Author: Tara Maxwell

There are many potential homebuyers, and even sellers, who believe that they need at least a 20% down payment in order to buy a home or move on to their next home. Time after time, we have dispelled this myth by showing that many loan programs allow you to put down as little as 3% (or 0% with a VA loan).

If you have saved up your down payment and are ready to start your home search, one other piece of the puzzle is to make sure that you have saved enough for your closing costs.

Freddie Mac defines closing costs as:

“Closing costs, also called settlement fees, will need to be paid when you obtain a mortgage. These are fees charged by people representing your purchase, including your lender, real estate agent, and other third parties involved in the transaction. Closing costs are typically between 2 and 5% of your purchase price.”

We’ve recently heard from many first-time homebuyers that they wished that someone had let them know that closing costs could be so high. If you think about it, with a low down payment program, your closing costs could equal the amount that you saved for your down payment.

Here is a list of just some of the fees/costs that may be included in your closing costs, depending on where the home you wish to purchase is located:

• Government recording costs
• Appraisal fees
• Credit report fees
• Lender origination fees
• Title services (insurance, search fees)
• Tax service fees
• Survey fees
• Attorney fees
• Underwriting fees

Is there any way to avoid paying closing costs?

Work with your lender and real estate agent to see if there are any ways to decrease or defer your closing costs. There are no-closing mortgages available, but they end up costing you more in the end with a higher interest rate, or by wrapping the closing costs into the total cost of the mortgage (meaning you’ll end up paying interest on your closing costs).

Home buyers can also negotiate with the seller over who pays these fees. Sometimes the seller will agree to assume the buyer’s closing fees to get the deal finalized, which is known in the industry as ‘seller’s concession.’

Bottom Line

Speak with your lender and agent early and often to determine how much you’ll be responsible for at closing. Finding out you’ll need to come up with thousands of dollars right before closing is not a surprise anyone is ever looking forward to.

Some industry experts are saying that the housing market may be heading for a slowdown in 2017 based on rising home prices and a jump in mortgage interest rates. One of the data points they use is the Housing Affordability Index, as reported by the National Association of Realtors (NAR).

Here is how NAR defines the index:

“The Housing Affordability Index measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national level based on the most recent price and income data.”

Basically, a value of 100 means a family earning the median income earns enough to qualify for a mortgage on a median-priced home, based on the price and mortgage interest rates at the time. Anything above 100 means the family has more than enough to qualify.

The higher the index, the easier it is to afford a home.

Why the concern?

The index has been declining over the last several years as home values increased. Some are concerned that too many buyers could be priced out of the market.

But, wait a minute…

Though the index skyrocketed from 2009 through 2013, we must realize during that time the housing crisis left the market with an overabundance of housing inventory with as many as one out of three listings being a distressed property (foreclosure or short sale). All prices dropped dramatically and distressed properties sold at major discounts. Then, mortgage rates fell like a rock.

The market is recovering, and values are coming back nicely. That has caused the index to fall.

However, let’s remove the crisis years and look at the current index as compared to the index from 1990 – 2008:

We can see that, even though prices have increased, mortgage rates are still lower than historical averages and have put the index in a better position than every year for the nineteen years before the crash.

Bottom Line

The Housing Affordability Index is in great shape and should not be seen as a challenge to the real estate market’s continued recovery.

Recently released data from the National Center for Health Statistics revealed that 1.3 million Millennial women gave birth for the first time in 2015. There are now over 16 million women in this generation who have become mothers.

“All told, Millennial women (those born between 1981 to 1997) accounted for about eight in ten (82%) of U.S. births in 2015.”

The data also shows that this generation has waited until later in life to become parents as only 42% of Millennial women were moms in 2014, compared to 49% of Generation X at the same age. A Pew Research Center article discussing the data, points to social influences that may have contributed to the delay:

“The rising age at first birth is hardly limited to the Millennial generation. It has been a trend since at least 1970. Many factors may contribute, including a shift away from marriage, increasing educational attainment and the movement of women into the labor force.”

Do Millennials Want to Be Parents?

“While Millennials may be delaying parenthood, it’s not for a lack of interest in eventually becoming moms and dads. Members of this generation rated being a good parent as a top priority in a 2010 Pew Research Center survey.  

Some 52% said it was one of the most important goals in their lives, well ahead of having a successful marriage, which 30% said was one of their most important lifetime goals.”

So, What Does This Mean for the Housing Market?

As Jonathan Smoke, Chief Economist for realtor.com explained: “At any given time in our history, demographics would explain 60-80% of what’s happening [in the market], and we are in a period of time where Millennials make up a largest demographic group.” 

As more and more Millennial families are formed, this generation will shift their focus to providing the best home for their children to grow up in, the best school districts, and often to the stability that owning a home of their own provides.

Two-thirds of Millennials have not yet reached the average first-time home buying age of 32, as reported by the National Association of Realtor. The homeownership rate amongst Millennials has nowhere to go but up!

Bottom Line

Millennials as a generation have delayed traditional social norms until later in their lives. Whether getting married, having children or buying a home, the desire to provide for their family is still there, even if it takes a little while longer than it did for previous generations.

Interest Rates Heading Up? What You Need To Know

Interest rates are expected to rise over 2017 and they are already one the move. 30 year fixed-rate mortgage rates were as low as 3.42% as recently as October and up to 4.12% for the week ending January 12, 2017. That .7% rise may not seem like much, but for a loan of $200,000, at 3.42% the monthly principal and interest payment would be $889.18 and for 4.12% the corresponding payment is $968.72. That $79.54 difference over the life of the loan means another $28,634.40 in payments.

We have been spoiled by historically-low interest rates for years. But now that the economy is doing well, it is time for interest rates to head back up. The policies and investments proposed by the new administration that are meant to improve our economy even more may cause interest rates to creep up even further. It would not be surprising to see interest rates at 4.75% by year-end.

So what does this mean to you if you are buying or selling in 2017?

• First Time Homebuyer – If you are a first time homebuyer, the lower the interest rate, the higher your buying power. That being said, when interest rates are lower, there are usually more buyers in the market which means more competition. So you might have to pay more if you are competing with multiple offers. However, even when interest rates rise, there will still be buyers in the market – your competition, so your best bet will be to start that process sooner in 2017 rather than later.
• Selling – If you are just selling and not buying, then your best plan would be to set up a meeting with me to look at your options. There are different pools of buyers for each price point in the market and each is affected by interest rate changes differently. Will your property be affected by a change in the number of buyers or will competition still be high into the fall (at which point you may have seen greater appreciation on your home)? If this is your situation, let’s analyze it before you take action.
• Selling and Buying – If you are going to sell your home and buy another, depending on the interest rate you are paying now, the competition in the buyer pool for what you are selling and then the competition in the buyer pool for what you are buying (and how those are affected by a change in interest rates) it may be more advantageous for your transaction to happen earlier in the year, later in the year, or it may not make much difference. I would be happy to prepare an analysis on your home based on what you are paying now, what you could sell for now, and the financials for the home you are planning on buying both now and at the end of the year.

If you are paying less than 4% for your mortgage, it may be difficult to think about exchanging your low mortgage rate for a loan with a higher rate. However, if your current home is no longer serving your needs, there is value in your happiness. Let’s set up a free consultation to review your scenario and options. Call (253) 222-2626 or email: john@altitude-re.com.

Getting a Jump on Spring by Listing Now!

If you are considering making a move this year and plan on listing in the next few weeks, I have some great tips to make your potential buyers feel more at home. The challenges of winter are many:

• The sun is lower in the sky and therefore light comes in your home at sometimes-unflattering angles.
• Deposits from snow, ice, and rain can make the entrance dirty and uninviting.
• Plants that are dead or dormant can be a challenge for curb appeal.
• Heating and air intake grates may have a constant flow of air and may be dirty.
• Homes that have great outdoor spaces may not show as well during cold, dark, or rainy days.

These are just a few issues that can make selling during the winter a challenge. However, there is a lot that you can do to counteract these:

• Make sure all your windows and outdoor glass is squeaky clean and streak-free. This way, when the sun is low in the sky, light streams through those flawless windows, illuminating the space.
• Hose down or sweep walkways and decks. Keep them free of excess sand, gravel, and moss.
• Plant boxwoods or other evergreens to provide curb appeal and mask perennials that won’t look fresh again until spring. Trim back perennials and pull out dead annuals to make your landscaping look neat and trim. Also rake the beds and get rid of all dead leaves.
• Keep all air grates clean by vacuuming every few weeks. Change your furnace filter. If your home is getting that burned-dust smell, have your ducts professionally cleaned.
• Maximizing outdoor spaces, even when it is cold and rainy, is a great way for prospective buyers to be excited about the seasons to come and your home’s outdoor living potential. Make sure pots are brimming with evergreens, light outdoor lanterns and landscape lighting, and get some blooming plants in the ground (crocuses, heathers, hellebores, and primroses are good go-to winter bloomers). These steps will make your outdoors showtime-ready.
• You can also accentuate the warm and cozy aspects of your home by turning on the fireplace, draping an accent throw over the arm of a couch or the back of a chair, drape a throw at the bottom of the bed, and put plush towels in the bathrooms.
• Make sure the lights are on both inside and outside your home for every showing. Pull back the curtains and open the blinds. Yes, you may be spending more on heating your home with windows uncovered, but you don’t want your home feeling dark and drab.

There are opportunities to be had selling now. Interest rates have started to creep up, so buyers who were disappointed and decided to take some time and regroup may be back in droves, trying to buy before the interest rates increase even more. Questions about your selling strategy? Give me a call at (253) 222-2626 or email: john@altitude-re.com.

Have you ever been flipping through the channels, only to find yourself glued to the couch in an HGTV binge session? We’ve all been there… watching entire seasons of “Love it or List it,” “Fixer Upper,” “House Hunters,” “Property Brothers,” and so many more, just in one sitting.

When you’re in the middle of your real estate themed show marathon, you might start to think that everything you see on TV must be how it works in real life, but you may need a reality check.

Reality TV Show Myths vs. Real Life:

Myth #1: Buyers look at 3 homes and make a decision to purchase one of them.

Truth: There may be buyers who fall in love and buy the first home they see, but according to the National Association of Realtors the average homebuyer tours 10 homes as a part of their search. 

Myth #2: The houses the buyers are touring are still for sale.

Truth: The reality is being staged for TV. Many of the homes being shown are already sold and are off the market. 

Myth #3: The buyers haven’t made a purchase decision yet.

Truth: Since there is no way to show the entire buying process in a 30-minute show, TV producers often choose buyers who are further along in the process and have already chosen a home to buy. 

Myth #4: If you list your home for sale, it will ALWAYS sell at the Open House.

Truth: Of course this would be great! Open houses are important to guarantee the most exposure to buyers in your area, but are only a PIECE of the overall marketing of your home. Just realize that many homes are sold during regular listing appointments as well.

Myth #5: Homeowners make a decision about selling their home after a 5-minute conversation.

Truth: Similar to the buyers portrayed on the shows, many of the sellers have already spent hours deliberating the decision to list their homes and move on with their lives/goals.

Bottom Line

Having an experienced professional on your side while navigating the real estate market is the best way to guarantee that you can make the home of your dreams a reality!

In many markets across the country, the number of buyers searching for their dream homes greatly outnumbers the amount of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. One way to show you are serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before starting your search.

Even if you are in a market that is not as competitive, knowing your budget will give you the confidence of knowing if your dream home is within your reach. 

Freddie Mac lays out the advantages of pre-approval in the My Home section of their website:

“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”

One of the many advantages of working with a local real estate professional is that many have relationships with lenders who will be able to help you with this process. Once you have selected a lender, you will need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.” 

Freddie Mac describes the 4 Cs that help determine the amount you will be qualified to borrow:

1. Capacity: Your current and future ability to make your payments
2. Capital or cash reserves: The money, savings and investments you have that can be sold quickly for cash
3. Collateral: The home, or type of home, that you would like to purchase
4. Credit: Your history of paying bills and other debts on time

Getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and it often helps speed up the process once your offer has been accepted.

Bottom Line

Many potential home buyers overestimate the down payment and credit scores needed to qualify for a mortgage today. If you are ready and willing to buy, you may be pleasantly surprised at your ability to do so as well.

It appears that Americans are regaining faith in the U.S. economy. The following indexes have each shown a dramatic jump in consumer confidence in their latest surveys:

1. The University of Michigan Consumer Sentiment Index
2. National Federation of Independent Businesses’ Small Business Optimism Index
3. CNBC All-America Economic Survey
4. The Conference Board Consumer Confidence Survey

It usually means good news for the housing market when the country sees an optimistic future. People begin to dream again about the home their family has always wanted, and some make plans to finally make that dream come true.

If you are considering moving up to your dream home, it may be better to do it earlier in the year than later. The two components of your monthly mortgage payment (home prices and interest rates) are both projected to increase as the year moves forward, and interest rates may increase rather dramatically. Here are some predictions on where rates will be by the end of the year:

HSH.com:

“We think that conforming 30-year fixed rates probably make it into the 4.625 percent to 4.75 percent range at some point during 2017 as a peak.”

Svenja Gudell, Zillow’s Chief Economist:

“I wouldn’t be surprised if the 30-year fixed mortgage rate hits 4.75 percent.”

Mark Fleming, the Chief Economist at First American:

“[I see] mortgage rates getting much closer to 5 percent at the end of next year.”

Lawrence Yun, NAR Chief Economist:

“By this time next year, expect the 30-year fixed rate to likely be in the 4.5 percent to 5 percent range.”

Bottom Line

If you are feeling good about your family’s economic future and are considering making a move to your dream home, doing it sooner rather than later makes the most sense.

According to data from the U.S Census bureau, there are approximately 76.4 million baby boomers living in the United States today. Contrary to what many think, there are very different segments within this generation, and one piece that sets them apart are their housing needs.

John McManus, editorial director of Hanley Wood’s Residential Group says his company “is focusing on the preferences of the younger half, or second-wave baby boomers, as they exhibit different needs than the older boomers.”

What are ‘second-wave baby boomers’ looking for?

McManus says, “They are seeking a fun, dynamic lifestyle with a home that can also adjust to their changing needs in the future. Living space should either include accessibility features, such as doorway space, lower shelves, and nonslip surfaces, or be easily adjustable when the time comes.”

In a homebuyer study performed by The Farnsworth Group, the participants revealed their reasons for purchasing a new home. The top three factors that influence their purchase include area/location (50.2%), price/affordability (37.4%), and the layout of the home (19%) (as shown in the graph below).

The report also found that when buying a new home, there were other concerns like quality of construction (9%), a safer neighborhood (8.4%), better floor plans (8.25%). The most important rooms or areas are the kitchen (82.8%), master bedroom (59.2%), and great room (36%).

Technology also plays an important role! Second-wave baby boomers prefer wireless security systems (7.1%), lighting that senses and adapts to them (6.3%) and integrated home technology, including “smart” thermostats and lighting controlled by a smartphone (6.2%).

Grey Matter Research and Consulting points to a sense of community as a major factor in wanting to purchase:

“The first impressions are important when entering a new community, as is feeling welcome in the community. Amenities such as clubhouses, pools, and walking trails featured prominently in the decision to purchase in a community. Location was key, as residents want their new homes to be near shopping, dining, medical services and entertainment.”

Bottom Line

If you are one of the many ‘second-wave’ baby boomers who is starting to feel like their current homes no longer fit their needs, take advantage of the low inventory of existing homes in today’s market by selling your current home and moving on to one that truly fits your new lifestyle.