Author: nafteamdrake

Categories
Blog

The Waiting Game: When’s the Best Time to Buy a House?

According to recent data studies by Redfin, the median home price in the United States through September 2022 was $403,556. The amount you pay for a house may be way over that or way under it depending on different factors. Inventory, market conditions, and—believe it or not—the seasons all play a role in how much you shell out for a new house.

Let’s explore the implications of waiting to buy during the “busy season” or opting to make the move during the less popular times of the year.

The Seasonal Impact on Home Buying

Market conditions are, by and large, the tree from which all the other branches of influence grow. Interest rates often drive someone’s decision to buy, sell, or refinance a home. When interest rates are low and supply is limited, we enter a seller’s market—something we’re now starting to leave. When rates are higher and supply is stacked—something that’s happening now, when prices and rates were too high for many to entertain the thought of buying—we enter a buyer’s market. In a buyer’s market, buyers have more negotiating power and are able to ask for fairly basic things like inspections.

Outside of market conditions, the seasons are the next largest influence. Let’s shoot straight here: How many people want to move in the dead of winter? By comparison, peak rental season for apartments and multifamily communities runs from May to August, or summertime. This is for a multitude of reasons, but the pros at Avail suggest a handful of major ones:

  1. Moving in the cold season is hard.
  2. Moving during the school year is disruptive.
  3. Moving before the school year starts is strategic.

The housing market at large tends to play by the same set of guidelines. Here’s how:

Scout the Sewer Lines & Septic Tank

Below-average temperatures, below-average pricing. Generally speaking, selling a house is harder in the winter. Fewer open houses, fewer people looking for homes, and less-than-ideal weather can mean less foot traffic for a listing. For sellers who are in a hurry, this could mean bargain buying for people who are looking for a new place to live. Additionally, these slow periods aren’t stellar for real estate agents either, so buyers might benefit from negotiating on closing costs and other fees.

According to Zillow, October, November, and December are the least competitive months for home buying, which could be a breath of fresh air for recent attempted-buyers who tried and tried to purchase but kept getting beat out by other, better-equipped buyers.

If you’re looking for a deal, Winter might be your best time to buy a house.

Spending in Spring

If winter means less competition, spring generally means more. Consider this: A fresh crop of buyers who held off on the house hunt to save up more money and a load of new listings made all the more stunning thanks to the curb appeal of blooming flowers. That’s a recipe for a super competitive real estate market, often resulting in an increase in bidding wars for homes.

Our advice? Spring is probably not the best time to buy a house unless you’ve got cash on hand and a rockin’ pre-approval to get your offer in, seen, and stamped before other buyers get their hands on your dream home.

The Summer Struggle

Warmth means activity, and a sunny house shows better than a dreary one. So, through the early parts of summer, you’ll see similar market activity to spring. More listings, more buyers, and more competition.

That said, all’s not lost:

  • Buyers—families in particular—want to be settled before the new school year starts.
  • Sellers who are looking to sell their current house before buying another could make out like bandits if they get the timing right. Keep an eye on previously overpriced homes that may have fallen off the radar for many buyers.
  • One of our very own employees bought a home this fall for under asking after it sat on the market for 90 days over the summer.

Falling in Love with Your New Home

As summer draws to a close, the sellers whose homes remain on the market might start to get a little antsy. As we mentioned before, colder seasons mean less activity, so sellers may be motivated to offload their house at a discount when fall rolls around.

Additionally, autumn may mean less competition. Remember, many families like to be settled by the time the school year starts. At this point, it’s started—so you probably won’t have to compete with a family for your dream home. That lessened competition may also mean you get a closer, more personalized relationship from your agent, which could pay off when it comes to negotiating closing costs.

One report from realtor.com found that, nationally, the best time to buy a house is the week of October 3rd to the 9th. The report attributed the finding to high inventory, below-peak pricing, waning demand, and the new school year.

Outside of market conditions, the seasons are the next largest influence.

Categories
Blog

3 Tips to Help You Pay Off Your Mortgage Early

When most people think of mortgage terms, they think of the very common 30-year commitment, which can feel like a lifetime. With a term like that, a mortgage is one of the longest “relationships” you’ll ever have — but that doesn’t mean you can’t benefit from that investment between now and then.

Consider this: in 2021, the average age of a first-time home buyer was 33. If those people stuck with a 30-year mortgage to term, they’d be 63 by the time the loan was paid off. Sixty-three also happens to be the average age of retirement in the United States.

Of course, many people move before their mortgage is paid off. Others opt to refinance, and both options have their upsides depending on the situation. But what if we told you there were ways to pay down (or pay off) your mortgage well before maturity?

3 Tips To Paying Off Your Mortgage

Tip 1: Make An Extra One-Time Payment Each Year

Setting aside a little extra cash every month and making an annual “lump sum” payment is an easy way to pay down your mortgage earlier than previously scheduled. Instead of getting a latte every morning (or finding another luxury to skip — after all, we all need our coffee), put that money in a designated savings account and let it accrue over the year.

Want to get extra bold with your payment plan? Add whatever bonuses, commission checks, and/or cash gifts you receive to the account. At the end of the year, make a large principal-only payment toward your home loan, separate from your standard mortgage bill.

Pro Tip: Contact your lender or review your closing disclosure to find out if there are any prepayment penalties, or if they’ll accept partial payments on top of your standard monthly payment. 

Tip 2: Make Bi-Weekly Payments

Another method to paying off your mortgage early is splitting your monthly payment into bi-weekly payments, also known as making payments every other week. With this approach you’d make 26 payments, each of which would be half as much as a full monthly mortgage bill.

For example, if you had a $2,000 mortgage payment per month and made monthly payments, you’d be paying $24,000 per year. With $1,000 bi-weekly payments, you’d be paying $26,000 per year — or adding a full extra payment per year.

Pro Tip: Not every lender accepts this style of payment. Speak with your lender to find out if partial payments are okay or if full payments are preferred. 

Tip 3: Refinance With A Shorter Term

For homeowners who have been chipping away at their home loan balance for a few years, or for those who are simply looking for a better rate (aren’t we all?), refinancing is always an option. While there can be upfront costs associated with refinancing, if you’re looking for a shorter term, you can look into swapping your 30-year mortgage for a 10- or 15-year mortgage.

The good news? If you’ve followed the tips above — making larger lump sum payments and making bi-weekly payments (or adding a little extra to your monthly payment) — you should see better results when refinancing.

Pro Tip: The caveat here is that even with substantially lower interest rates, your monthly payment will likely still be higher than what you’ve been paying, so budget accordingly. 

Considering The Cons

We love the idea of taking control of one’s finances, and who wouldn’t want to own their home outright? However, there are considerations to be made when thinking about paying off your mortgage early. In the interest (ha) of helping you make the best financial decision for you and your future goals, here are some things to think about before taking action on the tips above:

  1. By paying off your loan, you’ll lose out on the ability to deduct the interest you’re paying when it comes time to file taxes.
  2. You may be responsible for a prepayment penalty. Those amounts vary, and some lenders may not charge you at all, but it’s something to think about.
  3. Closing an account — especially one you’ve had for a few years or longer — will temporarily bring down your credit score.

If these are all things that you think you can live with, then go forth and conquer your home financing. And if you want to refinance once rates drop, we can help with that too!

At the end of the year, make a large principal-only payment toward your home loan, separate from your standard mortgage bill.

Categories
Blog

How Many FHA Loans Can You Have?

Government-backed mortgages help make homeownership possible for millions of Americans. Federal Housing Administration loans, or FHA loans as they’re more commonly known, are a popular choice for many buyers, thanks for their forgiving debt-to-income ratios and down payment requirements. In fact, according to the National Council of State Housing Agencies, 1.3 million FHA loans were issued in 2020 — more than 80% of which were for first-time home buyers.

But what about second-time home buyers? What about people who are looking to expand their real estate portfolio? And just how many FHA loans can one have? We’ve got all of these answers and more useful tidbits on FHA loans below. Let’s get into it.

Can I get an FHA loan more than once?

When it comes to a lifetime allotment of FHA loans, we’ve got good news: The limit does not exist. Simply put, you can apply for and receive multiple FHA loans throughout your lifetime.

However, carrying more than one FHA loan at a time? The rules advise against that.

Of course, this rule makes sense when you remember that FHA loans are intended for home buyers who are looking for a primary residence — not a vacation home or rental property. So, generally speaking, if you want a second FHA loan, you’ll need to pay off the first one.

Rules can be flexible though, and exceptions may apply to that rule if you meet specific criteria, such as:

  • Your new home is more than 100 miles from your current home. Ever heard of the 100-mile rule? You may be able to qualify for a second FHA loan if a new work opportunity requires you to move at least 100 miles away from your current one, for example..
  • Your family has grown significantly since you bought your home. There’s only so far you can plan ahead because life can be unpredictable. If your two-bedroom home becomes too small as you grow into a family of five or six, then you may have a case to qualify for another FHA loan.
  • You’re a co-borrower on an FHA loan, but you want to buy your own property. Things change. Plans change. Perhaps you’re going through a divorce and are on the market, or maybe you bought a home with friends and have realized you need more personal space. In cases like these, you may qualify for a second FHA loan.
  • You’re buying a HUD real-estate owned (REO) property. In this instance, if you’re looking to invest in an FHA-foreclosed home, you’ll need to put down at least 25% — which may counteract one of the main benefits of an FHA loan: Lower down payment requirements.

How can I qualify for multiple FHA loans?

Understandably, your mortgage lender will want to know that you can afford to repay more than one home loan at a time.

Like you did for your first FHA loan, you’ll need to meet the minimum credit score, debt-to-income ratio, and down payment requirements to qualify. On top of that, your lender will check your income and assets to make sure you’ve got the funds to back the buy. You’ll also need to be clear of any foreclosures for at least three years to qualify for another FHA loan.

Depending on your credit score, you could put down as little as 3.5%. Keep in mind, you’ll need to pay mortgage insurance (MIP, or your mortgage insurance premium) throughout the life of each of your FHA loans. Unlike other loans, which offer the ability to remove mortgage insurance after meeting certain requirements, FHA MIP stays with you for the life of the loan unless you refinance into something like a Conventional loan.

If the reason for your second FHA loan is to accommodate your growing family, you’ll need to provide evidence that your current home doesn’t meet your needs anymore. In this case, you’ll need to have at least 25% equity in your current home to be eligible for a second FHA loan. If not, you’ll either have to pay the principal balance down further, or use other loan financing.

What are the alternatives?

If you don’t want to hold two FHA loans at the same time, there are other options to consider. You could:

  • Sell your current home
  • Refinance your current home to a Conventional loan
  • Rent or lease a new home until your current home sells
  • Buy a new home with another loan type

Pro tip: If you need flexible qualification standards, a USDA loan can get you in a home in a rural area with no down payment requirement.

So, what’s next?

FHA loans are an incredible option for home financing, whether you’re looking to buy or even refinance your current loan. FHA loans are especially popular with first-time home buyers because of their flexible credit, income, and down payment requirements. If you’re interested in learning more about FHA loans, contact us today to chat with one of our experts.

You can get multiple FHA loans throughout your life. However, the general rule is that you can only have one FHA loan at a time.

Categories
Blog

What to Look For in an HOA and Why They Matter to Homeowners

Before you say “No way” to HOAs…

HOAs, otherwise known as homeowners associations, often get a bad rap. You’ve likely heard stories of strict HOA guidelines, dictating things like what color you can paint your house, which flags you can fly, or how many vehicles you can park in your driveway. While experiences vary depending on the neighborhood, there are many benefits to living in a community with an HOA.

Without further ado, here’s everything you need to know about these governing bodies that make and enforce rules for properties and residents so that you can make the best homeownership decision for you.

The value of an HOA

In a perfect world, HOAs don’t exist to overreach or make demands. They exist, in part, to maintain the local community. Their other purpose? Maintaining, or even boosting, property values to help homeowners make the most of their homeownership. After all, a home is an investment. A well-maintained investment can pay dividends in the future.

This value includes keeping lawns and grounds clean, ensuring property additions are built safely (without impeding someone else’s enjoyment), and maintaining community amenities like pools, playgrounds, and neighborhood landscaping.

What to look for in an HOA

So, how do you know what to look for in an HOA? First, it comes down to what’s most important to you. Second, it’s about what the HOA is responsible for — because those things will vary from community to community. Here are some questions you should ask yourself when you’re exploring neighborhoods and homes:

  1. What amenities are important to have?
    Community pools. Tennis courts. Playgrounds. These are all things that might be located in your new neighborhood for your enjoyment. And if you have an HOA, that governing body could be responsible for maintaining these amenities, which is a great thing.
  2. How much are you willing to pay for them?
    According to recent HOA statistics from iPropertyManagement.com, the average monthly HOA fee in the United States is $250. Some may cost more, many likely cost much less. Still, $250 is nothing to scoff at. When considering an HOA, it’s important to consider the monthly dues (as well as the consequences for not paying those dues).
  3. Does their inclusion justify a higher price?
    While some of these things may not be vital to young homeowners, they might be important for families. Additionally, the community upkeep is something to think about as well. Home prices in HOA neighborhoods tend to be 4% higher than homes without HOAs, but does the community’s appearance reflect those dues?
  4. How are you with being told “no”?
    Like we said, in a perfect world, HOAs would exist only to ensure the safety, consistency, and enjoyment of the neighborhood, but some may have more restrictive policies than you’re uncomfortable with. If you have a hard time with people telling you what you can or can’t do with property you own, an HOA community may not be for you.

Questions to ask the HOA

If you’ve decided to move forward with purchasing a home in an area governed by an HOA, you’re going to want to follow up with the HOA itself. Here are some other questions to consider:

  1. What are the bylaws?
    These will tell you how many board members there are, how often elections take place, who can vote, and how many votes are needed for a proposal to pass.
  2. What are the fees?
    The question everyone wants answered: what’s it going to cost? This will help inform your budget, and your monthly payment after PITI (principal, interest, taxes, and insurance).
  3. Are there any restrictions?
    Does the HOA restrict home color? Flag displays? We’d all love to do whatever we want with our property, but it helps to know what you can’t do.
  4. Is the HOA well-funded?
    If an HOA can’t afford updates or repairs, it could seek a loan. That loan may result in higher HOA payments from homeowners like yourself.

HOA Fast Facts

Now that you know what to look for in an HOA, you’re prepared to put your best foot forward when looking for a new home. Take your newfound knowledge, ask all the questions you can think of, and make the decision that best suits you.

After all, it’s your home.

Homeowners Association (HOA): An organization in a subdivision, planned community, or condominium building that makes and enforces rules for the properties and residents.

Categories
Blog

School District Impact on Property Values and Home Prices

Did you know? School district impact on property values can influence home prices and home buying trends.

It’s back-to-school season and we can’t think of a better way to get into school spirit than by discussing the importance of looking for good school districts during the home buying process.

The fact of the matter is that many buyers don’t even know school districts should factor into their decision, but they absolutely should. School quality is an integral part of a neighborhood, with a substantial impact on home prices and property values. So, where do we start?

The importance of a good school district

You might be surprised to learn that, when it comes to value, it’s not all about the ratio of bed to bath or square footage. With or without children, lots of buyers intentionally choose to buy homes in quality school districts. For some, it’s because they want a good education within walking distance for current or future children. For others, a good school district can be a sign of a healthy local economy and real estate value.

In 2017, the National Association of Realtors (NAR) found that nearly one quarter of buyers considered the quality of local schools when house hunting. Of course, families rarely stay put forever. Jobs change, children grow up, and when it comes time to sell, people want to know their home has retained or increased in value. Realtor.com found homes in higher-performing districts received 26% more views than the average listing. Even more surprising? Those homes were 42% more popular than homes in lower-ranked districts, which brings us to our next point…

School district impact on home prices

Many factors play into home prices, and a school district’s quality is just one of them. On one hand, sellers understand that a good district is more desirable, so they might use it as leverage for higher asking prices. On the other hand, if you’re a buyer and a good school district is one of your must-haves, you might be willing to bid higher to snag the right home. On average, people were willing to pay $50 more per square foot for a home in top-ranking school districts compared to homes in average districts, according to Redfin.

Other buyers might also be willing to trade some of their “wants” if it means securing a spot in a top district. After all, what’s more important: your bonus-room-turned-craft station, or a dependable school district with all the resources a child could need?

Even for buyers who aren’t parents yet, it’s something worth thinking about. Either way, it’s a trade off and it’ll come down to what you value most. And speaking of value…

School district impact on property values

Higher home prices and higher test scores often mean higher property values. Higher property values usually equate to higher property taxes, a portion of which tend to trickle down to local school districts. In a roundabout way, this is why higher-quality schools with higher test scores tend to be located in more affluent areas: more funding from the community.

Some sources even suggest that properties in better school districts hold up during various crises. Take the past housing crisis, for example. One study from Ken Corsini of BiggerPockets found that, between 2006 and 2009, “properties near schools with a rating of four or five stars were almost completely insulated from declining values, while those near schools with one to three stars experienced massive losses in value.”

That tells us that a neighborhood’s equity can serve as a buffer during challenging market conditions.

Not the most important factor

Children or not, every buyer should take the school district into consideration. But that doesn’t mean it needs to be your top priority. The right home for you is the one that feels right at the time. When that day comes, you can count on us to help you get there faster.

A good rule of thumb to keep in mind when you’re home shopping: wherever you buy, you’re buying into the local school district.