By Jim Hamilton
Is it the right time to buy a house? Is it the right time to sell? How do you know when to jump into the real estate market? The answer is….it depends. There’s no single answer that applies to everyone. A host of factors come into play, including the economy in general, whether home prices are rising or falling, the inventory of available homes, and the state of your own financial outlook. If you’re thinking about buying or selling a home, here are some factors to consider.
For buyers:
Improving Economy, Rising Prices, and Eager Buyers:
The rebound in the economy means more competition for homes because people who have been renting or staying put in their homes are now jumping into the housing market. This translates into quick turnover on home sales, multiple bids, and sometimes, buyers bidding over the asking price. The boost in housing prices is also fueling competition from buyers who want to get into the market before prices get too high. Even though prices are rising, many still consider some homes underpriced since prices had dipped so low. And buyers are looking to make a move while houses are still relatively a good deal.
FHA Fee Changes:
Loans through the Federal Housing Administration (FHA) were historically the best bet for people with low to moderate incomes and not much money to put toward a down payment. Generally, private lenders require a 5% down payment, while FHA only requires 3.5%. However, with several changes to loan terms, FHA may no longer be the smartest option.
FHA loans require mortgage insurance, a fee tacked onto the loan that provides the lender some protection in case the borrower defaults on the loan. In the past, the borrower only needed to carry the insurance until the loan reached 78% of the original loan amount. Under the new rules, the borrower is required to carry the insurance for the life of the loan.
The cost of mortgage insurance on FHA loans has also been on the rise, almost tripling since 2008. In 2013, the fee rose to 1.35% of the balance of the loan. Additionally, FHA loans require borrowers to pay an upfront fee of 1.75% when getting the loan. Between the upfront fee and the required mortgage insurance, saving up more for a down payment and getting a private mortgage may make more financial sense.
Beyond FHA:
Buyers with a low down payment have other options to consider. Fannie Mae HomePath loans, available only on Fannie Mae-owned properties, offer low down payments and no mortgage insurance requirement. Periodically, Fannie Mae also offers special deals in which they cover the buyer’s closing costs. There also loans available to people in various special circumstances. Veterans, for example, can get VA Mortgages, which offer good terms, low down payments, and easier qualification requirements. The USDA offers attractive mortgage terms to moderate-income families buying property in rural or semi-rural areas.
Check Other Affordability Programs:
The Good Neighbor Next Door program offers discounts of homes in “revitalization” areas of up to 50% for qualified fire fighters, law enforcement officers, EMTs, and teachers. Check with state and local housing agencies to see what programs are available in your area. Check http://www.usa.gov for links and other home buying help and information.
Mind Your Debt:
Having a large amount of debt in relation to your income will lower your chances of getting a loan with favorable terms, or even getting a loan at all. Private lenders generally have more stringent rules for debt-to-income ratio (DTI). There are two kinds of DTI–how much personal debt you can carry in relation to your income (e.g. car loans, student loans, child care expenses) and income versus the amount you will be spending on housing debt (e.g. mortgage payments, property taxes, insurance and so forth.) Lenders take both into consideration. Would-be borrowers who want private financing generally need to have less than 45% of their income going towards personal debts, while FHA will finance borrowers who have up to about 56% of their income allocated for debt payment. Borrowers can qualify for an FHA loan with up to 47% of their income slated for housing costs, while conventional lenders generally allow only up to 38-40%.
For Sellers:
Rising Home Prices:
House prices are rebounding from the downturn, and 2014 is shaping up to be a seller’s market. Rising home prices are a boon to sellers who can expect faster sales, multiple full-price offers and even offers above their asking price.
Starter Homes in Demand:
If you have a starter home and are looking to upsize, the market is especially in your favor. Starter homes are in short supply because during the economic downturn, people were buying and selling less frequently. Now that the economy is improving, there’s a lot of pent-up demand, especially for people looking for inexpensive housing or a starter home.
Fewer Underwater Mortgages, More Equity:
The nationwide trend of rising home prices means other good news for sellers. The boost in prices is finally lifting many homeowners from their underwater mortgages and giving others more equity in their homes. More equity means more owners will have the money for a down payment and closing costs if they’d like to move up to something pricier.
Time to Refinance?:
Rising prices will also raise the appraised value of many homes, meaning it may be a good time for homeowners to refinance. Higher appraisals may help you get more favorable terms on a first mortgage or refinance the rolling of a second mortgage into one stable, fixed-rate mortgage
The Kufner Team is an imaginative, inventive, and effective real estate consulting team working with the accomplished professionals at Pridemark Real Estate. For the last fourteen years we have unfailingly and thoroughly focused on serving the communities of Orange County and Corona. ------------------------------------------------------------------------------- The Kufner Team consists of three dedicated partners: George Kufner: Broker Associate & Team Founder. George's fourteen years in real estate have honed his consulting, negotiating and transaction overseeing skills. His financial back round and diverse experience in every type of real estate market has provided invaluable services to clients buying, selling, and investing in real estate since 1999. Anthony Kufner: Licensed Real Estate Agent. Anthony has provided dedicated, reliable and creative solutions for clients buying and selling residential real estate for the last six years. His marketing and technical abilities have helped him create customizable marketing plans for home sellers and convenient and efficient solutions for home buyers. Sandy Kufner: Licensed Real Estate Agent & Clerical Assistant. Sandy is a detail oriented transaction coordinator for the Kufner Team. Her eight years of real estate experience provides our clients with knowledgeable and proficient approach to overseeing transaction. She is a service oriented professional that our clients rely on to make each transaction move smoothly. ------------------------------------------------------------------------------- Our team is based on and is dedicated to our belief system: We believe that when its time to buy or sell a home you must have a person representing your interest more then they represent their commission check. We believe that when you work with a consultant that is deserving of your referrals they must have integrity or else they have no future business. We believe that even when clients are aware of what homes are selling for or available for in their area, they are unaware of the nature and the magnitude of benefits they can realize by creative consulting, no-nonsense negotiating, and careful overseeing of the details. We believe that every client has a different reason, time frame and need to sell their home. That is why a client deserves a competent, imaginative, and customizable marketing plan to achieve their own personal goals. We believe that successful people are busier than ever before, and therefore require that the home selling and buying process be made as easy as humanly possible. We believe that our clients deserve to have the most skilled consulting, negotiator, and overseer of the details representing them at all times.
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