It Might be Time to Buy vs. Rent Your Home

To rent or to buy: what used to be a given – that you would buy a home as soon as you could afford to – has become an agonizing conundrum for many a would-be homebuyer, in the face of the housing market’s big bust and super-slow recovery. Low prices seem to create a wide-open window of opportunity, but they also create the concern that prices will keep falling after closing. And that Catch-22 has hundreds of thousands of buyers-to-be stuck on the fence.
Fortunately, there are handful of life, mortgage and local market signals which indicate that the time *might* be right to hop – scratch that – leap off the fence and into homeownership:

Mortgage rates are going up. Home prices have been low for the last several years, and in fact are currently looking like they’re heading back down to the same levels they were at the depths of the real estate recession. During this same time frame, interest rates have also been low – this one-two punch has created record-high affordability for the last four years running, causing buyers to believe that this window of opportunity won’t be closing anytime soon.

While prices don’t look like they’ll be skyrocketing anytime soon, interest rates are another story. Rates have been on a rollercoaster over the past few months, and with inflation and Fed rates set to spike later this year, today’s low interest rates might be as good as they’re going to get for a long time to come. And I mean a very long time – in the next few years, governmental intervention in the mortgage markets is likely to wind down, and that means higher mortgage interest rates are not only inevitable, they’ll probably be here for a long, long time.

Mortgage rates on the rise are one signal that now might be the peak of home affordability, and the peak of the opportunity to buy.

Rents are going up. Rental rates in many areas are also on the rise – in fact, the foreclosure crisis has acted created additional demand on many markets’ rental housing inventory in several different ways. First, former homeowners who lost homes to foreclosure now need to rent; as well, buyers in foreclosure hot spots have been hesitant to buy, many electing to stay renters far beyond when they would have otherwise. On top of all that, super-tight lending guidelines have stopped even some who would like to buy homes from doing so. As a result, rental homes are in high demand – and rents are rising.

Rising rents at a time when the prices of homes for sale are low and, in some places, falling? One more signal that now might just be the time to buy. (Of course, where foreclosures are high, the chances of continued depreciation are, too – to offset this risk, have a long-term plan, to minimize the possibility that you’ll owe more than your home is worth when you need to sell. Read on for more on how to plan for the long term and minimize your homebuying risk.)

Your income and career are stable for the foreseeable future. The smartest homebuyers look to their lives, not just the market, for signals about when the time is right to buy. Homebuying is a long, long-term endeavor these days. The goal is to be able to commit to staying in the same place, geographically-speaking, for 7 to 10 years before you buy (more in a foreclosure-riddled market, less in an area that has been more recession-resistant). Most lenders will require that you’ve been at your job – or in the same general field of work – for at least two years before you buy. But that’s the bare minimum – beyond that, you don’t want to be barely beginning a career in which you think you may need to move sooner than that, nor do you want to buy when you’re advanced in your career, but in an industry which is dying or downsizing the workforce in your region (unless you have a strong Plan B).
When you get to the spot in your career where you can realistically project a stable income 7 to 10 years out, life might be giving you a green light to move forward on your homebuying dreams.

You can reasonably predict the home you’ll need in the years to come. Since successful homeownership requires that you be ready to be in the place for a good number of years, best practice is not just to buy a home with the space and number of rooms you need right now – rather, you should aim to buy the home you’ll need 5, 7 or even 10 years down the road (to the best of your ability to predict, of course). You might be a newlywed with no kids now, but you plan to have them in a few years. Or maybe you’re a newly minted empty nester right now, but can project that you’ll want to retire – and might not want to climb two flights of stairs to get to and from your bedroom – 10 years down the road. Before you buy, you should be in a position to buy the home that meets your future needs – not just your current ones; and that requires that you have a reasonable idea of your life vision and plan for the future.

If you’re able to predict – and afford, at today’s prices – a home with the space, amenity and geographic location you’ll need 7 to 10 years from now, you might be in a good phase of life to get off the rent vs. buy fence.

With that said. . . buying a home is a massive decision and includes multiple, long-term financial and lifestyle obligations, so if one or more of these signals are present for you, that doesn’t mean you have the green light to run out and buy a home tomorrow – rather, it’s a good sign you should begin down that path, if you’re so inclined. You’ll still need to do the work to make sure your personal finances and holistic life picture are also in alignment before you buy, as well of the work it takes to ensure that your real estate and mortgage decisions are sustainable and smart, over the long-term.

It’s not overkill to check in with a mortgage pro, a tax pro, a local real estate broker or agent and a financial planner to make sure all your ducks – not just one – are in a row before you make your move.

How a New Car Payment Reduces Your Purchase Price

For example, suppose you earn $5000 a month and you have a car payment of $400. Using an interest rate of 8.0%, you would qualify for approximately $55,000 less than if you did not have the car payment.

Even if you feel you can afford the car payment, mortgage companies approve your mortgage based on their guidelines, not yours. Do not get discouraged, however. You should still take the time to get pre-qualified by a lender.

Next, you contact a loan officer to get prequalified for a mortgage loan. You state your desired price and how much you can put down. You provide your income and may even supply pay stubs and W2 forms. The loan officer methodically crunches the numbers (by telephone, in person, or even over the internet).

However, if you have not already bought a car, remember one thing. Whenever the thought of buying a car enters your mind, think ahead. Think about buying a home first. Buying a home is a much more important purchase when considering your future financial well being.

Do not buy the car. Buy the house first.

8 Important Steps For Home Buying

1. Location counts. Location is crucial. How far are you really willing to commute to your place of employment? How good are the local schools, shopping centers, public transportation, seniors services and other public amenities? Will your new home be next to a vacant lot or a commercial property? Even a picture-perfect dream home can be a mistake if it’s in an undesirable location, and a poor-location home can be a particularly bad choice if you anticipate reselling the home within a few years.
2. Make a list. Do you really know what you need and want in your home? You’ll save yourself many hours of looking if you make a list ahead of time. Zero in on the features you must have, would like to have, definitely don’t want and would prefer not to have. Your goal is to find the right home for your family without falling in love with one that doesn’t suit your needs. Start compiling your wish list by thinking about what you like and dislike about your current home.
3. Do your homework. Not long ago, consumers had very little access to information about recent home sales prices, market trends, homes on the market, neighborhood statistics and the home-buying process. Today, all this information and more is available on the internet.
4. Get preapproved for a mortgage. Your top-dollar home price is a function of your household income, your creditworthiness, interest rates, the type of loan you select and how much ready cash you have for the down payment and closing costs, among other factors. Rather than guessing or estimating how much you can afford to spend, ask a lender or mortgage broker to give you a full assessment and a letter stating how much you’re qualified to borrow. The true amount may be much more or much less than you think.
5. Use a checklist. Touring multiple homes is a confusing experience for most people. Rather than relying on memory, make notes about the homes you visit. Turn your priorities into a personalized home-shopping checklist and use it track the features of each home.
6. Wear comfortable clothing and sturdy shoes. House-hunting can be tiring, especially if you’re relocating to a distant community and want to see a dozen homes in one day.
7. Be prepared to make an offer. House-hunting can also be frustrating, especially if you know in your heart you’re not really emotionally or financially ready to buy a home. If you’re not ready, don’t put yourself through the exercise. If you are ready, go through a blank purchase contract ahead of time so you’ll know what decisions you’ll face when you make an offer.
8. Relax. Granted, buying a home is a major life-altering event. But it’s not worth making yourself insanely crazy or super-duper stressed. Save time at the end of your house-hunting expedition to unwind, calm your thoughts and emotions and keep the whole experience in perspective.

Why The Delay In Tax Day

Tax Day is traditionally April 15th. So, why is it April 18th this year? You can thank Emancipation Day for your three-day reprieve.

If April 15th falls on the weekend, the tax deadline is moved to Monday.

This year: Emancipation Day, April 16th, is a legal holiday only in Washington, D.C. Since it falls on a Saturday this year, it will be observed April 15th. A federal statute says tax filings are impacted nationwide, so this year’s tax deadline is Monday. Who says nothing good comes out of Washington D.C.

Deep Cleaning Inside Your Home

A clean house is a sold house. When attracting prospective buyers, it’s critical to keep it well maintained and sparkling. Clean houses can also appear brighter and, coupled with organization, more spacious. Here are a few tips on how to accomplish the “Deep Clean”.

Start with your ceilings. Using a ladder, clear cobwebs and dirt from corners. And while you’re up there, clean your ceiling fans and light fixtures.

Walls usually need more than the usual wash down when you’re preparing to sell. After thoroughly cleaning wall-mounted fixtures and switch plates, touch up stubborn areas with paint. Leave the leftover paint so buyers can do the same after they move in.

Clean your baseboards with a mild detergent and rag. After your baseboards dry, be sure to dust.

When you hold an open house, you’ll want to bring in as much light as possible. Clean windows help the sunlight pour in. You’ll be showing a lot of glass when you’re selling, so make sure your windowpanes, sills, screens and wells are spotless.

Your window treatments should be fresh and clean as well. You can wash blinds with a wet cloth and duster. Vacuum draperies. Special window treatments might require dry cleaning.

Clean and polish your wood furniture with commercial oil soap or lemon oil. Use a clean rag, and let the soap or oil stand for a few minutes before rubbing it off.

For upholstered furniture, vacuum thoroughly. Don’t forget to vacuum in between and under cushions. When cleaning leather furniture, it’s best to use a water-based foam cleaner.

Be sure to launder or dry clean bedding that is often overlooked like bedspreads and skirts.

All of your floors must be immaculate. Pay special attention to the nooks and corners where grime usually builds up. And don’t forget to clean under your furniture.

Hardwood floors should be vacuumed or swept, mopped, and then waxed. Use carpet cleaner or sprinkle baking soda on your carpets before vacuuming to remove odors. For extra protection, put floor mats near every entryway to help with tracked in dirt.

More stubborn stains will need special attention, which could require some flooring first aid.

Clean mildew, grime and mold from your shower’s tiles, grout and caulking with appropriate cleaning agents. Polish and clean your faucets, showerheads and other fixtures.

Wash or replace your shower curtains. And make sure all bathroom surfaces are free from soap scum.

Finally, make sure your bath doesn’t retain musty odors by storing all dirty laundry in a hamper.

Clean your oven and range. Several heavy-duty cleaners are available for a solid clean. Follow the manufacturer’s instructions, and be sure to wear latex gloves.

Clean out your refrigerator and freezer. Something hidden inside could be the cause of an unpleasant smell you don’t want around for an open house. Use a solution of one part vinegar ad water for a deep clean. After you’ve cleaned the fridge, keep an open box of baking soda stored to trap new odors.

Polish wood cabinets with an oil or wax. If you have painted cabinets, touch up scuffs with paint. Remember to clean the inside of cabinets and keep utensils and dinnerware well organized.

Be sure to sweep and mop linoleum floors regularly.

Odor Removal
Keep your pets outside as much as possible when preparing to show your house. At the same time, do not allow anyone to smoke inside.

If you are storing chemicals in a garage, make sure these materials are properly sealed, as they tend to emit pungent odors.

Use citrus fruits, candles or potpourri to give rooms pleasant aromas. Put cedar blocks in closets to get rid of any musty scents.

Once you’ve finished your deep clean, you might notice a few areas that need reorganization or repair before you put it on the market.
Stay tuned for more tips!

Curb Appeal

Are you stuck for curb appeal ideas?

Start by walking across the street from your house. Now that you can see your entire front yard, you can see what everyone else sees as they drive by.

Curb appeal starts at the curb. If all you’ve got is a mail box, think about spicing it up with some shrubbery. Want something really amazing? How about a gated entrance or a wall entry? A country home would look lovely with a wooden gate swung open at the drive.

A little light at the end of the driveway can give you a welcoming feeling, too. That’s what curb appeal is all about. Not sure? Try checking in the evening. A welcoming home is bright and cheerful even at night. Guests will have an easy time finding the front door with the right lighting.

Ok, walking up to your house using the driveway, how does the entry look? Can you see the front door from the curb or from the driveway? If the front door is easily overlooked, this is another great place to increase your curb appeal.

Make your entry area stand out a little. Check the list for some quick ideas:

Paint the front door a bright or contrasting color.
Plant colorful shrubs on either side of the front door.
Build an archway or pergola if your front door seems hidden to guests.
A sidewalk to the curb really invites them in.
One landscaping idea for the front door — urns. Large urns overflowing with flowers instantly grabs your attention. The color in the vases will pull your gaze to the door area. If you have them on either side, it easily creates a grand entry feel.

Placing urns at the front entry is also a great way to still be able to plant annuals in the spring without having to invest a lot of time.

A great investment is to buy urns that can stay out all winter. Think metal, stone, or concrete.

Don’t forget the house. If you’ve got peeling paint or safety issues in the front, those really should be addressed. A sidewalk that might trip guests or a hand rail that moves needs to be fixed right away. This is a part of the first impression of your home.

Get an edge on the competition!

If you’re putting your house up for sale, curb appeal can increase the value of your home and help it sell more quickly. If you’re really stuck on how to improve things, check with your real estate agent or hire a landscape designer for a consultation.

Your house can make a great impression — and it starts at the curb.

Ratio of Debt to Annual Income

Q: What is the general ratio of debt to annual income that lenders allow when they are considering you for a standard mortgage or line of credit?

A: The standard rule for most lenders is that your debt-to-income ratio should be no higher than 36 percent. In other words, when you add up all of your regular monthly debts such as car, mortgage and credit card payments (minimum required payments — not the full outstanding balance) and divide that amount by your total gross monthly income, you should get a number that is less than 36. Lenders also like the total of your housing expenses alone to not exceed 28 percent.

Some lenders will provide loans to those with a higher debt-to-income ratio, but the loans may be smaller than they’d normally offer or they may charge higher mortgage rates on the borrowed money. Federal Housing Authority Loans allow a debt-to-income ratio of up to 41 percent, but require that you pay an additional monthly fee for mortgage insurance. Remember, just because you can get a loan with a high debt-to-income ratio does not mean you should. It may be better for you to borrow a lesser amount of money.

Your best bet is to try to pay down as much outstanding debt as possible before applying for a mortgage or line of credit. You can also reduce the cost of high-interest monthly credit card payments by applying for a lower-interest debt consolidation loan.

For more information contact a local lender