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Predictions on Interest Rates for 2019 May Disappoint Buyers

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When purchasing a home, there are a number of variables that may influence or even dictate which home the buyer can afford.  Obviously the price of the home, the property taxes for a specific home as well as how much money the buyer has to use as a down payment all are important factors for home buyers to consider when zeroing in on a home to purchase.   However, there is another variable that truly can vary and that is the mortgage interest rate.

For the past several years, buyers in the US have been spoiled by rates that hovered near record low interest rates.  Small upticks in the rates may have alarmed some home buyers that disappointed to see how it changed their monthly payment.  Obviously, as the interest rates for mortgages increase, the monthly payment also increases and it could be a deal breaker for some buyers.  This is why it is important for prospective home buyers to continue to be aware of interest rates fluctuations.

Unfortunately, based on an article published in Keeping Current Matters “Where are Interest Rates Headed in 2019?”, Freddie Mac is expecting rates to continue to increase throughout 2019.  Nevertheless, even if rates inch closer to 5.3 by the end of 2019,  a glance back at the history of rates in the US over the past 40 or so years may offer a bit of relief.  It is still nowhere near the 18% homeowners in the 1980s had to work with.

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Is Buying a Home A Good Financial Decision?

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Recent news of rising mortgage rates, low housing inventory, and an increase in property taxes may sound alarming and scary to prospective home owners.  It might even make them question whether or not buying a house is right for them.  Despite the ups and downs of rates, prices and taxes, owning a home still has many benefits.

A recent post in the Dragas Communities Blog shares the top five reasons to purchase a home, according to a Harvard University study.  The top reasons listed in the article detail the financial benefits of purchasing a home.

For example, owning a home can allow a homeowner to have a leveraged investment, meaning they are many times borrowing money and, over time the homeowner is seeing an appreciation in their investment.  Additionally, the dreaded property taxes and mortgage interest that homeowners have to pay, they are, in fact, tax deductible up to a specific dollar amount.  Further, capital gains up to a certain dollar amount, made on the sale of the home are excluded from income when filing taxes.

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No Cash for a Down Payment? New Mortgage Programs Might Offer Options

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Would be home buyers who have been held back from purchasing a home due to a lack of cash for the down payment may be able to see their dreams become a reality, even without a hefty down payment. Both Freddie Mae and Freddie Mac have introduced home mortgage programs that require as little as 3% down payment.

According to an article published by Fox Business, written by Brittany De Lea, “These new products are designed to compete with the low-down-payment options offered by the Federal Housing Administration (FHA), which offers loans for as little as 3.5 percent down for those with a credit score of at least 580.”
Freddie Mae’s program is named Home Ready and applicants can get approved with credit scores as low as 620 . The program allows parents to co-sign, even if they will not reside at the home. The product is geared toward prospective home buyers in with low to moderate income; both first time and repeat home buyers can qualify for a Home Ready Mortgage.
Similarly, Freddie Mac’s program, Home Possible, serves to offer affordable, low down payment loans specifically to “homebuyers in high-cost and underserved communities”. Either first time or repeat home buyers can qualify, even with credit scores as low as 640.
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Housing Market Predictions: Are We In Store for a Crash?

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Could a housing market slowdown, or worse a housing market crash, be looming?  If Lawrence Yun’s, National Association of Realtors chief economist, analysis is correct, the answer is a resounding “no”.   In fact, the slowdown in the housing market that some areas are experiencing is due to “insufficient supply”, not a lack of demand by buyers.

In an article published by Realtor Magazine, many positive signs for the housing market are present.  For example, the article states “home price growth remains strong in markets across the country—about 5 percent on a nationwide basis so far this year”.

However, the negative effect of the lack of housing supply is that the prices are being driven into price ranges that price some buyers out of the market.  A solution to that issue,the article notes , would be to have builders increase the supply of homes available.

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Finding the Best Real Estate Agent: Tips and Considerations

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Buying and selling  a home might be one or the biggest personal financial transactions of your life.  It can be emotional, confusing and time consuming.  Many home owners and those looking to purchase a home will eventually look to a real estate professional to guide them through the process.

In an article published by US News and World Report, the author, Devon Thorsby, provides some helpful tips and suggestions for finding a real estate agent for your next real estate transaction.  Thorsby begins by suggesting that potential home buyers or those considering listing their home begin the process of searching or a real estate agent earlier rather than later.  A real estate agent can help make important decisions and suggestions early on that may help the process go more smoothly.

Its important, of course, to find the right agent.  Narrowing down what kind go real estate professional you need is important:  an agent, Realtor or broker; each provides a different level of service and expertise.  Having a prepared list of questions for a potential agent can help ensure that there aren’t any surprises or concerns late in the process.  You  want to be sure you feel comfortable with the type and level service the agent will provide and what the ultimate price of using the agent will be.

Read the entire article for more specific information and details about tools to use when selecting a real estate professional.

 

 

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Surprising New Trends Revealed in Recent Home Mortgage Data

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Freddie Mac recently released data on mortgage trends for the first quarter of 2018.  One figure that may surprise many:  almost half of new mortgages in the first quarter of 2018 were secured by first time home buyers.

According to the National Association of Realtors, the age of these first time home buyers is around 32 years old.  It would, therefore, seem that these first time home buyers are, in fact, millennials.  A generation entering the economy with student debt, rising home prices, rising interest rates and a shortage of homes for sale, many would not have expected them to account for 46 percent of the new mortgages.

According to an article written by Phashant Gopal published by Bloomberg, with the improving job market and access to easier credit regulations, this group has been moving out of the rental market and becoming home owners.  These young adults are aware that mortgage rates and home prices are increasing and have decided to enter the home ownership ranks before they are priced out.

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Tips for Protecting Real Estate Consumers from Costly Scams and Fraud

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If you were to ask a room full real estate professionals if any of their clients were victims of wire fraud during a real estate transaction, chances are there would be many who might raise their hands.  In fact, according to an article published by Realtor Mag, “The Threat of Wire Fraud is Real”, “Wire fraud topped the list as a sophisticated scam causing consumers to lose millions of dollars each year”.  As alarming as that idea may be, real estate professionals can put some simple safe guards in place to help protect their clients.

In the article, written by Erica Christoffer and Graham Wood, a number of suggestions are touched upon.  For example, “If you or your agents do engage in a wire transfer with a client, call them on the phone immediately prior to the transfer of funds so they know they’re sending money to the legitimate source.”  Additionally, make your clients aware that you do no discuss personal financial information over e-mail and review with them what your communication practices are.  Hopefully, with this mutual understanding between you and your client, if they receive questionable e-mails, a red flag will be raised immediately before any sensitive financial information is shared.

Clients should also be reminded to not only use strong passwords, but update them regularly.  Perhaps even updating a password just before any wire instructions are sent.  As a real estate professional, you should also follow these guidelines for strong and updated passwords.

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Scams Targeting Homeowners: Be Sure You Don’t Fall Victim

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It seems that almost daily we read or hear reports and warnings of scams aimed at consumers which can result in significant financial losses.  It is imperative that consumers remain vigilant in protecting their assets and investments; especially in the age of hacking, privacy breaches, robo-calling and phishing scams.  It can be overwhelming to keep up with the warnings; however, a recent article published by U.S. News and World Report by Devon Thorsby offers some sound and easy to follow advice.

For homeowners and prospective homeowners, down payments sent via wire transfers have ended up in the hands of high tech thieves instead of their mortgage companies.  Emails sent from mortgage brokers to their clients with wire transfer instructions can get intercepted by hackers.  The hackers are then able to change the wire instructions in the e mail prior to the customer receiving the message.  In the end, the customer receives an e mail with modified wire instructions and then ends up wiring the funds meant for a home closing directly to the hackers account.

To avoid this type of scam, one broker indicated “she instructs all of her clients to have the title company and bank communicate directly…and verify where the money is going, what the value number is and what the account number is… in any other situation where you have to authorize your bank or title company to do anything, rather than scanning and emailing any personal information or signed authorization, [she] instructs clients to send it via fax to eliminate the possibility of theft from an email hack.”

Thorsby provides additional advice to avoid telephone phishing scams that can result in financial hardships.

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Sound Advice for First Time Home Buyers

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The real estate market has been improving significantly over the past several months.  Home prices are on the rise and homes aren’t sitting on the market for very long before going under contract.  This is great news for home sellers, but challenging for those looking to purchase a home.  First-time homeowners might find the conditions overwhelming and intimidating.

CNN Money published an article written by Beth Braverman which outlines several mistakes first-time home buyers make and tips for avoiding these pitfalls.  Important reminders noted include getting pre-approved for a mortgage early in the home buying process, not maxing out the mortgage limit provided by the lender and keeping emotions out of the decision making process.

It is highly recommended that all prospective home buyers get pre-approved for a mortgage early in the home buying process.  It allows the buyer to have an idea of how much money a bank is willing to lend them for a home.  As Braverman points out, “Second, it shows sellers that you’re serious and gives you slightly more standing if you’re competing for homes with all-cash buyers.”  This can be an important advantage in a competitive market.

However, upon receiving a pre-approval, home buyers maybe anxious to bump their budget up to the maximum amount the bank has approved.  It is wise to review a detailed budget to be sure the monthly budget can handle the mortgage payment, including potential income changes and other unexpected housing expenses.

As the home search continues, there will be bumps in the road, houses lost to other buyers or dream homes priced just outside the budget.  Braverman warns, “In that kind of environment, it’s easy to fall in love with a house that’s out of your budget, or get caught up in the heat of a bidding war and end up paying more than you expected.”  Being level headed and taking emotions out of the decision making process will ensure financially wise decisions are made.

For more details and additional tips, read the entire article.

 

 

 

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Low Inventory is Concerning Real Estate Professionals

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The low inventory of homes for sale is causing some real estate companies to panic a bit.  The number of homes for sale March 2017 compared to March 2016 fell seven percent according to the National Association of Realtors.  In an article published by CNBC by Dian Olick, she quotes Glenn Kelman, CEO of Seattle-based Redfin, a real estate firm, “”The inventory is reaching historic lows. It’s never declined faster than it did last month. It’s freaking us out — it’s affecting our business; it’s limiting our sales.”  

The cause of this low inventory issue can be attributed to a few factors.  To begin, many homeowners are deciding to become landlords.  Instead of selling a home when moving on, homeowners are holding on to their home and renting it out.  Another reason is new home construction is declining.  On average, home builders are building about 18 percent fewer homes than the historic average.

The good news for home owners looking to sell, homes are selling quickly and some are even selling above list price.  Homes in April 2016 went under contract in 50 days, as of April 2017, that number decreased to 40 days.

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