Category Archives: first-time home buyer

Rents Still Skyrocketing

Rents Still Skyrocketing | Keeping Current Matters

Zillow recently revealed that the 43 million renter households in the US spent $535 billion on rent in 2015. Aggregate numbers like these often make it difficult to truly assess a situation. For more clarity, we want to share some points that were made in aWall Street Journal article earlier this month.

The article made two important points:

1. Rents are increasing faster than the last several years:

 “Apartment rents increased faster last year than at any time since 2007.”

2. Rent increases are accelerating

“Another report from Axiometrics Inc., a Dallas-based apartment research company, showed that rents increased 4.7% in the fourth quarter compared with the same quarter a year earlier, the strongest year-end performance since 2005”.

Here is a graph to illustrate the rate of increase over the last several years:

Average Effective Rent in the US | Keeping Current Matters

Why Do Americans Consider Moving? [INFOGRAPHIC]

Why Do Americans Consider Moving? [INFOGRAPHIC] | Keeping Current Matters

Some Highlights:

  • In a recent Harris Poll, Americans listed “change in climate/weather” as their top reason for wanting to relocate.
  • 41% would move for a better job opportunity.
  • Being closer to loved ones filled out 3 of the top 6 reasons why American’s move.

Thinking of Buying a Home? 3 Questions Every Buyer Should Answer First

Thinking of Buying a Home? 3 Questions Every Buyer Should Answer First | Keeping Current Matters

If you are debating purchasing a home right now, you are probably getting a lot of advice. Though your friends and family will have your best interest at heart, they may not be fully aware of your needs and what is currently happening in the real estate market.

Answering the following 3 questions will help you determine if now is actually a good time for you to buy in today’s market.

1. Why am I buying a home in the first place?

This truly is the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with money.

A study by the Joint Center for Housing Studies at Harvard University reveals that the four major reasons people buy a home have nothing to do with money. They are:

  • A good place to raise children and for them to get a good education
  • A place where you and your family feel safe
  • More space for you and your family
  • Control of that space

What does owning a home mean to you? What non-financial benefits will you and your family gain from owning a home? The answer to that question should be the biggest reason you decide to purchase or not.

2. Where are home values headed?

According to the latest Home Price Index from CoreLogic, home values are projected to increase by 5.3% over the next 12 months.

What does that mean to you?

Simply put, if you are planning on buying a home that costs $250,000 today, that same home will cost you an additional $13,250 if you wait till next year. Your down payment will need to be higher as well to account for the higher home price.

3. Where are mortgage interest rates headed?

A buyer must be concerned about more than just prices. The ‘long term cost’ of a home can be dramatically impacted by even a small increase in mortgage rates.

The Mortgage Bankers Association (MBA), the National Association of Realtors and Freddie Mac have all projected that mortgage interest rates will increase by approximately three-quarters of a percent over the next twelve months as you can see in the chart below:

Mortgage Rate Projections | Keeping Current Matters

Bottom Line

Only you and your family will know for certain if now is the right time to purchase a home. Answering these questions will help you make that decision.

Obstacles to Homeownership: Perceived or Real?

Obstacles to Homeownership: Perceived or Real? | Keeping Current Matters

Yesterday, we discussed the belief Americans have in homeownership and their desire to partake in this piece of the American Dream. We also discussed some of the obstacles preventing them from attaining that goal. However, studies have shown that many of the obstacles mentioned are perceived, not real.

A recent study by Fannie Mae, What Do Consumers Know About The Mortgage Qualification Criteria?, revealed that many consumers are either unsure or misinformed regarding the minimum requirements necessary to obtain a mortgage. Let’s break down three such challenges.

Down Payment

Perceptions

Many renters have mentioned that the lack of an adequate down payment is preventing them from moving forward with the purchase of a home. According to the Fannie Maereport:

  • 40% of all renters don’t know what down payment is required
  • 15% think you need at least 20% down
  • An additional 4% think you need at least 10% down

The Reality

There are programs offered by Fannie Mae, Freddie Mac and FHA that require as little as 3-3.5% down. VA and USDA loans offer 0% down programs. According to theNational Association of Realtors, the typical down payment for a first time buyer is 6%.

Credit Score

Perceptions

Many renters have mentioned that the lack of an adequate credit score is preventing them from moving forward with the purchase of a home. According to the Fannie Maereport:

  • 54% of all renters don’t know what credit score is required
  • 5% think you need at least a 740 credit score

The Reality

Many mortgages are granted to purchasers with a credit score of less than 700. According to Ellie Mae, the average credit score on a closed FHA purchase is 687 and the average credit score on all loans is 722.

Back End Debt-to-Income Ratio (DTI)

Perceptions

Many renters have mentioned that they carry too much debt which is preventing them from moving forward with the purchase of a home. According to the Fannie Mae report:

  • 59% of all renters don’t know what DTI is acceptable
  • 25% think you need at under 25%
  • 7% think you need under 39%

The Reality

Lenders like to see a back-end ratio that does not exceed 36%. Fannie Mae’s maximum total DTI ratio is 36% of the borrower’s stable monthly income. The maximum can be exceeded up to 45% based on credit score and other requirements.

Bottom Line

Don’t let a lack of knowledge or misinformation keep your family from buying a home this year. Meet with a local real estate professional who can evaluate your ability to buy now!

10 Numbers That Will Revolutionize Your Budget

We’re here to talk numbers. Wait! Come back!

These aren’t chalkboard-squeaking, SAT-sweating, pencil-breaking numbers. These are fun numbers. You know the ones that show themselves on bills and bank accounts, the ones that make you wealthy. These are the numbers of the budget.

For 20 years, Dave’s class Financial Peace University (FPU) has taught families how to win with money by laying a solid foundation, which is—you guessed it—a budget! The 10 numbers below prove that even the most free-spirited among us can benefit from a little focus on the numbers each month.

1 – One piece of paper is all you need to make a budget. Forget the fancy spreadsheets and scientific calculators—you just need space to write everything out. Of course, if you’re a nerd and it makes you feel better, go ahead and fire up Excel or print one of Dave’s budget forms to get as detailed as you’d like.

$8,000 – Families who learn to budget in FPU report an average turnaround of $8,000 in the first 90 days. This represents $5,300 reduction in debt and $2,700 saved. Think about where you were at just three months ago. Wouldn’t it feel nice to be $8,000 ahead today?

We’d love to help you get there with Dave’s $8,000 Turnaround Giveaway, celebrating 20 years of life change through FPU. You can enter once a day through September 2!

56% – We talk about budgeting all the time, so it might sound like it’s what all the cool kids are doing. It’s not. In fact, 56% of Americans admit they don’t budget. Many of them don’t even know what they spend each month on housing, food and entertainment. Don’t be like these folks. Be weird!

0 – A zero-based budget is the key to winning with money. Give every dollar a name, on paper, on purpose before the month begins. This means your income minus your expenses should equal zero. Take control of your money by telling it what to do!

15% — Studies show people spend 15% more money when they pay with a card instead of cash. Identify budget categories where you tend to overspend. Then make a cash withdrawal for those areas and place the money in the envelope. When it’s gone, it’s gone!

3 – A kid’s budget is broken into three areas: give, save and spend. Budgeting helps kids understand the value of work and how to use their own money to make purchases and bless others. It also teaches kids to be content—a refreshing quality in today’s youth.

20 billionThe turnaround tracker is at 20 billion and counting. More than 2.5 million families have taken FPU since it launched in 1994. The tracker is a real-time calculation of the estimated turnaround that occurs each time another family signs up for FPU. While you’ve been reading this, another family likely paid off their car loan and saved $1,000!

18% – Families who use the zero-based budget save 18% more money than people who don’t. This means they’ll build an up emergency fund and pay off debt more quickly simply because they’re applying the wisdom of giving every dollar a name. If you’re smart, you do what works.

4 – The first time you budget, it’s going to hurt. The next month, you’ll still be confused. By the third month, your needs—and the ability to meet those needs— will finally start to make sense. By month four, you’ll feel like an old pro. What once took hours will eventually take just twenty minutes and might—just might—be a little fun.

312 – Dave and Sharon Ramsey filed for bankruptcy in September 1988. As a result, they made big changes to how they handled their money. Dave and Sharon began budgeting immediately and the budgeting continues today. They’ve completed 312 budgets so far. Yes , Dave and Sharon still complete a budget each month—and that means you should too.

Budgeting really is the secret to winning with money. Start now or refine your current budget with our free Guide to Budgeting or search for an FPU class in your area.

How has budgeting changed your life? How has it helped you reach a goal that seemed unattainable? Tell your story in the comments below!

(Courtesy of Dave Ramsey, “Top 6 Life–Changing Articles of 2015″http://www.daveramsey.com/blog/10-numbers-revolutionize-budget?ictid=4UQRP211)

6 Reasons You Should Get Pre-approved For A Mortgage

mortgage-preapproval-01

(courtesy lighterside-staff-authorBy Lighter Side Staff  |  S.D. Shank )

Shopping for a home before getting pre-approved for a mortgage is like walking into a grocery store without a wallet. You may have the desire to buy, but you lack the ability. Let’s cover some basics…

What is a mortgage pre-approval?

In a nutshell, a mortgage pre-approval is written assurance from a lender or broker that you’re able to borrow money to purchase a home up to a certain amount. It’s based on the income, employment and asset documentation you supply at the time of application, in conjunction with your credit history.

1. Without it, most agents won’t work with you.

Makes sense, too. Right? Think about it: when you hire an agent, he/she will invest countless hours showing you homes over the course of your house hunt. If you were in their shoes, wouldn’tyou want assurance that your hard work would lead to a favorable outcome for both you and your client?

2. You’ll know how much house you can afford.

Getting pre-approved before you begin house hunting allows you to know how much house you can realistically afford. Knowing this narrows down the options and makes the selection process more efficient. Not to mention, it protects you from the unpleasant surprise of realizing the home you fell in love with doesn’t fit your budget.

3. It adds clout to your offer.

In many markets, homes attract more than one offer. If the sellers are weighing one offer against another, they may lean towards the one accompanied by a pre-approval letter. That’s because pre-approvals instill confidence that the buyer is financially capable of purchasing their home.

4. It could increase your negotiating power.

In addition to strengthening your offer when compared to buyers who haven’t taken this step, getting pre-approved may give you the upper-hand when negotiating the price. If the homeowner is eager to sell, they may be more willing to accept a lower offer from someone they’ve been assured is financially capable of purchasing their home.

5. It saves time.

Obtaining a mortgage is a lengthy process. Getting pre-approved ahead of time shortens the time between contract to close — this way you’re ready to proceed with finalizing the mortgage once you’ve found the home you want to purchase.

6. It carries more weight than a “pre-qualification”.

A pre-approval differs from a pre-qualification. With the former, 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 30, 60 or 90 days). A pre-qualification can be useful as an estimate of how much you can afford to spend on your home, but it’s a less accurate indicator of your ability to purchase. A pre-approval always carries more weight.

 

NAR’s Latest Existing Home Sales Report [INFOGRAPHIC]

NAR's Latest Existing Home Sales Report [INFOGRAPHIC] | Keeping Current Matters

Why Did Home Sales Drop So Dramatically Last Month?

Why Did Home Sales Drop So Dramatically Last Month? | Keeping Current Matters

Yesterday, the National Association of Realtors (NAR) released their latest Existing Home Sales Report which covered sales in November. The report revealed that sales:

“…fell 10.5 percent to a seasonally adjusted annual rate of 4.76 million in November (lowest since April 2014 at 4.75 million)…”

That revelation gave birth to a series of industry articles, some of which quoted pundits questioning whether the housing market was slowing. In actuality, there is one rather simple explanation to much of the falloff in sales last month. It is likely the implementation of the “Know Before You Owe” mortgage rule, commonly known as the TILA-RESPA Integrated Disclosure (TRID) rule, which went into effect on October 3. These regulations caused house closings to be delayed by an extra three days in November as shown in the graph below.

Average Days To Close | Keeping Current Matters

Three days might sound like a minimal difference. However, since there are only approximately 20 days in a month that a closing would normally take place (Mondays through Fridays), losing three days constitutes well over 10% of all closings. These sales are not lost. They are just moved into the next month’s numbers. In a DS Newsarticle on the subject yesterday, Auction.com EVP Rick Sharga explained:

“The most likely cause for the weak sales numbers is a delay in processing loans due to the new TRID mortgage requirements imposed by the CFPB. This is the biggest change in mortgage document processing in many years, and there have been numerous reports within the industry of problems implementing the process and the new documentation that comes with it.”

So how is the housing market actually doing?

A better way to look at how well the housing market is doing is to look at the Foot Traffic Report from NAR which quantifies the number of prospective buyers that are actively looking for a home at the current time:

Foot Traffic Growing | Keeping Current Matters

We can see immediately that demand to buy single family homes is increasing over the last few months – not decreasing.

Bottom Line

No matter what last month’s sales numbers show, the housing market is still doing well as demand remains strong.

Building Family Wealth Over The Next 5 Years

Building Family Wealth Over The Next 5 Years | Keeping Current Matters

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 purchases and closes 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 latestsurvey, here is how much value that $250,000 house will gain in the coming years.

Family Wealth Earned with Home Equity | 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.

Home Prices: Where Are They Headed Over The Next 5 Years?

Home Prices: Where Are They Headed Over The Next 5 Years? | Keeping Current Matters

Today, many real estate conversations center on housing prices and where they may be headed. That is why we like the Home Price Expectation Survey.

Every quarter, Pulsenomics surveys a nationwide panel of over one hundred economists, real estate experts and investment & market strategists about where they believe prices are headed over the next five years. They then average the projections of all 100+ experts into a single number.

The results of their latest survey:

Home values will appreciate by 3.9% by the end of 2015, 3.4% in 2016 and 3.1% in each of the following four years (as shown below). That means the average annual appreciation will be 3.2% over the next 5 years.

Projected Mean Appreciation | Keeping Current Matters

The prediction for cumulative appreciation rose from 18.1% to 21.6% by 2020. Even the experts making up the most bearish quartile of the survey still are projecting a cumulative appreciation of 13.8%.

Cumulative House Appreciation | Keeping Current Matters

Bottom Line

Individual opinions make headlines. We believe the survey is a fairer depiction of future values.