How Much Home Can You Truly Afford?

Low interest rates have made this a great time to buy, but if we have learned anything from the housing crisis, it is that buying more home than you can afford is a bad idea.  Beyond the price of the property, your income, or even debt outflows, how much home you can afford can also depend on costs associated with buying and maintaining a home.  While some costs include one-time fees, other costs can increase your monthly expenses.  To more accurately assess what you can truly afford, consider (and calculate!) how the following costs can affect how much you will have to spend before closing and each month to keep your home:

Appraisal fees

Survey fees

Mortgage broker fees

Closing costs

Utility instillation (and monthly) charges

*Property taxes

Moving costs

*Home owner association fees

Land transfer taxes

*Mortgage loan insurance

*Property insurance

Home repairs

 

*These costs can significantly increase the amount of money you pay out each month.  I will discuss them in detail in a later post.

 

Get What You Pay for When Buying a Home

Interest rates are low, spring is just around the corner, and you are thinking that it’s a good time to buy a home.  You’re right!  It is a good time to buy, but if you want a dream home rather than a nightmare, here are three things that you can do to make sure that you get what you pay for:

Have a Title Search Completed

Burdens on a property can hinder your ability to own a home free and clear.  A title search will let you know for certain whether there are undisclosed owners, easements, or tax liens which can complicate or jeopardize a home buying transaction.  Getting a title search can help you avoid costly legal issues after you have purchased a home.

Request an Updated Property Survey

You cannot assume that a fence on or near a property that you want to buy correctly marks the boundaries of the property.  An updated property survey is the only way to know for sure how much land you will own.  The survey will also show whether previous owners made any structural changes to a home that may have enlarged or reduced the amount of visible outdoor space.

Get a Home Inspection

You should not just rely on a disclosure statement from a seller to tell you everything that is wrong with a house that you want to buy.  The seller may not know that he has termites or some other major problem that could cost you lots of money to fix after you buy the house.  To help avoid unpleasant and expensive surprises, get an independent inspector to inspect your home and make sure that your final contract is contingent upon the inspector’s findings.  With a contingency, if a home has too many problems, you won’t get stuck with it.

Spotlight On: Old Town Commons

Some people move to Northern Virginia hoping to find a historic home with lots of charm.  Others hope to find new construction.  Well, those looking for a mix of both are in luck.  A developer is building five blocks of new, mixed-income townhomes, condos, and apartments in historic Alexandria.

The Old Town Commons development features brand new condos and townhomes walking distance to the metro, shops, and restaurants.  The properties are LEED certified and come with ENERGY STAR appliances and ENERGY STAR labeled double-pane windows and exterior doors.  The townhomes also have lofts, rooftop decks, and optional garages.

Models are open for viewing daily from 11:00 a.m. to 6 p.m.  To find out more about this new development visit this website or email me at jdeevy@cbmove.com.

Two Smart Ways to Save Money on Your Mortgage

Last week the Federal Reserve announced that it would keep interest rates low until 2014.  Currently, the 30-year fixed mortgage rate is hovering below 4 percent, which will save you thousands of dollars if you buy a home while rates remain low.  The good news is that there are other ways you can save money on your mortgage.  When you structure your loan, consider the two options below:

     1.       Split Mortgage Insurance

What it is:  Borrowers can pay an upfront mortgage insurance premium at closing and pay monthly mortgage insurance payments.  To qualify for split mortgage insurance, borrowers need a 720 FICO score and 5% down for loans at or below $417,000 and 10% down for loan amounts up to $729,750.

How you save:  You pay an upfront premium to get a lower monthly mortgage insurance payment.  Plus, you can request to have your mortgage insurance payment removed if the value of your home goes up.

     2.       Increased Payment Frequency

What it is:  Borrowers can structure weekly or bimonthly mortgage payments.

How you save:  Frequent mortgage payments lower the amount of interest you pay over the life of your loan and can shorten the number of years you pay a mortgage.  You can save thousands of dollars in interest.

Why Home Sellers Need Real Estate Agents

Would you go with the person who could sell your home for $150,000 or the person who could sell the same home for $215,000? If your answer is to go with the person who can get you the most money, you should get a real estate agent to help you sell your home.  Why?  Because in 2011, the average home sold by a home owner sold for $65,000 less than the average home put up for sale by a real estate agent.

You may wonder why real estate agents net more money for homes than the For Sale By Owner (FSBO) crowd. Here’s why:

Real Estate Agents Sell Homes for a Living

Whereas the average FSBO seller must juggle a full-time job and other obligations while dealing with the enormous task of getting their home on the market, real estate agents usually just have one job to focus on – getting your home sold for the best price.  Although agents tend to have more than one house to sell at a time, they also have stuff a FSBO seller doesn’t: immediate access to a vast amount of market data, access to state-of-the-art marketing tools, and access to a large network of brokers, agents, home stagers and home repair vendors.  Access to such resources is essential if you want to get your home sold in a reasonable amount of time for a great price.

According to the National Association of Realtors, the top five most difficult tasks for FSBO sellers include:

• Getting the right price
• Understanding and performing paperwork
• Having enough time to devote to all aspects of the sale
• Preparing/fixing up the home for sale
• Selling within the planned length of time

Why put yourself through such difficulty to end up wasting time and money?  It doesn’t make sense (or dollars!).  If your ultimate goal is to make the most money you can from the sale of your house – AND THAT SHOULD BE YOUR GOAL ─ you need a real estate agent!

Why Home Buyers Need Real Estate Agents

According to the National Association of Realtors, 63% of home buyers drove by or walked through a home that they found online.  If it is so easy to find a home by yourself, you may wonder why you need a real estate agent.  Here’s why:

Real Estate Agents Have Knowledge and Experience

The average real estate agent working today has at least 10 years of experience.  They have seen the ups and downs of the housing market and possess thorough knowledge of neighborhoods in areas that they serve.  This knowledge can help you make an informed decision about the right neighborhood for you and your family. 

Real Estate Agents Have Access to Active Home Listings

You may have found the home of your dreams online and possibly even attended an open house.  Your finances are finally in order and you see that the home is still listed for sale online.  Guess what?  The listing wasn’t updated and your dream home is already under contract.   

Real estate agents have access to real-time listing information.  If the home you fell in love with is no longer available, an agent can help you find a comparable property much faster than you can on your own.

Real Estate Agents Have Access to Important Market Data

In addition to providing data on comparable properties, real estate agents can compile market data quickly and track trends to help you get the most for your money.  Among other things, real estate agents can tell you the average cost of homes in your target neighborhood and provide ratios of list-to-sold prices.  While it might take you days to gather information, real agents have access to tools that can amass housing market data from all over the country in minutes.  Most importantly – agents know how to interpret that data so you can understand how a move will impact your finances, including how much you can expect to pay in insurance and taxes.

Want to Sell Your Home?

For every seller, the answer should be a resounding YES!  But, some sellers aren’t realistic about what it takes to sell their homes.  Other sellers focus on the wrong things, and their homes languish on the market.  One of the most important factors in selling your home is setting the right asking price.

Here are two common mistakes that sellers make when pricing their homes and how you can avoid them:

     1.       Sellers assume that a higher asking price will net a higher selling price

If you price your home even 5-10% over the current market value, your home could stay on the market longer than you expect.  If you price it 20% over market value, you risk having your home languish on the market so long that the listing expires, forcing you to go through the listing process again.  At this point, your home might be viewed as a “troubled” home that receives low offers if you get any at all.

 

     2.       Sellers base their asking price on emotion rather than true market value

How much you love your home might be reflected in the care and detail displayed in your home’s décor.  You expect others to value the custom marble sushi bar that you had installed as much as you do.  But, it is a mistake to assume that others will value your upgrades as much as you do ─ especially if your renovations are unconventional or flashy.

You can avoid both of these mistakes by carefully analyzing sale prices of other comparable homes in your area.  Your agent will usually provide this information to help you set a competitive price, but if he or she doesn’t, ASK FOR IT, and be open to the results.  Competitively priced homes sell faster and you’re more likely to get the price you want or something close to it.

The Housing Market is Better Than You Think!

Just yesterday, I received multiple offers on my listing that came on the market five days ago!  This shows that the housing market is not as bad as you think.  Although there is less inventory right now, there are buyers ready to purchase.  I am not alone in this opinion.  Today, Bloomberg announced that pending sales of existing U.S. homes exceed forecasts with a 10.4 percent increase.  This means that the number of Americans buying previously owned homes rose more in October than anyone expected.  Economists also expect an additional two percent increase in the sale of existing homes.

Falling prices and record low mortgage rates have made home ownership more affordable.  Buyers can find rates below four percent on 30-year, fixed mortgages!  You can check out current rates in your area right now on Bankrate.com.

As economist Roger Arnold once said, “As the U.S. housing market goes, so does the U.S. economy.  And as the U.S. economy goes so does the world.”   More home buying will help improve the United States and world economy, which is great news for all of us!

Share your thoughts with me.  How does this news make you feel?  How do you think your neighbors are feeling about the housing market?