Which Downpayment Strategy is Right for You?

Downpayment
What downpayment strategy is for you?

You’ve most likely heard the rule: Save for a 20-percent down payment before you buy a home. The logic behind saving 20 percent is solid, as it shows that you have the financial discipline and stability to save for a long-term goal. It also helps you get favorable rates from lenders among other benefits.

But there can actually be financial benefits to putting down a small down payment—as low as three percent and sometimes no-money down—rather than parting with so much cash up front, even if you have the money available.

THE DOWNSIDE

The downsides of a small down payment are pretty well known. You’ll have to pay Private Mortgage Insurance for years, and the lower your down payment, the more you’ll pay. You’ll also be offered a lesser loan amount than borrowers who have a 20-percent down payment, which will eliminate some homes from your search.

THE UPSIDE

The national average for home appreciation is about five percent. The appreciation is independent from your home payment, so whether you put down 20 percent or three percent, the increase in equity is the same.  You may find that even with low or no money down, the interest rate and mortgage insurance, you are paying less than or about the same as you are currently paying for rent.  It could make sense for you to jump into the market and at least start to build equity.    If you’re looking at your home as an investment, putting down a smaller amount of downpayment can lead to a higher return on investment, while also leaving more of your savings free for home repairs, upgrades, or other investment opportunities.

THE HAPPY MEDIUM

Of course, your home payment options aren’t binary. Most borrowers can find some common ground between the security and advantages of a traditional 20 percent and an investment-focused, small down payment.

(Keep in mind that besides downpayment, buyers typically must also pay closing costs in addition to whatever minimum downpayment may be required.  Depending on the market and your loan product, sellers may contribute none, some or all of your closing costs.)

To learn more about what is involved in purchasing a home, don’t hesitate to contact me for a complimentary home buyer consultation.

 

Alabama First-Time Homebuyer Savings Account!

Becoming a homeowner is a big step with big rewards. However, it can also be a challenge, especially when it comes to saving for a down payment. Thanks to a new law that goes into effect in 2019, Alabamians will be able to save for a down payment with the First-Time Homebuyer Savings Account Program, an Alabama state tax-free savings account dedicated to the purchase of your first home. It also applies to those re-entering the housing market if you haven’t owned a home in the last 10 years.

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Individuals or couples can open one of these tax-free savings accounts at any local bank, credit union or other financial institution in Alabama.

 

 

The principal deposits and earnings will be deductible on your state income taxes. Savings from the account can be used to pay for the down payment and/or closing costs for the purchase of a single family dwelling.

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Mythbuster: Many people believe that they need to put 20% down to purchase a home.

 

 

The average down payment is actually closer to 11%. In many cases, the down payment can be even lower than that.  In our area, there are often low money down options–and your savings may be used for closing costs!

If you want to own a home, opening a tax-free savings account through the First-Time Homebuyer Savings Account Program is an important first step in making your dream a reality. To learn more about this program contact me, your local bank or credit union, and view the Infographic.

Information courtesy of Alabama Association of Realtors.

Secrets to a Stress Free Purchase!

Are you in the market for a new home or  thinking about it?

Either way these tips can help you prepare and better understand the process once you make the decision to move forward!

STEP 1:  Lay the groundwork. 

These are things you can (and should) be doing right now even if your home purchase is months or even years ahead!  It is especially important to assess your financial situation, including your credit status, money for downpayment and closing, and how much you can and want to spend on your home.  The sooner you sort this out, the sooner you can set your timetable to get your new home.  Check out the infographic below for more details!

STEP 2:  Work with an agent.

Even if you are just getting started in the process, you can still work with a Realtor®.  A Realtor® can help you understand the steps in the process, what to expect and how to prepare,  and will coach you on navigating the real estate market place.

STEP 3:  Communicate effectively.

The team involved in your home purchase consists of your Realtor®, lender/banker, inspector, any other agent involved in the property listing, and others who have a role in making the home purchase come together.  Your Realtor® serves as a coordinator to ensure the transaction goes smoothly with all involved.  It is essential that you communicate effectively with the team, but in particular with your Realtor® who can help facilitate communications with everyone else on the team.

STEP 4:  Be patient, persistent and decisive.

This is another really important area where your Realtor® can be invaluable.  There are times in the process where you need to be patient and wait for the process to move forward, but there are also times when some action needs to be taken.  Your Realtor® can help you through these steps and help you through the decision process so your transaction goes as smoothly as possible with the least amount of stress!

Step 5:  Be flexible.

Keep in mind that it may take some home improvements or even multiple moves to reach your goal of the totally perfect home of your dreams.  It’s important to dream, but also to be flexible with the process as you take the steps to move closer to living your dreams.

Check out the infographic for more details:

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Secrets for a Stress Free Home Purchase

Thinking of buying a home now or in the future?  It’s not too early to contact me to help you understand the process and get familiar with the market.  Contact Me to arrange a complimentary consultation.

Money! Part 1

Are you one of those people who wakes up at night thinking about money?

Sometimes the thoughts keep us from even getting to sleep.  Sometimes they creep up even during the day.  Usually the thoughts are questions like: How to get more?  How to pay the bills?  Will I ever have enough to live, let alone to ever afford the finer things in life?  How am going to make it?  What if the car breaks–how can I afford to fix it?  These thoughts can be a simple case of overanalyzing, or it could be unhealthy worry, stress and anxiety that takes away our joy and interferes with our relationships and our health.  I can relate because I’ve been there–but more about that another day….

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If you don’t have money concerns, good for you!  You may consider yourself extremely special!

Either you have learned how to manage your finances effectively, manage stress well, or on the downside perhaps you haven’t given your situation much thought.   Many of us get up and go to work everyday and go through life paycheck to paycheck and squeak by, thinking that’s the way it is supposed to be.

If you are one of those who are concerned about their finances though, you have plenty of company.

A recent report from the American Psychological Association (APA)¹ indicated that money (62 percent) and work (61 percent) remain among the top common stressors for Americans.  An article earlier this year from CNBC² noted that 43 percent of adults polled identified unexpected expenses and 34 percent identified simply making ends meet as their primary financial concerns.  The article goes on to say that fewer than half of adults have saved $1000 to cover an emergency–meaning they are basically going pay check to pay check.  Does that sound familiar?

Not only do most American’s lack sufficient savings to cover emergencies, but they are also racking up credit card debt to record-breaking levels.

Earlier this month, BizJournalsreported that credit card debt is on the upswing, up 8.6% over last year, with the average American adult with over $4,000 in credit card debt and $8,683 per household.  Credit card companies are charging higher interest rates, and according to Credit Card Catalog4, average rates are moving up to 20% for new cardholders.  Existing cardholders are also seeing increased rates.  Do the math, and see how much the credit card company is making each year on that balance…and how much consumers (you) are paying to borrow that money.

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Fun (not-so fun?) fact about worrying about money:

Worrying about money is bad for your health.  People who worry about their finances have higher risks of significant health problems.  Worrying about money can affect your health in more ways than you may realize. Research reported in Business News Daily has established that the risks of several significant health problems increase when people worry about their financial situation.   In fact, people with high stress over their finances were found to be twice as likely to have a heart attack versus those not worried.  And health problems weren’t limited to those of the heart—digestive tract problems, headaches and migranes, depression, and significantly higher levels of muscle tension and low back pain were reported.   And you already may have thought that you had enough to worry about!

The good news is that there are some proven methods to get your finances under control and to reduce worry and stress.

Business News Daily reported that people who take an active role in planning and learning about their finances were less stressed and more confident in their financial situations.  Stay tuned for more info about how you can feel better about your finances, get your finances in order, and fulfil your destiny.

And if you can’t wait for Part 2, feel free to contact me.

Links to References:

1APA Stress in America report 2017

2CNBC Article

BizJournals

4Credit Card Catalog

Business News Daily

How big of a home do you need?

When buying a new house, it’s easy to get distracted by size and think that bigger is better. However, depending on your situation, the opposite may be true.

So how can you determine if your new home is too small, too big, or “just right?” You’ll want to consider these elements.

backyard-house-lights-32870What’s Your Long-Term Goal?

How many years do you see yourself in this house? Is this the place where you want to raise your kids and retire?  Do you expect to have other family members  live with you now or in the future, such as an aging parent, sibling, or adult children?  If not, then a larger size home may not be as crucial as you think. Consider the fact that you will likely move again, which means that you can upgrade or downsize in the future if necessary.  Many first time buyers start out with an entry level home and then leverage their equity in the future toward their next home when it’s time for a move.

What’s Your Financial Limit?

For the most part, you don’t want more home than you can truly afford.  Keep in mind that the cost of ownership no only includes your regular housing expense such as mortgage, taxes and insurance but also includes other expenses such as maintenance costs and utility costs that tend to escalate with the increased size of the home. While you may be getting that promotion in a couple of months, you can’t buy now expecting to have more money in the bank later.  This is especially important for commission based consumers who are not guaranteed a regular paycheck.  Overextending your financial reach is always a bad move, so it’s best to avoid putting yourself (or your family) in that position.

How Many People are Living Here?

In a perfect world, everyone would be able to have their own bedrooms, but  that’s not always possible or practical.  However, more and more multi-generational families are in the housing market, and are looking for multiple main bedroom suites within the home.  When thinking about this situation, consider how imperative it is to have sufficient space for everyone, and what it will do to your budget.  Also, keep in mind how long you may expect to have a certain number of people living with you, if you need guest quarters, or must have the flexibility of multiple areas of personal space.architecture-daylight-driveway-277667

Overall, buying a home should be about your current needs with an eye toward how you plan to grow into space in the future–or on the other hand how you may eventually want to downsize your living area. Don’t buy big for the sake of showing off – in the end, you’ll probably regret it.  

To see a list of  Central Alabama area homes for sale, check out my home search site at:  Search Central Alabama Homes.

Buy or Rent? What should you do in 2018?

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Do you sometimes think you are throwing away your money on rent?  With homeownership there are many advantages as shown in the graphic, but one of the biggest advantages is that at the end of the time period of your mortgage you will OWN THE PROPERTY and your monthy expenses will be greatly reduced!  With renting, you will never own the property, but you are buying it for the landlord!

Did you know that the average cost to rent in the Central Alabama area is over $800/month?   That amount is strictly for your rent to the landlord and does not include your renters insurance, any fees, or utility costs that you need to pay in addition.  (Data from the US Census American Community Survey).

Even if you are spending less than the average of about $800 each month for your rent, take a look at this chart and see how much money you will spend each year as you continue to rent.  And if you are spending more, you may be even more shocked to see just how much you will have paid over the course of just a few years!

Cost of Renting Over TimeThe median total monthly home owner costs are under $1200/month in our area.  This value is the monthly median housing expense for all homes in the area that are mortgaged.  The statistic includes the median cost of the mortgage AND taxes, insurance, and utilities.  (Data from the US Census American Community Survey).   And of course your monthly mortgage payment and housing expenses may be significantly less or more than $1200/month depending on the price of the home you purchase and your financing terms and operating expenses.

In our area we are fortunate that there are a number of affordable homes available.  Our  median  home value is between $122,000 and $141,000 depending on the county, well below the national median home value of $203,000 for homes with a mortgage.  (Data from the US Census American Community Survey.)   We also have a number of financing programs available to individuals that require little or no money down and will consider purchasers with credit scores in the 600 range (and above of course!)  You don’t need a ton of money or have perfect credit to purchase a home.

If you are interested in learning more about how you can make home ownership a reality, contact me and I’ll be happy to help you get started.

If you want to do some more research, feel free to take a look at this rent vs buy calculator provided by Realtor.com and see how things look for your situation.  https://www.realtor.com/mortgage/tools/rent-or-buy-calculator/

 

Dog Friendly Dwellings and More…

Pups at homeIt may come as no big surprise that pets have their preferences when it comes to the home they share with you. 

Check out my December Newletter here for ideas to make your home a dog-friendly dwelling and other useful news.

 

The Consumer’s Guide to Hiring an Amazing Real Estate Agent

Amazing RE CG Superhero

When you’re buying or selling a home, it’s crucial to work with a qualified real estate agent. Not just a professional, but an amazing agent and a market expert. So how do you ensure you’re hiring an amazing real estate agent?

There are currently more than two million real estate professionals in North America.1,2 With so many options to choose from, how does a prospective home buyer or seller choose the right agent or broker? According to the National Association of Realtors®, trust and reputation are the top deciding factors consumers use when hiring an agent.3

But how do you measure trust and reputation … and what criteria can be used to help you make your decision?

In this guide, we’ve outlined the top attributes that amazing agents possess, as well as the questions you can ask to make sure you’re working with the right market expert to achieve your real estate goals.

5 ATTRIBUTES OF AN AMAZING AGENT

Not all real estate professionals are the same. Following are five key attributes of amazing agents to help you understand what makes top agents and market experts stand apart from the competition:

1. A Pricing Specialist: For buyers, amazing agents have a strong understanding of market trends to help you identify and secure a deal to ensure you get the home you want, within your desired budget, and at a reasonable price. For sellers, market experts have experience pricing homes optimally for the market, helping you sell for your desired price, and avoid costs like additional mortgage and utility payments.  

Takeaway: Whether buying or selling a home, pricing can be tricky. Market experts can help navigate best-possible pricing strategies, and also secure the home you want within your budget.

2. An Effective Time Manager: The average agent may not be utilizing the latest tools and technology to make the transaction easier and more cost effective for you. Market experts have tools and strategies at their disposal to minimize the amount of time you spend on the process. For sellers, they can also ensure you only deal with qualified buyers, not “window shoppers” who waste your time. For buyers, a market expert knows how to prioritize your needs and wants to find you the ideal home within your budget, without wasting your time on houses that aren’t a fit or are likely turn up major issues in an inspection.

Takeaway: Even a well-intentioned agent may not have the skills, tools or technology to make the experience easy for you. There are lots of hidden activities that may take up unexpected time, and a market expert will save you time and energy.

3. A Market Insider: While most agents can pull market stats about a neighborhood, community or city, they may not understand important trends or developments that would affect your transaction. Market experts live and breathe local real estate and know the trigger points for buying and selling in your market. We also stay current on effective marketing and negotiation practices, resulting in our track record of success.

Takeaway: An experienced real estate agent is often the best source of information about a city, neighborhood, or even street … we’re literally conducting market research every day.

4. A Strong Negotiator: Amazing agents truly set themselves apart in their ability to negotiate. Real estate negotiations take skill, experience and a knowledge of how to fight for your client’s best interests. While any agent can enter negotiations to buy or sell a home, experienced Realtors understand what to do before entering negotiations (establishing the upper hand), as well as during the process (when to offer or accept concessions) in order to set up the best outcome to represent your interests.

Takeaway: Working with a market expert will help ensure you get the best deal on your terms, not just the fastest deal.

5. An Effective Closer: Closing a deal fast is often a good thing. However, top real estate professionals know how to not only achieve your real estate goals quickly, but in the right way to avoid pitfalls. Just like negotiations, the paperwork and process of closing a real estate transaction are complicated. Market experts have a strong understanding of the contracts, timelines, clauses and contingencies within the closing process.

Takeaway: Real estate transactions often involve a significant investment, so even a small mistake can mean serious trouble. With that in mind, it’s best to work with a true market expert.

5 QUESTIONS TO ASK YOUR REAL ESTATE AGENT

The first step would be to “shop around.” Many people work with the first agent they come across without a firm understanding of their level of experience or education. It’s always a good idea to interview a number of agents before selecting one. If you’ve gotten referrals from people you trust, then you may only need to interview 2-3 agents.

However, it can be tough to know what to ask in the interview process. Here are some questions that can help you qualify the best agent to help you achieve your real estate goals:

1.     Can you send me some information about yourself? Look for professionalism and consistency. What are their accomplishments? See how they approach their work. If they’re a newer agent, that’s ok, ask about their specialized training, previous relevant work accomplishments, and their team’s dynamic and accomplishments.

2.     How long have you been in real estate? While longevity can be important, don’t be fooled by just sticking with the status quo.  It is more important to be up-to-date.  Also, consider the quality of transactions they have closed or been involved in.  So feel free to also ask: “What’s your track record?”

3.     What will you do to keep me informed? Will the agent be able to meet your expectations? Determine how much communication you want, and then find an agent who will give you the attention and time you deserve.

4.     Can you provide me with further resources I may need? From market reports and pricing trends to lenders, inspectors, and reference materials on school performance and crime statistics, top agents should have resources at their disposal … or know where to find them.

5.     Seller only: Can you share with me your plan to market my property? Many agents will simply put your home in the MLS and wait for it to sell. An amazing agent should have a detailed plan of how to get your home exposure on social media, to their local networks, and more.

GET STARTED

Now that you’re armed with the 5 Attributes of Amazing Agents and the Top Questions to ensure you work with the best possible real estate agent, you’re ready to start interviewing agents.

We’d love an opportunity to win your business. Schedule a free consultation with us to find out how true market experts can help you achieve your real estate goals!

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Sources:

  1. National Association of REALTORS – https://www.nar.realtor/field-guides/field-guide-to-quick-real-estate-statistics
  2. Financial Post – http://business.financialpost.com/personal-finance/mortgages-real-estate/canada-housing-bubble-agents/wcm/b49d4e3a-bd8d-4d1c-9566-bd3d80c8e23a
  3. National Association of REALTORS –https://www.nar.realtor/reports/highlights-from-the-profile-of-home-buyers-and-sellers