Five Year Rule for Home Equity

Housing recovery 250Rule of  thumb is to plan on staying in your home at least five years after purchasing a home. Why? You’ll need equity in order to sell the home without bringing cash to the closing table.

Equity means ownership. Building equity takes time, usually about five years for typical households to be able to sell at a profit, break-even, or without losing money.

This five-year rule can change depending on what state you live in, how much you put down to reduce the size of your loan, and how healthy the housing market is in your area. In some states, you could pay as much as 14% in closing costs and fees to buy and sell a home.

These include the fees to close your original loan, Realtor fees when you sell, title and/or abstract company fees, attorneys fees, surveys, home inspections, and so on.

Building equity can be challenging.

 
With any mortgage loan, you’ll find that the first five years’ worth of payments go more toward paying interest to the lender than reducing your principal obligation.

That said, there are four ways you can build enough equity so you can sell at break-even or better:

  1. Put more money down. If you put 20 percent down, you’re covered. If you put down 3.5, 5, or 10 percent, you’ll have a little equity, but not enough to sell your home anytime soon.
  2. Pay your mortgage on time and in full. Some of your principal will be reduced along with interest. The longer you pay, the more principal you’ll reduce.
  3. Make additional payments toward reducing your principal. You can add an extra $50, $100 a month, $500 or whatever you want as extra payment.
  4. Let the housing market raise the value of your home. The housing market typically rises one to two percentage points above inflation annually, but for nearly a decade, the market has been volatile. Many homes gained and lost significant value. As the market stabilized, home prices have risen again, replacing lost equity and adding more value in most markets.

Putting money into your home is the most reliable way to build equity. Equity gives you freedom to sell whenever you want. If you don’t have much equity, you’re better off following the five-year rule before you sell.

If you are buying or selling a home in the greater Phoenix area, please get in touch with me.
I’m happy to tell you about my listing services or help you shop for a new home! 480 688-2000

 

3 Great Reasons to Buy a Home Now

Buy a HomeIf you are thinking about purchasing a home and decided to wait until after the holiday season, you may want to think again….3 opportunities exist for the home buyer now that may not be available come 2014.

3 Great Reasons to Buy a Home Now

 
Fixed Mortgage Rates Declined

In Freddie Mac’s results of its Primary Mortgage Market Survey®, average fixed mortgage rates declined amid weaker manufacturing growth and declines in overall inflation rates.

  • 30-year fixed-rate mortgage (FRM) averaged 4.22 percent with an average 0.7 point for the week ending November 21, 2013, down from last week when it averaged 4.35 percent. A year ago at this time, the 30-year FRM averaged 3.31 percent.
  • 15-year FRM this week averaged 3.27 percent with an average 0.7 point, down from last week when it averaged 3.35 percent. A year ago at this time, the 15-year FRM averaged 2.63 percent.
  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.95 percent this week with an average 0.5 point, down from last week when it averaged 3.01 percent. A year ago, the 5-year ARM averaged 2.74 percent.
  • 1-year Treasury-indexed ARM averaged 2.61 percent this week with an average 0.4 point, unchanged from last week. At this time last year, the 1-year ARM averaged 2.56 percent.

Lenders Loosen Down Payment Requirements

Lenders’ tight underwriting standards have been blamed for sidelining many potential home buyers the last few years. But lenders may be showing signs of loosening up a bit.

The average down payment on a 30-year, fixed-rate mortgage fell 2.74 percent from the second quarter to 15.73 percent of the home’s value in the third quarter, according to a new report from LendingTree.

“Lenders are putting more focus on purchase mortgages and are adjusting minimum requirements to attract borrowers,” says Doug Lebda, LendingTree founder and CEO. “With home values improving, the risk of borrowers defaulting on loans has decreased, giving lenders more confidence to lend with less cash down from qualified borrowers.”

According to LendingTree, the states with the highest home values are also where down payments remain the highest percentages of the property price.

Aging Homes May Present Big Bargains

More than 70 percent of the U.S. housing stock was built prior to 1990, and an aging housing stock may present more opportunities for buyers searching for a bargain, according to RealtyTrac’s Aging Homes Analysis.

“The high percentage of homes that are at least 20 years old and likely in need of some major repairs is eye-opening,” says Jake Adger, chief economist at RealtyTrac. “However, given the low inventory of homes available for sale in today’s market, this challenge of aging U.S. housing supply can also be an opportunity for buyers looking for a bargain and home owners looking to update their living space and improve the value of their homes.”

Older homes often need upgrades for energy efficiency and may lack floor plans or amenities that home buyers desire today, according to RealtyTrac’s analysis.

On average, homes built prior to 1990 sold for $233,211 this year, compared to $256,292 for newer homes.

Buyers Jump in as Fixed Mortgage Rates Decline

Coin bank sitting on grass with hand putting in a coinJust when we thought the attractive low mortgage rates were starting to rise we find they are plunging again, presenting favorable rates for buyers in today’s market.

In Freddie Mac’s results of its Primary Mortgage Market Survey®, average fixed mortgage rates declined amid weaker manufacturing growth and declines in overall inflation rates.

Fixed Mortgage Rates

  • 30-year fixed-rate mortgage averaged 4.22 percent with an average 0.7 point for the week ending November 21, 2013, down from last week when it averaged 4.35 percent. A year ago at this time, the 30-year fixed-rate mortgageaveraged 3.31 percent.
  • 15-year fixed-rate mortgage this week averaged 3.27 percent with an average 0.7 point, down from last week when it averaged 3.35 percent. A year ago at this time, the 15-year fixed-rate mortgage  averaged 2.63 percent.
  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.95 percent this week with an average 0.5 point, down from last week when it averaged 3.01 percent. A year ago, the 5-year ARM averaged 2.74 percent.
  • 1-year Treasury-indexed ARM averaged 2.61 percent this week with an average 0.4 point, unchanged from last week. At this time last year, the 1-year ARM averaged 2.56 percent.

According to Frank Nothaft, vice president and chief economist, Freddie Mac: “Fixed mortgage rates fell this week on reports of weaker manufacturing growth and declines in overall inflation rates. Industrial production slipped by 0.1 percent in October, below the market consensus forecast of a 0.2 percent gain. The consumer price index also unexpectedly fell during the month. On an annual basis, consumer prices are up 1 percent, the smallest increase since October 2009.”

If you are buying or selling a home in the greater Phoenix area, please get in touch with me.
I’m happy to tell you about my listing services or help you shop for a new home! 480 688-2000

 

Why Shop for a Home During the Holidays?

Buying a Home during holidaysWhen you’re writing out the holiday shopping list, maybe it’s time to put your name on it and a home as the gift. If you’ve been considering buying a home, here are a few reasons why shopping for one during the holiday season can benefit you.

Yes, it may involve you really prioritizing your time; the holiday season is a busy time. But if you can make time to house-hunt and you have already been pre-approved so you know how much home you can afford, then this could be a very good experience. And it may lead you to a new home in time for Christmas!

Like many businesses, the holiday season can cause things to slow way down. That’s often the case for real estate. However, that doesn’t mean you won’t find eager sellers hoping you’ll make an offer on their homes. Even though there are parties, kids’ social activities and end-of-the-year work commitments, real estate sellers are still ready to let you step inside their homes to see if you’ll find one is a good fit.

Why Shop for a Home During the Holidays?

  • Get a Good Mortgage
  • Speedier Mortgage Process
  • Serious Sellers
  • Lower Home Prices
  • Less Home Buyers Shopping

When real estate slows down, that means mortgages slow down. So this is a good time to get a mortgage. There’s a chance your loan will move through the process faster. That doesn’t mean you will have lax guidelines, rather it means that if there are fewer loans to process, yours can move along faster.

Some say that you have fewer options because inventory drops during the holiday season. While that may be true, it doesn’t mean that every seller takes their home off the market. Sellers with their homes on the market during the end-of-the-year months are typically serious sellers. There may be tax reasons motivating a seller to sell before the end of the year which could create greater opportunities for negotiation. There’s likely a sense of urgency on the seller’s side.

Often home prices are lower in December than in other months. If you wait until the spring, you’re likely to wish you’d, at least, done some house-hunting. Industry reporting services often show home appreciation slows in the fourth quarter, making homes more affordable.

Since it is a busy time of year, you may find that there aren’t many buyers shopping for homes, which is exactly why this may be a good time to house-hunt. Fewer buyers could mean a great opportunity for you to make an offer and negotiate a favorable price. However, fewer homes to choose from could mean you have more difficulty finding precisely what you’re looking for. But too many homes can also create a no-win situation by confusing and overwhelming you.

Shop smart by making a list of the “must-have” and the “really-would-like” items. Carry the list with you or use a home-buyers’ app to keep it on your smartphone. It’s much like a holiday gift shopping list – better to know who you’re buying for, how much you want to spend, and, at least, an idea of what you’d like to get that person. Same goes for a home.

Simplify the house-hunting process by having some written notes about what you intend to buy. Of course, things do change, so be open to discovering that dream home that has something on your list you never knew you needed or wanted. Your list will just help you evaluate and prioritize which things in a home are most important to you. Then instead of unwrapping this holiday season, you might be wrapping up and packing up your belongings!

Written by Phoebe Chongchua for Realtytimes for REMAX

If you are buying or selling a home in the greater Phoenix area, please get in touch with me.
I’m happy to tell you about my listing services or help you shop for a new home! 480 688-2000

First Time Home Buyer Mistakes That Can Cost Thousands

Save thousands when buying a homeAre you buying a home? Would you like to save thousands? You can if you avoid 3 common mistakes home buyers make when buying real estate.

1. Buying More Than What You Can Truly Afford

Just because the bank says that you qualify a certain amount for a mortgage doesn’t mean that you have to choose a house at the very top of this price range. Many people get carried away and buy the most expensive house that they qualify for.

If something unexpected happens, they may find it difficult to keep up with their monthly mortgage payments later on.

Remember that you will also have student loan payments, vehicle costs, credit card bills, health insurance, groceries, retirement savings and other expenses, so make sure that your mortgage payments will comfortably fit within your budget.

2. Failing To Get A Home Inspection

Before buying a house, you should always have a professional inspection done. Not doing so is a big mistake. You don’t want to get stuck with hidden damage that could saddle you with the expense of ongoing repairs.

Hiring a professional to assess the home’s condition is absolutely essential before making your final decision.

3. Disregarding Your Future

When you are buying real estate, don’t just think about how the home will work for you in the immediate future. Also consider what your needs will be five, ten or even 20 years from now.

Find out the development plans for the neighborhood. Look for reputable schools if you intend to start a family. And consider whether the street’s home values are likely to increase or decline in the future.

Your Next Steps

Don’t let the home-buying process overwhelm you! Learn from these common first-time home buyers’ mistakes, so you can avoid them.

A great next step toward planning for your first home purchase is to consult with a trusted, licensed mortgage professional who is trained in providing the best advice on how a new home will affect your budget.

If you are buying or selling a home in the greater Phoenix area, please get in touch with me.
I’m happy to tell you about my listing services or help you shop for a new home! 480 688-2000

Home Builders Confidence Remains High

Home Builder's ConfidenceHome builders confidence is measured by The National Association of Home Builder HMI Index. This month’s HMI reading was 54 against expectations of a reading of 55. October’s reading was also 54 after being downwardly revised.

Readings over 50 generally indicate that a majority of builders surveyed are confident in current housing market conditions, but the current pause came after two months of decline in home builder confidence. While the short term index readings are lower than in past months, the HMI is currently 20 percent higher than last year.

David Crowe, chief economist for NAHB said that “the fact that builder confidence remains above 50 is an encouraging sign.” Mr. Crowe also cited federal debt and budget issues as factors that keep builders and consumers from building and buying homes.

Home Builders Concerned About Fluctuating Mortgage Rates 

Home builders are also subject to the impact of volatile mortgage rates, which can create affordability issues for first time and moderate income home buyers. There is some good news concerning mortgage rates as the Federal Reserve announced its plant to keep its quantitative easing program in effect in the coming months.

QE was implemented in 2012 and consists of the Fed purchasing $85 billion per month is treasury and mortgage-backed securities with the goal of keeping long-term interest rates and mortgage rates low.

Home builder confidence readings are not in synch with construction rates, as builder confidence was rapidly driven by excessive demand for homes against minimal inventories of available homes in many areas.

Components of November’s HMI provide more precise indications of builder confidence. November’s reading for confidence in sales of single family homes within the next six months fell from 61 in October to 60 in November.

Builder sentiment for current home sales was unchanged at 58 and the November reading for builder confidence in buyer foot traffic fell by one point from 43 in October to 42.

Regional Home Builder Confidence Readings Mixed

Regional builder confidence readings for November were as follows:

  • Northeast: This region gained 14 points with a reading of 44 for November.
  • South: Builder confidence rose by one point to a reading of 55.
  • Midwest: November’s reading declined by eight points to 54.
  • West: The reading for November was one point lower at 58.

Home sales are typically slower during the holiday season and winter months.

If you are buying or selling a home in the greater Phoenix area, please get in touch with me.
I’m happy to tell you about my listing services or help you shop for a new home! 480 688-2000

 

Don’t Go Shopping for a New Construction Without Your Real Estate Agent

Home Builder's ConfidenceYou have decided on new construction rather than a resale and you are ready to make the rounds of the Home Builders Model homes and developments.  The first thing you should so is call you Realtor who will act as a Buyers Representative in the buying process.  Why?  Well, the first thing you need to realize is that the new construction sales agent represents the developer and has their investment in mind. A real estate agent is someone who will be on your side. They’ll represent your interests and can help you.

Go Through The Process

If you’re looking at a specific development, the sales agent might offer you a discount if you sign without using a real estate agent. This is because the sales commission for the real estate agent usually comes out of the seller’s pocket.

However, most developers have this figure built into their price, so you might as well enlist a real estate agent’s help and advice — it’s free after all.

Decide If It’s A Smart Investment

Developers are invested in the property they’re trying to sell. They need to unload every lot in order to make a return on their investment, so it’s likely they don’t have your best interests in mind. A real estate agent will know what homes sell for in the area, what the school district is like and if it’s a good neighborhood. They’ll be able to recognize if it’s a good fit for your family.

Negotiate With Insider Knowledge

A real estate agent knows their market and usually the local gossip. If they’ve heard that a developer is willing to entertain low offers, then they might have clients that could buy in a neighborhood thought to be out of their price range. Also, they’ll know which upgrades a developer is likely to include in order to make the sale.

Decipher Confusing Paperwork

Buying property comes with a lot of paperwork. Contracts can be extremely confusing, so it’s always a good idea to have a seasoned veteran read over yours. A real estate agent has a great deal of experience with complicated contracts and knows what phrasing should be included and where sellers slip in sneaky wording.

From making sure the new construction is right for you to ensuring you get the upgrades you want and examining the contract with a fine-toothed comb, only your a real estate agent will represent your interests and get you the best deal.

 If you are buying or selling a home in the greater Phoenix area, please get in touch with me.
I’m happy to tell you about my listing services or help you shop for a new home! 480 688-2000

 

Beware of a Home That Keeps Haunting

haunted-houseWith the economic downturn, anyone dealing in real estate quickly became familiar with previously little-known terms such as foreclosure and short sale. Now that the housing market is picking back up and people are moving on, a new term is coming to light — zombie titles.

The Zombie Title

This is when a home has been vacated because the owners defaulted on their loan and their bank started the foreclosure process. However, for some reason or another the bank never completed the foreclosure and sold the home.

So, when the city starts fining someone for the overgrown grass and dilapidated structure, the homeowner who thought they were finished with the property gets the bill.

A Home That Keeps Haunting

Homeowners think they don’t own the property any longer and therefore try to move on by rebuilding their credit score and finding a new place to live. It can be a rude awakening to find out that not only do they still own a home they could have been living in, but also its long vacancy has caused it to fall into disrepair.

Its Spooking The Neighborhood

These vacant homes can decrease the value of a neighborhood. If the bank or the un-suspecting homeowner are neither one taking care of the property, then it can become overgrown and an eyesore on the block. It becomes a problem with no solution because the owner won’t want to invest any money in fixing up the property when the bank could come back with the foreclosure at any time.

Nail Shut The Foreclosure Coffin

Homeowners who have foreclosed on a home should double check that their bank actually followed through to closing on a sale. They could contact their lender or check public property records just to make sure. Otherwise, they could be haunted by their housing nightmare all over again.

Don’t let the zombie title of a past property haunt your future! Check with your bank to make sure you’re free and clear of your foreclosure. If you’d like more information on zombie titles or have other questions about local real estate, contact Debra Obrock  at: 480 688-2000
 

What Items are Excluded in the Sale of a Home?

Chandelier-300Before you list your home you should first decide what items you want to exclude in your home for sale. Items may include a chandelier that is a family heirloom or draperies custom-made to match your bedding. Sometimes it can be special plantings such as rose bushes and irises excluded from a home for sale. You may also hear excluded items referred to as “reserved” items.

In the Arizona real estate contract, certain items are spelled out that remain with the home, including but not limited to, window treatments, light fixtures, built-in sound systems, built-in furniture, attached outside cooking units, exterior landscaping and much more. When you list your Tulsa home for sale, make sure that you understand what all transfers with the home and exclude any items that you intend to take with you.

The exclusion area of the real estate contract is also used to identify items that shall not remain with the property.  Don’t assume Sellers will remove all their junk – if you want the contents of the storage shed cleared out, spell it out in the contract.

If you are going to sell your home regardless, it’s best to go ahead and pack that heirloom chandelier and replace with something attractive before you list your  home for sale. However, if you are only going to sell if you get a specific offer, it’s fine to exclude it in your MLS (Multiple Listing Service) listing.

Also in the Arizona real estate contract is a section to write in items you would like to remain with the property at no additional cost to the Buyer. Typical inclusions are refrigerator, washer and dryer. Be careful about what you ask for in this part of the contract, as Lenders do not want to see a list of personal items. If you want to ask for the Seller’s pool table or a specific piece of furniture, write that in a Supplemental Agreement.

If you are buying or selling a home in the greater Phoenix area, please get in touch with me. I’m happy to tell you about my listing services or help you shop for a new home! 480 688-2000

What to Look for During Final Walkthrough on Your New Home

checklist-The final walkthrough is your last opportunity to ensure that everything in the home is in working order and that there are no potential problems waiting for you when you take over ownership of the property.

By the time you get to the final walkthrough on your property, the home buying process is almost complete. However, it is still important to pay close attention to this final step, as it will be crucial in the success of your home purchase.

While conducting a final walkthrough of the property, give yourself enough time to look carefully at everything and not be rushed. You are looking for any new issues that might have arisen since the last time you viewed the home.

Once you close on the purchase the previous owners will not be obligated for fixing any damage. For this reason, you should schedule your walkthrough approximately 24 hours before closing on a home.

What You Should Look For?

When you are performing your walkthrough, here are some of the important issues that you should be watching out for:

  • Are all major appliances in working condition? Do they all have their warranties and owner’s manuals?
  • Do all of the light switches and outlets work?
  • Have any of the fixtures or appliances gone missing, even though the seller agreed to leave them behind?
  • If you have agreed on any repairs, has the seller had these repairs completed?
  • Are there any signs of damage (i.e. scratched walls or floors) as a result of the previous owner moving out?
  • Do all of the water faucets and toilets function as they should?
  • Check the exterior of the house, especially if there has been a storm or strong winds since your last visit.
  • Did the previous owner leave any garbage, extra furniture or unwanted items behind?

What To Do If You Spot A Problem?

If you find a problem when you are going through your walkthrough, there are a few options of what you can do. If the issue is very serious, you might choose to walk away from the deal completely. However, if the issue is not that significant you might decide that it is not worth losing your dream home over.

You could simply pay for the repair yourself, or postpone the closing until the seller fixes the problem. If the repair was agreed upon during the negotiations, you have a legal recourse.

If you’d like to work with a Realtor who oversees EVERY portion of the real estate transaction give Debra Obrock a call: (480) 688-2000 or send her an Email