3 Questions You Need To Ask Before Buying A Home
If you are debating purchasing a home right now, you are probably getting a lot of advice. Though your friends and family have your best interests at heart, they may not be fully aware of your needs and what is currently happening in the real estate market.
Ask yourself the following three questions to help determine if now is a good time for you to buy in today’s market.
1. Why am I buying a home in the first place?
This is truly 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.
For example, a study by realtor.com found that “73% said buying in a good school district was “important” in their search.”
This report supports a study by the Joint Center for Housing Studies at Harvard University which revealed that the top four reasons Americans buy a home have nothing to do with money. The actual reasons are:
- A good place to raise children and provide them with 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 Existing Home Sales Report from the National Association of Realtors (NAR), the median price of homes sold in February (the latest data available) was $249,500. This is up 3.6% from last year. The increase also marks the 84th consecutive month with year-over-year gains.
Looking at home prices year over year, CoreLogic is forecasting an increase of 4.6%. In other words, a home that costs you $250,000 today will cost you an additional $11,500 if you wait until next year to buy it.
What does that mean to you?
Simply put, with prices increasing, it may cost you more if you wait until next year to buy. Your down payment will also need to be higher in order to account for the higher price of the home you wish to buy.
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.
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.
Slaying the Largest Homebuying Myths Today [INFOGRAPHIC]
- The average down payment for first-time homebuyers is only 6%!
- Mortgage interest rates have been on the decline since November! Hop in now to lock in a low rate!
- 88% of property managers raised their rents in the last 12 months!
- The average credit score on approved loans continues to fall across many loan types!
Homebuyers Shouldn’t Worry About 2008 All Over Again
Last week, realtor.com released a survey of active home shoppers (those who plan to purchase their next home in 1 year or less). The survey asked their opinion on an impending recession and its possible impact on the housing market.
Two major takeaways from the survey:
- 42% believe a recession will occur this year or next (another 16% said 2021)
- 59% believe the housing market would fare the same or worse than it did in 2008
Why all the talk about a recession recently?
Over the last year, four separate surveys have been taken asking when we can expect the next recession to occur:
- The Pulsenomics Survey of Market Analysts
- The Wall Street Journal Survey of Economists
- The Duke University Survey of American CFOs
- The National Association of Business Economics
70% of all respondents to the four surveys believe that a recession will occur in 2019 or 2020 with an additional 18% saying 2021.
However, we must realize that a recession does not mean we will experience another housing crash. According to the dictionary definition, a recession is:
“A period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.”
During the last recession, a dramatic fall in home values helped cause it.
However, according to research done by CoreLogic, home values weren’t negatively impacted as they were in 2008 during the previous four recessions:
During the four recessions prior to 2008, home values depreciated only once (at a level that was less than 2%). The other three times home values appreciated, twice well above the historic norm of 3.6%.
If there is an economic slowdown in our near future, there is no need for fear to set in. Most experts agree with Ralph McLaughlin, CoreLogic’s Deputy Chief Economist, who recently explained that there’s no reason to panic right now, even if we may be headed for a recession.
“We’re seeing a cooling of the housing market, but nothing that indicates a crash.”
10 Steps to Buying a Home [INFOGRAPHIC]
- If you are thinking of buying a home, you may not know where to start.
- Here is a simple list of 10 steps that you will go through to purchase a home.
- Make sure to ask your agent for details about each step and what else may be required in your area!
Your Tax Refund Is The Key To Homeownership!
According to data released by the Internal Revenue Service (IRS), Americans can expect an estimated average refund of $3,143 this year when filing their taxes. This is down slightly from the average refund of $3,436 last year.
Tax refunds are often thought of as ‘extra money’ that can be used toward larger goals. For anyone looking to buy a home in 2019, this can be a great jump start toward a down payment!
The map below shows the average tax refund Americans received last year by state.
Many first-time buyers believe that a 20% down payment is required to qualify for a mortgage. Programs from the Federal Housing Authority, Freddie Mac, and Fannie Mae all allow for down payments as low as 3%. Veterans Affairs Loans allow many veterans to purchase a home with 0% down.
If you started your down payment savings with your tax refund check this year, how close would you be to a 3% down payment?
The map below shows what percentage of a 3% down payment is covered by the average tax refund by taking into account the median price of homes sold by state.
The darker the blue, the closer your tax refund gets you to homeownership! For those in Oklahoma looking to purchase their first homes, their tax refund could potentially get them 85% closer to that dream!
Saving for a down payment can seem like a daunting task. But the more you know about what’s required, the more prepared you can be to make the best decision for you and your family! This tax season, your refund could be your key to homeownership!
Do 46 Million Millennials Know They Are Mortgage Ready?
Many have written about the millennial generation and whether or not they, as a whole, believe in homeownership as part of attaining the American Dream.
Millennials have taken longer to obtain traditional milestones than the generations before them, such as getting married, having kids, and buying a home. However, that does not mean that they do not still aspire to achieve those things.
History shows that people tend to buy their first home around age 30. Nearly 5 million millennials will turn 30 in the next two years. This will continue to fuel demand for housing.
This is also one of the many reasons why the millennial homeownership rate has continued to grow over the past few years. 48.4% of Americans between the ages of 30-34 now own a home.
There are over 46 million millennials (33% of the generation) who are considered “Mortgage Ready”, meaning they meet the qualifications to be approved for a mortgage today!
- a FICO Score ≥ 620
- a Back-End Debt to Income Ratio ≤ 25%
- no Foreclosures or Bankruptcies in the last 7 years
- no severe delinquencies in 1 year
Rob Chrane, CEO of Down Payment Resource, commented on the findings of the report,
“We now know there are millions of buyers with the income & credit necessary to qualify to buy a home. The biggest question is:
Do they know it? …Unfortunately, many renters don’t investigate homeownership simply because they don’t believe it’s an option.”
The good news is that more and more millennials are realizing that they can afford a home now. Even so, more can be done to increase awareness of low down payment programs to attract even more of this generation.
New data from realtor.com shows that in December, millennials accounted for 42% of all new home loans originated in the month. This is more than any other generation.
If you are one of the many millennials who may be “Mortgage Ready” but are unsure what your next steps should be, let’s get together to help guide you on your path to homeownership!
What Credit Score Do You Need To Buy A House?
There are many misconceptions about the credit score needed to buy a house. Recently, it was reported that 24% of renters believe they need a 780-800 credit score to be considered for a mortgage. The reality is they are misinformed!
Only 25% of the Americans have a FICO® Score between 740 and 800. Here is the breakdown according to Experian:
- 16% Very Poor (300-579)
- 18% Fair (580-669)
- 21% Good (670-739)
- 25% Very Good (740-799)
- 20% Exceptional (800-850)
Randy Hopper, Senior Vice President of Mortgage Lending for Navy Federal Credit Union said,
“Just because you have a low credit score doesn’t mean you can’t purchase a home. There are a lot of options out there for consumers with low FICO® scores,”
There are many programs available with low or no credit score requirement. The Federal Housing Administration (FHA) now requires a minimum FICO® score of 580 if you want to qualify for the low down payment advantage. The US Department of Agriculture (USDA) does not set a minimum credit score requirement, but most lenders require a score of at least 640. Veterans Affairs (VA) loans have no credit score requirement.
As you can see, none of them are above 700!
It is true that the average FICO® score for all closed loans in January was 726, but there are plenty of people taking advantage of the low credit score requirements. Here is the average FICO® Score of closed FHA Loans since April 2012 according to Ellie Mae:As you can see, that number has been dropping for the last seven years. As a matter of fact, the average FHA Purchase FICO® Score reported in January 2019 was 675!
One of the challenges is that Americans are unsure about their credit score. They just assume that it is too low to qualify and do not double check. Credit.com confirmed that only 57% of individuals sought out their credit score at least once last year.
“Since October 2009, the average year-over-year FICO® Score has steadily and consistently increased, from a low of 686 in 2009 to the latest high of 704 as of 2018.”
Here is the increase in the average US FICO® Score over the same period of time as the graph earlier.
At least 84% of Americans have a score that will allow them to buy a house. If you are unsure what your score is or would like to improve your score in order to become a homeowner, let’s get together to help you set a path to reach your dream!
Don’t Let Your Luck Run Out! Buy A Home This Spring [INFOGRAPHIC]
- Interest Rates for a 30-year fixed rate mortgage have dropped to 4.41% from near 5% in 2018.
- Take advantage of more inventory coming to market in the spring to find your dream home!
- Buying now will allow you to start earning equity today!