don’t have to be purchasing your very first abode. You qualify under the tax rules as long as you (or your spouse) did not own a principal residence at any time during the two years prior to the purchase of the new home. In these instances, Uncle Sam waives the penalty for early withdrawal, but you may owe tax on the money depending on the type of IRA. Many cash-strapped home buyers, however, find the long-term return of investing in residential real estate is worth the short-term tax bill. (Bankrate)
  3. Borrow from your 401K
    • Do you have more retirement money in a company savings plan? Consider borrowing against your 401(k) for the down payment. There are downsides to this strategy: Unlike an IRA home-related withdrawal, you’ll have to pay back any money you take out of your company plan. The repayment will cost you a bit more since the account contributions were made with pretax money, but your payback will be made with after-tax dollars. At least the interest payments on this loan will be going back into your 401(k). (Bankrate)
  4. CDs, Stocks, Bonds
    • Do you have money stashed in CDs, stocks, and bonds? These assets would help would it comes to your down payment.
  5. Down Payment Assistance Programs
    • Majority of the major cities in the metroplex have down payment programs. The state of Texas does as well. These programs are based on your household size and income. The amount of money from these programs range from 5% of the loan price to $20,000. The city programs are based for low to moderate income families. The chart below is widely used in the Dallas, Collin, and Denton County areas. FYI – The income cannot exceed the number based on your household size. These are local income limits. The state limits are higher.
    • Income Limits
  6. Ask a Relative
    • Do you have a rich uncle or parents? Aunt Sue and Uncle James love you right? Butter up that loving to ask relatives for a gift fund. Your down-payment can be funded by relatives who are willing to give you funds to purchase your home with no strings attached. It has to feel good to come from such a loving family right? Go ahead and give Uncle James a call right now.
  7. USDA/VA Loan
    • If you have served our country, you are due to a special treat when it comes to homebuying. You will be able to qualify for a 100% financing loan. This means no down payment and low interest rates.
    • You may not be a veteran but you don’t mind living in a rural area to have 100% financing. Then you may be eligible for a USDA loan. This loan has income restrictions too. USDA loans are restricted to rural areas BUT areas such as Little Elm, Aubrey, Cross Roads, Oak Point, Prosper, and Celina are eligible for 100% financing. These areas are quickly growing in the metroplex.
    • Below is the income limit for USDA Loans in the metroplex. The limits are based on household size in each column. Column one is for a one person household and so on until an 8 person household size.
    • USDA Limits
  8. Get A Second Job
    1. You can also get a part time job to help secure your down payment. We could all use some extra income to satisfy our needs so why not apply for a job to help secure those extra funds Uncle James couldn’t give?
  9. Sell Your Assets
    • With new sites and apps, you’re able to sell things quickly and shortly to secure some cash. Sites like OfferUp, Ebay, and Craiglist are all valuable to sell things that you could give up to secure a few more dollars.

These are just the steps to fund your down payment to becoming a homeowner. As always, I’m #CrowningHomeowners and this is my Tuesday Tip.

How Long Does it Take to Save A Down Payment?

How Long Does It Take To Save A Down Payment? | Keeping Current Matters

In a recent study conducted by Builder.com, researchers determined that nationwide it would take “nearly eight years” for a first-time buyer to save enough for a down payment on their dream home.

Depending on where you live, median rents, incomes and home prices all vary. By determining the percentage a renter spends on housing in each state and the amount needed for a 10% down payment, they were able to establish how long (in years) it would take for an average resident to save.

According to the study, residents in South Dakota are able to save for a down payment the quickest in just under 3.5 years. Below is a map created using the data for each state:

Years Needed to Save 10% Down | Keeping Current Matters

What if you only needed to save 3%?

What if you were able to take advantage of one of the Freddie Mac or Fannie Mae 3% down programs? Suddenly saving for a down payment no longer takes 5 or 10 years, but becomes attainable in under two years in many states as shown in the map below.

Years Needed to Save 3% Down | Keeping Current Matters

Bottom Line

Whether you have just started to save for a down payment, or have been for years, you may be closer to your dream home than you think! Let’s get you matched with one of my preferred mortgage professionals who can help you evaluate your ability to buy today.