Various online tools give first-time homebuyers the ability to determine what effect the down payment amount has through the course of a loan. While the amount you pay as down payment has a bearing on the overall interest you end up paying, it also affects your monthly repayments.

As a first-time buyer on the path to homeownership, paying attention to a few simple aspects help ensure that you do not falter when it comes to making the down payment. For instance, you might decide to pay more than 20% as a down payment to make your monthly repayments more affordable. Alternatively, you might benefit by looking at options that require no down payment at all.

 

Calculate Costs Carefully

Most mortgage providers look at borrowers’ housing debt ratio to determine how much they can afford to borrow. Typically, the total cost of a home should not be more than 28% of a borrower’s annual income. Housing costs would include mortgage payments, taxes, homeowner insurance, and any applicable association fees.

Take into account ongoing maintenance expenses as well. As a general rule of thumb, expect to spend around 1% of a home’s value toward its upkeep every year. For example, if you buy a house for $100,000, prepare to spend around $1,000 each year as maintenance expenses. In addition, you might need to spend even more when addressing problems related to plumbing, wiring, and remodeling.

 

Start Saving

Unless you’re handed a home on a platter, there’s no particularly easy way to home ownership. Here are a few pointers you may follow to save for the down payment:

• Transfer your tax refund directly into a savings account
• Set up automatic weekly, fortnightly, or monthly transfers from your checking account to your savings account
• All bonuses go into your savings account
• Use credit cards wisely, by paying off entire balances before due dates
• Round up purchases to the next dollar, with the change going directly into your savings account
• Sell items you no longer use

 

Minimize Spending

You might not do very well with saving if you don’t try to reduce your spending. An easy way to do this is to make sure that you limit your expenses to the essentials, knowing what you need to avoid. For instance, while going out with your coworkers every weekend might be a great way to unwind, you may consider inviting friends over to your house to keep the expenses in check If your normal is buying a coffee on the way to work every day, think about making a cup at home or using the company coffee machine.  With each cautious, the savings can add up quickly enabling you to have more money to put towards your down payment.

 

Downsize

For someone who lives on rent, one of the biggest expenses is rent. The money you spend on rent might work as a barrier when it comes to saving for a down payment. However, if you want to become a homeowner, you might need to reconsider your living arrangement. One way to do this is to look for a smaller apartment, or you might consider getting a flatmate. 

In this day and age, several young adults move back with their parents in order to save money.  According to data released through the Young Money Survey carried out by TD Ameritrade, close to half of all millennials moved back with their parents after graduating, mainly to save money.

 

Get a Side Hustle

Statistics from the Federal Reserve show that over 30% of all adults in the U.S. worked in the gig economy in 2017, of which several had primary full-time jobs. According to a survey carried out by Redfin, more than 35% of all millennial home buyers take on second jobs to save for their down payment. What you choose to do depends on your existing skillset, unless you’re willing to upgrade. While you can offer your assistance as an online tutor or writer, you might also consider driving for Uber, Lyft, and the likes.

 

Build an Emergency Reserve

Unexpected expenses tend to increase considerably when you move from being a renter to a homeowner. Before you decide to get a home loan, make sure you build an emergency fund to cover for around six months of living expenses. This would include mortgage repayments, food, utilities, insurance, and travel. This is because you never know when your home might need a large repair or when you might suffer a financial setback because of work.

 

Get a Monetary Gift

If you don’t have much money saved but wish to buy a house, determine if any of your family members are willing to gift you money that you may use toward making a down payment. In such a scenario, the person giving you the money needs to provide a letter that says the money is a gift, and he/she does not require any form of repayment. In addition, the gift needs to come through a verifiable method such as a money order or a cashier’s check. These measures are in place so lenders can ensure that the money is a gift because repaying it will add a financial burden to the borrower.

 

Use Retirement Funds

If you have been working for a while and saving toward retirement, you might have a tidy sum saved up in your 401(k). While this might not be the best way forward in making a down payment, it can give you access to funds you need to become a homeowner. If you are okay with the idea of dipping into your retirement funds, start by getting in touch with your 401(k) plan administrator. Bear in mind that you’ll be taking a loan which you need to repay, and withdrawing money from this account before you retire might also come with tax penalties.

The rules surrounding using retirement money to make a down payment before the ages of 55 and 59½ vary depending on the type of account you hold.

• Employer-sponsored 401(k) plan. While these may allow for early withdrawal, you’ll need to pay a 10% penalty for early withdrawal as well as income tax. If you get a loan, you need to repay the entire amount within a stipulated time period, including interest, to avoid the penalty and taxes. With some 401(k) plans, borrowers get over five years to repay loans they take for primary homes. In case you leave your job, you need to repay the loan or roll it into an eligible retirement account before the next deadline for filing taxes. If you don’t, you’ll end up paying the penalty and taxes.
• Traditional individual retirement account (IRA). As a first-time homebuyer, you may withdraw up to $10,000 from your traditional IRA. While you will need to pay tax on the money you withdraw, there is no penalty involved if you use the money to build or buy your first home.
• Roth IRA. If you’ve held a Roth IRA for five years or more, you may withdraw funds to use toward making a down payment for your first home purchase. In this case, you don’t have to worry about incurring a penalty or paying taxes.

 

Identify Your Mortgage Alternatives

It is important to take a good look at the different types of mortgages you qualify for before signing the dotted line. Remember that getting a mortgage, from the time you apply till you get the money, may take weeks or even months. If you don’t begin the process in advance, there is a possibility that you will lose out on homes you like to buyers who come prepared. The first step is to look for a reliable mortgage lender.

Once you get preapproved, you get a fair indication of how much money the lender is willing to provide. This gives you the ability to look for homes within your budget. This stage also gives you a fair picture of existing interest rates.  In the absence of pre-approval, your offer will need to include a “mortgage contingency”, which says that your offer is good provided you get a mortgage. From a seller’s perspective, this comes across as a negative, especially if there are other offers with pre-approval on the table.

If you cannot come up with a 20% down payment, take a look at alternatives where you can pay a lower down payment. Some of your options include:

• USDA loans. These loans are provided by the United States Department of Agriculture. If you qualify for a USDA loan, you don’t have to make any down payment. You may use funds from a USDA loan to buy a home in a rural area, towns with populations of less than 25,000, as well as in suburbs of large cities. These loans are mainly offered to low and moderate-income individuals.
• VA loans. If you are a veteran, a surviving family member, or an active service member, you may qualify for a VA loan. These loans are provided by the Veteran’s Administration. Just like USDA loans, these do not require you to make any down payment. However, you do need to pay a VA guaranty fee. VA loans come with highly competitive interest rates, and borrowers don’t need to get mortgage insurance.

 

Look for Down Payment Assistance Programs

As a first-time homebuyer, you might benefit by taking a look at various local and state-level down payment assistance programs that are in place for low-to-middle income borrowers. Several states in the country, New York included, have such programs in place. They are typically implemented by government bodies, nonprofit organizations, and even employers.

The money you receive through a down payment assistance program usually comes in the form of a zero-interest forgivable loan. While some programs are made available across the country, others are more limited in their geographical focus. What you need to remember, though, is that qualifying for these programs requires that you meet various eligibility criteria.

 

What You Need to Know About Private Mortgage Insurance

You typically need to get private mortgage insurance (PMI) if you pay less than 20% of a home’s selling price as a down payment. While this is a usual requirement with conventional loans, it is also required with USDA loans and FHA loans.

If you wish to pay less than 20% as down payment, most lenders would require that you getPMI.  This offers lenders protection in case you default on your loan. PMI typically costs around 0.5% to 1% of the loan amount. With a $100,000 mortgage and a PMI of 1%, you’ll end up paying $1,000 per year. In most cases, you will need to keep the PMI in place for at least two years. Once the equity you build in your new home crosses 20%, you get to drop the insurance.

The cost of the PMI is usually added to your monthly mortgage payment. However, some lenders give you the option to make a one-time upfront payment at closing or to make a partial upfront payment and getting the balance incorporated into your monthly payments. Some lenders offer lender-paid PMI, in which case you end up paying slightly higher interest on your mortgage. As a result, you might consider getting lender-paid PMI only in a low-interest-rate environment.

 

Conclusion

When buying a home, the down payment you make can have a significant effect on how much you end up paying as interest through the course of the loan. Knowing how much you can afford to borrow is crucial, as is trying to pay as much as you can toward the down payment. While a no down payment loan can get you on the road to homeownership, bear in mind that it might cost more than a conventional loan.

Since there is more to buying a home than making a down payment, you might benefit by going through the Meadowbrook Financial Mortgage Bankers’ First Time Homebuyer’s Guide.

 

Disclaimer:

30-Year Fixed-Rate Mortgage:  The payment on a $200,000 30-year Fixed-Rate Loan at 3.875% and 80%loan-to-value (LTV) is $940.14 with 0 % points due at closing. The Annual Percentage Rate (APR) is 4.026%. Payment does not include taxes and insurance premiums. The actual payment amount will be greater. Some state and county maximum loan amount restrictions may apply.

According to a report released by ATTOM Data Solutions, house flippers in the United States renovated over 200,000 houses in 2018, generating an average gross profit of around $65,000 per home. A fairly steady upward trend has been in place since 2011.

 

House flipping, simply put, is when someone buys a house, typically at an auction, intending to fix it and sell it at a profit somewhere down the road. While you can make a tidy sum by doing this, a bad decision can also lead to unrecoverable losses.

 

What You Need to Look for

First-time fix and flippers need to pay attention to three crucial aspects. These include comparables, numbers, and speed.

 

Comparables

Taking a close look at the prices of recently sold comparable homes in the area is important when arriving at a suitable selling price. While there could be a wide range of comparables, you might be better off looking at the lower end of the spectrum. This is because when you budget for the lower side of selling prices, you get more leeway in budgeting for renovations. It’s important to determine how much time homes tend to remain unsold in any given area, and if it’s possible to flip a house for profit in the area in the first place.

 

Numbers

You need to create a detailed renovation budget and add at least a few thousand dollars more to cover for unexpected expenses. Your entire budget should also account for maintenance, closing costs, property tax, property insurance, interest, and agent commission. In some cases, the added costs exceed the actual cost of renovation.

 

Speed

The job schedule of a renovation determines just how quickly you may get a house back on the market. It makes sense to keep a backup list of contractors, in case the one you hire decides not to show up. Bear in mind that even slight delays in getting houses on the market can lead to significant losses.

 

What You Can Do

Just about everyone who offers advice for first-time fix & flippers stresses the importance of getting as much information about the process as possible. While online research is valuable, it might also be worth your while to learn from people who have already mastered the craft. Real estate seminars give you a great opportunity to see how other people have gone about with their home-flipping businesses. Seminars also give you easy access to hands-on training as well as a variety of resources.

 

Polish Your Communication Skills

You will need to interact with people at every stage of the house-flipping process, which means you need to develop great communication skills. You need to be respectful toward everyone you interact with, be it sellers, property managers, loan officers, contractors, or construction workers. A friendly and positive approach can make all the difference between a successful flip and one that is not.

 

Get Organized

If you hope to find success as a home flipper, take time to improve your management skills. Try to make your day as productive as possible, even it if means carrying out online research while watching a game on TV. Create a schedule that includes tasks you need to complete every day, as well as through the week. Once you create and stick to a schedule, working on increasing your return on investment (ROI) becomes simpler.

 

Know Your Finances

Ensure that you have enough money to take you through the carrying costs for the entire duration of your being a homeowner. Arrive at a drop-dead rate at which you need to sell the house, and work on creating a realistic deadline surrounding the completion of all work. Taking longer than previously planned might eat into your profits. Also, if you don’t have enough money at hand, hanging on to the house for longer than expected can make matters worse.

 

The costs you need to account for include:

• Down payment of around 20% to 45% of the home’s selling price
• Holding costs such as HOA fees and insurance payments
• Renovation costs
• Closing and realtor costs

 

When borrowing money to buy and renovate a home, there are multiple options from which to choose. These include:

• A loan from a family member or friend
• Loan for investment properties
• Home renovation financing
• Line of credit or home equity loan
• Personal loan
• A business line of credit
• 401 (K) financing
• Seller financing
• Hard money loan

 

Learn About the Area

Take adequate time to learn about the neighborhood and its vicinity. Find out if there are good schools and hospitals in the area, as these are right up there when it comes to what buyers are after. Think twice about buying in areas that have upcoming industrial parks or highways, as these might affect home prices adversely. No matter how much time and effort you put into a flip, selecting a wrong neighborhood might lead to disappointment and losses.

 

Find Motivated Sellers

If you’re thinking about making money by flipping and fixing a house, focus on finding short sales or foreclosures. These present great opportunities when buying a home for cash, and this keeps you away from the open market. Motivated sellers can also come in the form of owners of dilapidated homes, couples who are getting divorced, and families looking for larger homes. If you manage to find a motivated seller, you get to close on your investment quickly and minimize your initial expenses.

 

Determine Your Renovation Goals

Not doing enough to fix a house before you put it on the market might be just as bad as doing too much. Cutting corners when renovating a home is not the way to go, because potential buyers can see through your efforts. In such a scenario, expecting someone to pay the market price would be foolhardy. Going overboard with your improvements, on the other hand, can cut into your profits. As a result, you need to determine just what’s required as well as what’s not.

 

Don’t forget to take care of easy fixes such as changing worn-out switchboards or light fixtures. Also, do away with any big-ticket plans you might have.

 

Pay Attention to Curb Appeal

When it comes to selling a home, first impressions matter. What potential buyers see at the curb can work in making or breaking a deal. The home you wish to sell should look good at first glance. Make sure the landscape looks appealing, and not unkempt. Invest in a paint job and get new curtains or blinds.

 

Data suggests that curb appeal can add up to 10% to your home’s after repair value (ARV). You don’t need to build a gazebo or install a fountain as these expenses may eat into your profit, and probably limit your audience. What you need, on the other hand, is a cleanup and a well-maintained garden.

 

Know What Buyers Want

Sure, fixing and flipping a home allows you to get your creative juices flowing. However, it is important that you do not let your whims and fancies get in the way of creating a home that finds appeal with potential buyers. If you follow a very specific design and want to make the home trendy, you might limit the number of people interested in the property. This is because most buyers want to do up their homes in their way. The best way forward is to play safe and try to create a home that is as neutral as possible.

 

Learn About Taxes and Fees

Depending on the location of the house you wish to fix and flip, property taxes can be a major burden or a minor inconvenience. If the property tax is very high, it might serve as a deterrent for potential buyers. Besides, you will need to keep paying the property tax for as long as the house does not sell. How much you might need to pay as homeowners association fees also require your attention, because this may put a dent in your budget.

 

Use Professional Help

Start by getting a professional home inspector to give you a clear picture of what you might be up against even before you purchase a property. While this requires that you spend some money, it’s better than getting nasty surprises down the road. When fixing a house, don’t attempt to carry out tasks that are beyond your expertise. Remember that errors in plumbing and electrical work can lead to major damage. Installing new flooring is also best left to the experts.

 

Mistakes You Need to Avoid

Not all people who attempt to fix and flip homes for profit find success. This is because they tend to make mistakes along the way. To maximize the possibility of succeeding, you need to steer clear of certain mistakes, which include ones you might make when buying a home.

 

Overlooking the Neighbors

Fix and flippers usually like buying homes that are not much to look at, and more importantly, ones that sell underpriced. However, do other homes in the vicinity also in similar condition? If so, the other homes will probably remain the same, even when your house is all spruced up and ready to be sold. From a buyer’s perspective, other eyesores in the neighborhood can make your house less desirable.

 

Ignoring the Bathroom

A shabby looking, leaky, or damp bathroom is almost certainly a deal-breaker. If you can budget your way to give the bathroom a makeover, it might be well worth the effort and money. Several real estate experts suggest that kitchen and bathroom renovations provide similar returns on investment (ROI).

 

Forgetting Building Permits

Even the slightest of unlicensed construction may lead to unwelcome consequences. If a potential buyer or a buyer’s lender discovers permit problems late in the sale process, you might have to face legal challenges. Before working on any aspect related to a home’s structure, as well as its electrical, gas, or plumbing system, make sure you get approval from the relevant local body.

 

Now Working With a Real Estate Pro

The internet serves as a treasure trove of resources, but you need to get some real-world exposure too. Local real estate agents can provide help in various ways, from looking for suitable homes to determining a home’s ARV, to putting it back on the market.

 

Staging on Your Own

As a first-time fix and flipper, it makes sense to use the services of a home stager to prep a home for its open house. Follow what the stager does to increase the appeal of the house and present it in the best possible way, as you can use this information to good effect in your subsequent efforts.

 

Setting Unrealistic Deadlines

There’s no point is giving more priority to speed instead of doing a good job. Potential buyers, and the inspectors they bring with them, can easily tell the difference between a job well done and one that simply tries to cut corners. Making a couple of extra mortgage payments might be a better idea than trying to rush through renovations, especially when they don’t account for much.

 

Taking on Multiple Projects

The last thing you need on your plate as a fix and flipper are too much. The only way to make sure you do a great job is to give your first project your undivided attention. Remember that while you might be able to delegate much of what needs to be done, your continued presence at the site is crucial if you want things to go exactly as planned.

 

Conclusion

Once you’ve decided that you want to become a fix and flipper, contact a mortgage provider to determine how much you can borrow. This gives you a clear picture of the kind of homes you can afford, while also taking into account money you might need to spend on the renovation.

 

Once you’ve fixed the house, bear in mind that the market will dictate its selling price. If you end up overpricing the home, buyers’ agents will tell their clients that, and your home will remain unsold. As a result, spend no more than you need to make the house look and feel presentable.

 

Disclaimer:

30-Year Fixed-Rate Mortgage:  The payment on a $200,000 30-year Fixed-Rate Loan at 3.875% and 80% loan-to-value (LTV) is $940.14 with 0 % points due at closing. The Annual Percentage Rate (APR) is 4.026%. Payment does not include taxes and insurance premiums. The actual payment amount will be greater. Some state and county maximum loan amount restrictions may apply.

Once you decide that you wish to buy a house, you need to determine what type of mortgage might work best for you. For instance, you may benefit by applying for a USDA loan or a VA loan, provided you meet the required eligibility criteria. Two aspects that remain common no matter what type of loan you get include interest rates and loan terms.

Here’s what you need to know.

1. What are fixed-rate loans?

A fixed-rate home loan is one where the interest rate remains the same for the entire course of the loan. It depends on the market rate at the time of your loan’s origination. Changing market interest rates have no impact on the interest you need to pay through a fixed-rate loan. This ensures that your monthly repayments remain the same for the entire loan term.

2. What are adjustable-rate mortgages?

Adjustable-rate mortgages (ARMs) typically come with a fixed interest rate for a specific period of time, after which it may fluctuate according to prevailing market rates. After the fixed-rate period, the interest rate of an ARM may change monthly or annually, depending on the market index. Some lenders also place caps on the maximum interest you’ll need to pay.

With an ARM, part of the interest rate risk is transferred from the lender to the borrower. As a result, ARMs are commonly used in situations where fixed-rate alternatives are prohibitively expensive or difficult to obtain.

While the United States Treasury rate is used as a basis to determine the interest rates of most ARMs in the U.S., around 20% rely on the London Interbank Offered Rate (LIBOR).

3. What are the different types of adjustable-rate mortgages?

Adjustable mortgages for home purchase come in three basic forms:

Conventional Variable Rate Mortgages

Getting a typical ARM requires that you prepare yourself for adjusting rates for as long as you do not repay or refinance the mortgage. The rate usually reflects a third-party index and includes your lender’s margin. Rates adjust based on a predetermined schedule, which can be monthly, every six months, or every year.

Hybrid ARMs

Hybrid ARMs, also referred to as fixed period ARMS, come with a fixed rate for a specific period of time, and this is followed by an adjustable rate. The fixed-rate periods may vary from three (3/1) to five (5/1), to seven (7/1), to even 10 (10/1) years. When the initial fixed-rate period is long, the difference between the interest rate of an ARM and that of a fixed-rate mortgage is small. The converse holds true as well.

The date when the switch takes place is referred to as the reset date. Then, the interest rate is assessed and recalculated every year. Some ARMs, such as 3/3 and 5/5 ARMs, come with more than one interest rate adjustment per year. However, these are not easy to find.

Option ARMs

If you go the option ARM way, you get to choose from four monthly payment alternatives. These include a predetermined minimum payment, a 15-year amortizing payment, a 30-year amortizing payment, or an interest-only payment.

4. Who might benefit by getting an ARM?

Most people who benefit by getting ARMs are people who plan to sell their homes in a few years or people who plan to refinance their mortgages down the line. This is because the longer you plan to draw out an ARM, the riskier it can get. After all, while the interest rate is typically low when you start, it can get noticeably higher once rate adjustments begin. An example in case is the period during the sub-prime crisis. After rates began to adjust, several borrowers found that their monthly payments increased drastically.

5. How do cap limit adjustments work?

Several ARMs come with cap limits on adjustments. This ensures that the interest you need to pay through the course of the loan will not exceed a predetermined rate. For example, if your mortgage comes with a two percent cap, and market rates increase by three percent, the interest rate on your mortgage will increase only by two percent. ARMs can come with caps for the first few years, periodic caps, as well as lifetime caps.

Consider a 3/1 ARM that comes with a cap limit structure of 2-3-7. What this means is that the interest rate can increase by a maximum of 2% after the initial three-year fixed-rate period. In subsequent years, the rate may increase by a further 3% every year. The maximum interest rate hike that loan may attract during the entire loan term, in this case, limits to 7%.

Example: The initial interest rate is 4.1% for the first 3 years; the interest rate in the fourth year can increase to a maximum of 6.1%. In the fifth year, it may increase by up to 3%, getting to no more than 9.1%. Going forward, the interest cannot increase to more than 11.1%, which is 7% more than the loan’s original interest rate.

The cap works in reducing your risk to some degree. However, the difference in monthly payments can be noticeable in some instances. For example, if you take a $200,000 ARM at 4%, and the interest rate increases to 10%, your monthly mortgage payment would increase by around $800. Just how much the rate adjusts depends on the ARM’s index rate.

 

 

6. Should you get a fixed-rate or adjustable-rate mortgage?

Various aspects require your attention when determining if a fixed-rate or adjustable-rate mortgage might work better for you.

Interest Rate Prediction

Since the 1990s, variable rates have decreased gradually, although there have been periods of movement in both directions. However, historical trends can’t be taken for granted when it comes to predicting future performance. Besides, predicting the timing, direction, and speed of adjustments is not easy, especially when it comes to getting all three right.

When existing interest rates are low and there is speculation about a hike, opting for a fixed-rate mortgage might be the way to go. This is because the low-interest rate will stay in place even if the market rate climbs to a higher level. However, if interest rates are predicted to fall, you might want to consider taking an adjustable-rate mortgage.

The Certainty Factor

If you are already on a tight budget, you don’t want to worry about unfavorable changes in interest rates denting your ability to make timely repayments. In such a scenario, while a fixed-rate mortgage would come with higher monthly payments initially, it would offer peace of mind down the road, with you knowing that your repayments will not change through the loan term.

Making Prepayments

If you plan to make aggressive prepayments to try and pay your mortgage off ahead of time, you can benefit by getting an ARM. This is because if you manage to pay a significant portion of the loan during the fixed-rate period, interest rate hikes in the later stage might not have too much of a negative effect on an already reduced loan balance.

Time Period

People who plan to repay or refinance their mortgages in short timeframes tend to favor ARMs over fixed-rate alternatives. For instance, a borrower who intends keeping a loan for around six to eight years might be comfortable taking an ARM that is set to adjust in five or seven years.

Amortization Period

Your amortization schedule will give you a clear indication of your periodic loan payments. The schedule provides a visual of how much your payment goes toward interest and your principal amount and paying off the interest. With a long amortization period linked to an ARM, changing interest rates can have a considerable impact on your monthly payments. This is not the case with fixed-rate mortgages, where your payments remain the same throughout.

The bottom line is that getting an adjustable-rate mortgage might work well for you in a decreasing interest rate environment. However, the flip side is that any rise in interest rates will translate into higher monthly payments. Bear in mind that many borrowers could not keep up with their rising payments because of steep interest rate resets during the 2007-2009 Great Recession.

 

 

7. What’s an interest-only mortgage?

An interest-only mortgage gives you the option of making considerably low monthly payments for a predetermined time period, where the payments you make only go toward the interest that your loan attracts. Once the introductory period (interest-only period) ends, your payment would increase and a portion of your payment would be applied towards your principal loan amount.

In the long run, interest-only mortgages turn out to be more expensive. However, such mortgages might work well for first-time homebuyers who expect their careers to improving soon as well as for individuals who have limited resources at first.

8. What is a loan’s term?

A loan’s term refers to the time you get to repay the loan in full – to include the principal amount and the interest it attracts. Loan terms are typically easy to identity. For example, a fixed-rate 30-year loan requires that you repay it completely within 30 years.

The term of a loan has a bearing on how much it ends up costing because the interest you pay is affected directly. The relationship is simple – the longer the loan term, the more you pay as interest. So, while a longer loan term might seem tempting because it comes with lower monthly payments, you’ll end up paying more in the form of interest. The reverse holds true as well.

As a result, you’ll end up paying considerably more through a 30-year mortgage when compared to a 15-year mortgage. The question is – how much can you afford to repay each month?

Common Loan Terms

• 30-year mortgages. According to Freddie Mac, around 90% of home loan borrowers in 2016 opted for 30-year mortgages. This is probably because long loan terms reduce the financial burden of homeownership, and it also gives borrowers the ability to buy more expensive homes.
• 20-year mortgages. If you get a 20-year mortgage, not only do you pay your loan off sooner, you end up saving a tidy sum in the form of interest. The interest rate you get will also be slightly lower than that of a 30-year mortgage.
• 15-year mortgages. These mortgages come with the most competitive interest rates. This ensures that your payments are not twice as much as they would be through a 30-year mortgage. In addition, the reduced loan term means you end up paying considerably less in interest dollar value.

 

 

9. What is a combination mortgage?

If you cannot make a 20% down payment and want to avoid paying private mortgage insurance (PMI), consider taking a look at how combination mortgages work. Typically, you would take one loan to cover

80% of the home’s value, and another to cover the remaining 20%. In the mortgage industry, this would be referred to as an 80/20 combination loan.

In such a scenario, the first loan for the higher amount usually has a lower fixed rate, whereas the second loan comes with a higher and/or variable rate. Depending on how quickly you expect to repay the second loan, you might be better off getting a combination loan instead of PMI. However, you must do your math in advance.

Conclusion

The interest rate attached to your mortgage and the loan’s term can have a telling effect on how much you end up paying overtime. A variable rate mortgage spread across a long loan term might not be the best way to go, because hikes in interest rates may affect your ability to repay the loan. Fixed-rate mortgages, on the other hand, are the safer approach to homeownership. To determine what loan term might work well for you; take your existing and predicted financial situation into account while talking to your loan officer.

Disclaimers:

30-Year Fixed-Rate Mortgage: The payment on a $200,000 30-year Fixed-Rate Loan at 3.875% and 80% loan-to-value (LTV) is $940.47 with 0 % points due at closing. The Annual Percentage Rate (APR) is 4.026%. Payment does not include taxes and insurance premiums. The actual payment amount will be greater.  Some state and county maximum loan amount restrictions may apply.

Adjustable-Rate Mortgage: The initial payment on a 30-year $200,000 5-year Adjustable-Rate Loan at 3.875% and 80% loan-to-value (LTV) is $940.47 with 0 points due at closing. The Annual Percentage Rate (APR) is 4.187%. After the initial 5 years, the principal and interest payment is $965.40. The fully indexed rate of 4.17% is in effect for the remaining 25 years and can change once every year for the remaining life of the loan. Payment does not include taxes and insurance premiums. The actual payment amount will be greater. Rate is variable and subject to change after 5 years.

Home buying requirements often tend to vary, and finding a home that meets your needs to a tee can be quite challenging. However, most real estate experts suggest that paying attention to the neighborhood is more important than narrowing down on a suitable home. A home, after all, can be remodeled and fixed.

 

Top Neighborhoods for Buying a Home in New York

New York, with its diversity, gives homebuyers several great neighborhoods from which to choose. Here are some that are well set or up and coming.

 

Manhattan

If you like the hustle bustle typically associated with New York, you’ll feel right at home in Manhattan. Often referred to as The City, Manhattan is described as the financial, cultural, media, and entertainment capital of the world.

 

The average median home value in Manhattan is around $1,190,000, with there being a 4.4% year-on-year decline in home values.

 

Manhattan has over 350 primary and secondary schools. Public schools in the area fall under NYC Geog District # 2 – Manhattan or NYC Geog District # 3 – Manhattan. Residents may also choose from schools that are part of NYC Geog District # 4 – Manhattan and NYC Geog District # 5 – Manhattan.

 

There are several big hospitals in Manhattan, some of which include Bellevue Hospital, Lenox Hill Hospital, Lower Manhattan Hospital, and Metropolitan Hospital Center.

 

Chelsea

Predominantly residential, Chelsea offers a mix of townhouses, row houses, apartment blocks, city housing projects, and tenements. In addition, the area’s social and ethnic diversity is plain to see through its many retail businesses. Eighth Avenue boasts of a carnival like atmosphere all through the year.

 

The average median home value in Chelsea is $1,648,800. There has been a 5.1% decline in home values from August 2018 to August 2019.

 

With 19 primary and secondary schools, Chelsea gives its residents numerous education alternatives from which to choose. Public schools in Chelsea are part of NYC Geog District # 2 – Manhattan, although residents also get to choose from schools that are in the Hoboken Public School District and the Weehawken Board Of Education School District.

 

The nearest major hospitals include Bellevue Hospital Center and NYU Langone Medical Center in Kips Bay as well as the Beth Israel Medical Center in Stuyvesant Town.

 

Hell’s Kitchen

Hell’s Kitchen’s gritty reputation is long gone. It is now home to numerous entertainment and dining alternatives. It merges with the Theatre District, where Broadway and Off-Broadway shows are all too common. Long favored by many new actors, it has also started attracting young Wall Street financiers.

 

The average median home value in hell’s Kitchen is around $884,000. There has been a 5.1% year-on-year decline in home values.

 

The New York City Department of Education operates three public elementary schools in Hell’s Kitchen as well as 10 high schools. The rate of student absenteeism in Hell’s Kitchen and Chelsea is lower than in other parts of NYC. In addition, more than 80% of the neighborhoods’ high school students graduate on time, which is over 5% more than the citywide average.

 

Major hospitals that are easy to access from Hell’s Kitchen include the Bellevue Hospital Center and NYU Langone Medical Center in Kips Bay along with the NewYorkPresbyterian Hospital in Upper East Side.

 

West Village

In 2017, West Village earned the distinction of having the most expensive residential property sale prices in the U.S., with prices typically exceeding $2,100 per square foot. It is regarded as an important historical landmark linked to the American bohemian culture of the early and mid-20th century. The now-famous Stonewall Inn is located just off Seventh Avenue and Christopher Street.

 

The average median home value in West Village is around $1,810,400. There has been a 5.1% decline in home values from August 2018 to August 2019.

 

West Village is home to four schools. While the NYC Geog District # 2 – Manhattan operates public schools in West Village, residents also get to choose from options that are part of the nearby Hoboken Public School District and the Elysian Charter School.

 

Major hospitals that residents may turn to include Lenox Health Greenwich Village as well as the Bellevue Hospital Center and NYU Langone Medical Center in Kips Bay.

 

 

East Village

East Village has been home to free-thinkers and artists for a while. While corporate interests have made inroads into some parts of this neighborhood, the area around the St. Mark’s Church on Second Avenue continues to support local art and artists.

 

The average median home value in East Village is around $1,264,200. There has been a 7.1% decline in home values from August 2018 to August 2019.

 

There are 23 primary and secondary schools in East Village. The public schools in East Village are part of NYC Geog District # 1 – Manhattan. The Northside Charter High School and NYC Geog District #14 – Brooklyn are in close proximity.

 

Major hospitals that are easily accessible include Beth Israel Medical Center in Stuyvesant Town, the New York Presbyterian Lower Manhattan Hospital in the Civic Center area, as well as NYU Langone Medical Center and the Bellevue Hospital Center in Kips Bay.

 

Williamsburg

Williamsburg, in Queens, on the other side of the water from the East Village, wins the popularity contest with visitors heading to this part of New York. This neighborhood boasts of a great nightlife as well as numerous restaurants, vintage designer shops, and indie fashion alternatives.

 

The average median home value in Williamsburg is around $931,900. There has been a 4.7% decline in home values from August 2018 to August 2019.

 

Williamsburg’s public schools are part of NYC Geog District #14 – Brooklyn. The neighborhood has a total of 55 primary and secondary schools. Other alternatives include the Believe Northside Charter High School and the Bedford Stuyvesant New Beginnings Charter School.

 

Woodhull Medical Center is the nearest major hospital. In addition, the neighborhood has several medical clinics.

 

Park Slope

In 2010, Park Slope was ranked as the most desirable neighborhood in New York by the New York Magazine. The American Planning Association called it one of the “Greatest Neighborhoods in America” in 2007. Fifth Avenue and Seventh Avenue are home to the area’s commercial interests such as shops, bars, and restaurants. The east-west side streets house lines of apartment buildings.

 

The average median home value in Park Slope is around $1,227,300. There has been a 6.9% decline in home values from August 2018 to August 2019.

 

Park Slope has as many as 22 primary and secondary schools. Public schools in the neighborhood belong either to NYC Geog District #15 – Brooklyn or NYC Geog District #13 – Brooklyn. The Bedford Stuyvesant New Beginnings Charter School and NYC Geog District #17 – Brooklyn are in close proximity.

 

The New York Presbyterian Brooklyn Methodist Hospital is a major hospital that is located in Park Slope.

 

Jackson Heights

Jackson Heights has found favor with middle-class homebuyers since the early 2000s, primarily because of its cultural diversity and the unique architecture of buildings in the area. Street food from the world over is easy to find along Roosevelt Avenue from 74th to 108th Street. A stretch of Roosevelt Avenue that is home to several bars and clubs often makes for comparison with Christopher Street in the West Village.

 

The average median home value in Jackson Heights is around $554,200. There has been a 3.4% decline in home values from August 2018 to August 2019.

 

There are a total of eight schools in Jackson Heights. Public schools in this neighborhood belong to NYC Geog District #30 – Queens. Other school districts in the vicinity include NYC Geog District #32 – Brooklyn and NYC Geog District #25 – Queens.

 

The Elmhurst Hospital Center in Elmhurst is the nearest large hospital.

 

Other Popular Neighborhoods in NYC

Some of the other neighborhoods that find favor with people who wish to buy homes in New York include Gramercy Park, Harlem, Hudson Valley, the Hamptons, Windsor Terrace, East Williamsburg, Bushwick, Bedford–Stuyvesant, Melrose, Mott Haven, Fordham, Long Island City, and St. George. Alternatively, people who wish to move beyond the city may also take a look at what the top neighborhoods in Long Island have to offer.

 

 

What You Need to Know About Buying a Home

Before you think about buying a house, take time to learn about the pros and cons of owning a home. Take your individual needs into account before narrowing down on any neighborhood. For instance, do not fail to account for the time you will need to spend commuting to and from your workplace. Other aspects that need your attention include:

• Affordability – after taking into account income and expenses
• The down payment and closing costs
• Selecting a mortgage lender
• Getting preapproved for a loan
• Comparing multiple listings and carrying out home visits
• Making an offer

 

Selecting a Mortgage Lender

The neighborhood you select notwithstanding, it is important that you work with a reliable mortgage lender. Finding a mortgage lender who might work well for you requires that you pay attention to different aspects. The interest rate you get has a significant effect on the overall cost of your loan, and even a small difference in percentage can make a noticeable dollar-value difference. Take a close look at all the fees you might need to pay, which may come in the form of application fees, loan origination fees, document preparation fees, credit report fees, assumption fees, closing fees, and prepayment penalties.

 

When getting a loan to purchase a home, flexibility in terms and conditions might make the entire process more borrower-friendly. For example, several borrowers benefit by being able to choose from making weekly, biweekly, and monthly repayments. Some lenders provide home loans that come with fixed interest rates for the initial period of the loan while moving to a variable rate at a later stage. Some borrowers also look for features such as redraw facilities and repayment pauses.

 

Since getting a mortgage requires a long-term association with a lender, do not forget to pay attention to customer service levels. An easy way to do this is to look for testimonials or reviews written by previous or existing borrowers.

 

Choosing the Right Type of Mortgage

When it comes to applying for a home loan, you get two basic alternatives from which to choose. In both cases, eligibility might involve meeting different criteria, including having good creditworthiness. Your credit score might also play a role in the interest that applies to your loan.

 

Government-Backed Loans

No matter whether you are a first-time homebuyer or not, you can think about applying for a government-backed home loan through a mortgage lender. The U.S. Department of Agriculture (USDA) provides USDA loans.  The Department of Veterans Affairs (VA) guarantees VA loans. Similarly, the Federal Housing Administration (FHA) insures FHA loans, but note that FHA insured loans come with the additional cost of mortgage insurance regardless of the down payment amount. The benefit of most government-backed loans, however, is that they require you to pay little to no down payment.

Conventional Home Loans

Conventional home loans are ones that you may get through banks, credit unions, mortgage lenders, and private lenders. With a typical conventional home loan, you may be able to pay as little as 3% of the home’s selling value as a down payment, but the average down payment can range anywhere from 5% to 20% of the home’s selling value based on your comfortability and various circumstances discussed with your loan officer.

 

Conclusion

It is only normal for people to want to buy homes in which they can lead safe and comfortable lives. Fortunately, there are a number of neighborhoods in New York where people from different walks of life can feel right at home. Once you narrow down on a suitable locality, think about approaching a lender to get preapproved. This way, you can limit your search to homes that fit your budget.

The days may get a little shorter and the weather a little crisp, but the housing market in the fall seem to continue its trend. Fall can be a great season to purchase a home for a number of reasons. Consider this – around 40% of home sales in the United States take place from April to July. While there are different reasons for the increase in the sale of homes during the spring, improving weather is an important factor. So, why should you consider buying home in the fall, and how might you benefit?

 

When is Autumn/Fall?

Fall in North America traditionally begins toward the end of September and continues until the end of December. It is said to start with the September equinox and end with the winter solstice. In the U.S., popular culture associates Labor Day as the end of summer and the beginning of fall.

 

Why Buy a Home During Fall/Autumn?

While some aspects that you need to pay attention to when buying a home in spring or fall remain the same, there are distinct advantages if you plan to buy a home in autumn.

 

Lesser Competition

Fall is considered as an off-season by the real estate industry, which results in lesser competition. This drop-in competition is through a reduced number of prospective home buyers. Homes continue to be put up for sale. In some cases, the fall inventory even exceeds the inventory for summer and spring.  While you get access to new homes being put on the market, you also get to choose from homes that did not sell during spring and are now repositioned accordingly.

 

Lesser competition when buying a home in autumn puts you in a good position to negotiate. It is not out of place to make low ball offers while following aggressive negotiations tactics. Bear in mind that many sellers want to close deals before the holiday season, and you may use this to your advantage.

 

Increased Attention

Given the home buying lull the sets in during fall, real estate agents are typically more enthusiastic about following leads. They would go that extra mile to find homes that suit your requirements. You can also be sure of getting more attention from them than you would during the spring season.

 

This applies to movers as well. Summer and spring are when movers are at their busiest. This is when customers can expect delays as well as other types of service issues. Come fall, the probability of delays or other problems reduces significantly. Besides, this is a time when movers are competing for your attention.

 

More Time

If you think about buying a home during spring, you may expect to get entangled in bidding wars, where multiple buyers want to buy the same house. With lesser buyers in the market, there is a possibility that you are the only bidder for a home. In such a scenario, you don’t have to worry about rushing to make an offer. You get more time to compare your options and make your decision at a relaxed pace.

 

Motivated Sellers

A number of homeowners who want to sell their homes wish to take advantage of any gain or loss before the end of the tax year. As a result, you might come by sellers who wish to go through the closing before December 31to get tax breaks.

 

Lower Prices

Several homeowners put their homes up for sale during the spring season. It is not uncommon for them to price their properties aggressively, and with rather high listing prices. According to a study released by Nerd Wallet, while listing prices don’t drop during autumn, sale prices do. So, while a home you wish to buy might be listed outside your budget, you get to steer clear of a bidding war, and can even make a suitable deal with the seller. If you end up paying below market value, you would need to get a smaller mortgage for your home purchase.

 

Lower prices also extend to the services you might need after you buy a home. These include movers, contractors, and painters. You also stand to benefit through sales if you plan to move around the holidays. Consumer Reports indicates how the prices of consumer goods vary depending on the calendar. It suggests that September is a good time to buy paint and carpets, October is great for buying lawn movers, and November is perfect for buying cookware and appliances.

 

More Competitive Interest Rates

Mortgage bankers and brokers also experience slow periods. The fall home-buying season is usually when they process fewer mortgage applications. After you narrow down on a suitable mortgage banker, do not hesitate to ask for a better deal. Even a seemingly insignificant drop in interest rate may have a noticeable impact on how much money you pay through the course of the loan term. You might also stand to qualify to pay a lower than usually required down payment.

 

Tax Breaks

This aspect requires particular attention of first-time homebuyers. This is because they can look forward to interest rate and property tax deductions on their entire year’s income even if they go through with the closing as late as December. Any payments you make before the closing are also tax-deductible.

 

Get a Clearer Picture

Homes typically look their best during summer and spring, and they might just lose their luster as fall starts to take over. This is when you get to see how a house holds up as the weather starts to get rough, be it through rain, winds, or even snow. For instance – rains during autumn give home inspectors an easy way to look for leaks. Peeling paint jobs, worn-out areas of the roof and cracks in the foundation are easier to spot. In addition, you get to check how the interior of a home feels on cold and gloomy days.

 

You might also benefit by getting a clearer picture of the neighborhood after September when schools are back in action, and people return home from their vacations.

 

 

The Best Neighborhoods in Long Island

Given the real estate prices in New York City, instances of people looking for homes outside of the city come as no surprise. Different places on Long Island find favor with several buyers, and this is not just because of the Long Island Rail Road (LIRR). Long Island, after all, boasts of some great educational institutes and job opportunities as well as plenty of green cover.

 

What also helps is that buyers can find neighborhoods that suit different budgets. Here are some of the best neighborhoods in Long Island that deserve your attention in this autumn home buying season.

• Greenport – average median home value is around $617,600.
• Smithtown – average median home value is around $485,200
• Bellmore – average median home value is around $518,100.
• Roslyn – average median home value is around $961,700.
• Massapequa – average median home value is around $495,800.
• Stony Brook – average median home value is around $453,100.
• Lake Ronkonkoma – average median home value is around $353,900.
• Holtsville – average median home value is around $373,000.
• Wantagh – average median home value is around $494,100.
• Commack – average median home value stands at around $486,800.

 

Tips for Buying a Home in Autumn

Buying a home in autumn or at any other time during the year requires that you pay attention to different aspects. Following a few simple measures can result in a smoother process and also in savings.

• Get your finances and creditworthiness in order. While you might be inclined to put all your savings toward the down payment of your new home, make sure you maintain an emergency fund that can help tide you through unforeseeable circumstances. Go through your credit report and work on fixing any errors you might spot. Consider consolidating your existing debt and improving your debt-to-income ratio. The latter may result in your getting a more competitive interest rate on your mortgage.
• Choose the right lender. No matter whether you are a first-time homebuyer or are looking to get a loan for a second home, selecting the right lender is crucial. Aspects that need your attention include the reputation of a lender as well as interest rate, fees, flexibility in terms and conditions, and customer service.
• Determine which type of loan is best for you. If you are a first-time homebuyer, you might qualify for different programs or grants. If you qualify for a USDA loan, you do not have to worry about making a down payment. The U.S. Department of Veteran Affairs provides VA loans for existing service members, veterans, as well as eligible surviving spouses. Federal Housing Administration (FHA) loans, issued by FHA-approved lenders and insured by FHA, require eligible borrowers to pay 3.5% or 10% as a down payment.
• Get preapproved. Getting preapproved gives you an indication of how much money a lender is willing to lend to you. This way, you can limit your search to homes that fall within your budget.
• Use the services of a real estate agent. While the internet is a good place to look for listings, not all make it to the online world. This is why working with a real estate agent might work well for you. It makes sense to work with an agent who has local knowledge and the required experience to guide you through the process. In addition, look for an agent who is easily contactable and has good negotiation skills.
• Pay more than 20% as a down payment. Putting as much as you can toward the down payment works well in two ways. This gives the seller a clear indication that you are serious about your offer. It also works in reducing the amount you will pay as interest toward your mortgage.

 

 

Should You Consider Getting a Zero Down Payment Home Loan?

Paying little to no money toward down payment might seem appealing to several prospective home buyers, given that this provides an easy means to become a homeowner. However, you should consider the downsides too.

• Higher repayments. You will end up paying a higher than usual monthly repayment.
• Need to get mortgage insurance. You will, in all likelihood, need to get mortgage insurance. The lesser you pay toward the down payment, the more you will need to pay toward your mortgage insurance premium.
• Funding fees. Loans that come with zero down payment requirements may charge funding fees. While lenders might add this amount to the loan, you will still need to pay it at some stage.
• Financial risk. By paying nothing toward the down payment, you begin with no equity in the house you purchase. If the real estate market experiences a slump, you end up increasing your exposure to risk. In case you wish to sell your home during a slow period, the amount you get could be lesser than how much you paid. If you do not plan to sell the house, the amount you owe toward the mortgage could still be higher than the home’s actual worth.

 

Is Christmas a Good Time to Buy a Home?

Buying a home during the holiday season might work well for you because of multiple reasons. For instance, you can be sure that someone wanting to sell a house during this period is serious about making a deal. Other reasons include:

• Lesser buyers in the market result in lower competition
• Prices are typically lower
• Festivities put sellers in good moods
• The season to give might make some sellers more open to negotiation

 

If you plan on buying a home during the holiday season, make sure you work with a real estate agent who is willing to spend time with you when required. Your agent should also be able to convince hesitant sellers to meet with you during this period.

 

Conclusion

Home buying in autumn may work well for you, provided you do your research and pay attention to all the aspects you need to consider. Selecting the right real estate agent can lead to a smoother home buying process. Making sure you get the right mortgage, on the other hand, is even more important because you will need to stay in touch with your lender for years to come.

If mortgage companies plan to remain relevant in today’s tech-savvy world, they must take a close look at what technology has to offer. Consider this – in 2018, close to 45% of prospective homebuyers began their search for homes online. In addition, around 11% used the internet to learn about the home buying process before getting in touch with a loan officer or a real estate professional.

 

Several mortgage companies in the United States are adapting to evolving technologies. This, in part, is because of new regulations, and also because mortgage customers are now looking for quicker and paperless processes. Besides, the fact that customers are looking for a better digital experience when purchasing a home or getting a mortgage is hard to ignore.

 

Mortgage companies that have woken up to the digital revolution are not just offering great user experiences through their websites, they are also simplifying how people may apply for mortgages. In addition, several FinTech players have entered the field to provide relevant solutions for banks and other financial institutions that offer mortgages. With online mortgages finding traction, the typical back-and-forth movement along with considerable paperwork is now making way for online applications, e-signatures, and document uploads.

 

What Are Mortgage Companies Doing to Market Their Products?

An average homebuyer, even with access to the internet, typically spends more than two months to find a home. This gives mortgage companies enough opportunities to market their mortgages using different online tools.

 

Mortgage companies that have embraced technology are working in curating content that helps position themselves as solution providers. For instance, probable applicants are often found looking for information such as the differences between mortgages on offer, how to save money for a down payment, and what differentiates pre-qualification from pre-approval.

 

Blogs are now commonly seen to be part of websites of various mortgage companies. This is because blogs give businesses easy means to provide tailored content for specific demographics, without cluttering a website. Creating short informative videos is a tactic that some mortgage companies have already put to good use. The process also involves effectively promoting videos on different social networking platforms such as Twitter, Facebook, and Instagram.

 

Another aspect that shows how mortgage companies are coming of the digital age is the increased use of organic and inorganic search strategies. Well designed landing pages that include clear calls to action (CTAs) encourage probable borrowers to provide their contact information so they may get more details. Search engine optimization (SEO) is quickly becoming part of the parcel, where content-driven landing pages make use of keywords related to specific mortgage-related queries. Mortgage companies have also started taking cues by understanding the habits of specific consumer groups, and they optimize their strategies accordingly.

 

Mortgage providers that are yet to make the most of what technology has to offer need to start by reviewing their existing websites. They need to identify which areas borrowers find useful. They need to diversify content and ensure that it remains relevant to the questions and requirements of different generations of homebuyers.

 

The Importance of Creating a Good UI and UX

User interface (UI) includes various elements that go into creating a website or an application. These include menus, buttons, blocks, and controls. From a borrower’s perspective, UI essentially refers to the steps or commands that one needs to follow to interact with a digital offering. Mortgage companies are now relying on this aspect to create their brand identity, and are using the latest in design principles to try and keep prospective clients from leaving their websites.

 

User experience (UX), on the other hand, is about how borrowers feel when they interact with digital products. While web design plays a significant role in creating a good UX, environmental factors, as well as individual preferences, may also affect the outcome. Aspects that mortgage companies need to address in creating good UX include design, utility, performance, accessibility, and usability.

 

Statistics surrounding the importance of creating good UI and UX clearly show why mortgage companies need to pay attention to these aspects.

• Around 38% of all users do not engage with websites that have unattractive content or layout
• More than 35% of users choose to leave websites because of poor design or navigation
• Slow loading images result in around 40% of users leaving websites
• Over 30% of users leave websites that make use of auto-loading audios or videos
• More than three-fourths of all advertising agencies state that focusing on creating better UX would benefit their customers

 

Given that an increasing number of prospective borrowers now use their mobile devices to look for suitable alternatives, mortgage companies must create responsive websites. Such websites not only work well with just about any kind of device, but they also find favor with search engines such as Google and Bing.

 

 

Providing a Personalized Experience

Millennials have grown up with the internet at their fingertips. They have access to music and video streaming services that take little time to identify their preferences, and then provide content in accordance. After all, it is not uncommon for apps to create curated playlists based on browsing history. When people provide information about themselves to online businesses, what they expect in return is products and services customized to meet their preferences. Besides, they look for complete information about what they’re interested in online.

 

Most people will look for mortgages no more than a few times during their entire lives. While many borrowers try to learn as much about mortgages as they can online, it is also common for them to turn to lenders to get a better understanding of where they stand and what they might expect. As a result, the onus to provide mortgages that are ideal for borrowers depending on their circumstances falls on mortgage companies.

 

Borrowers should have easy means to compare the impact of trading points, be it through paying less monthly and more upfront, or the other way around. Through online tools, mortgage companies can make way for complete transparency by giving borrowers the ability to take a close look at estimated fees, and how their monthly payments may differ depending on variables such as loan amount, term, interest rate, down payment, and creditworthiness.

 

Giving Borrowers Increased Control

Prospective homebuyers remain wary of mistakes they might make at some point during the home buying process. When it comes to getting mortgages, it is not uncommon for borrowers to want some kind of control. They look for products that are customized to meet their specific needs even during the application and approval process.

 

Mortgage providers that are keeping up with technological advances take into account that the application process needs to be interactive and intuitive. For instance, the process should be able to differentiate the needs of a first-time homebuyer from the requirements of someone looking to refinance an existing loan. Besides, borrowers can now navigate through specially designed apps provided by mortgage companies on their own, with built-in tips guiding them on their way.

 

After borrowers narrow down on mortgages that suit their needs, they like to be kept in the loop at every stage right until closing. As a result, mortgage providers now give borrowers the ability to check the status of their applications at any time and from anywhere, provided they have access to internet-enabled devices. Apps also make way for feedback and interactions. Mortgage companies, on their part, use their online platforms to deliver qualification decisions as quickly as possible.

 

 

Making the Overall Process More Effective

People who are accustomed to the online world have realized that the cost of several services involving middlemen has reduced because of technological changes. Data suggests that the average cost of originating a loan has increased significantly over the last decade, mainly because of increased investor and regulatory requirements. Increased reliance on manual processes, with double and triple checks to avoid errors, has contributed to making the processing time consuming as well as costly.

 

With technology at the forefront, several mortgage companies have created digital platforms to automate large parts of the process. While this adds to cost-effectiveness from the loan provider’s point of view, increasing operational efficiency results in quicker, more accurate, and cheaper loan processing for borrowers. Data models employed by some mortgage companies no longer rely just on aggregate numbers, they also collect and analyze metadata that plays a role in the decision-making process.

 

Where Does the Appraiser Stand?

When industries transform, there is often a question mark surrounding the future of different roles. With the mortgage industry going the digital way, this happens to be the case with appraisers. However, while their numbers have dwindled in the recent past, their relevance stands. Even as digital mortgages gain traction, mortgage providers still need appraisers to look closely when enough data is not available, as well as in cases of complicated home-buying deals.

 

The strategy, moving forward, requires integration with the digital process. Besides, the changes that state regulatory boards have started to implement following their introduction by the Appraiser Qualifications Board of the Appraisal Foundation in 2018 aim to simplify entry into this field.

 

 

Meadowbrook at the Forefront

Understanding fully well that a significant number of people now use their mobile devices to get through the mortgage process, Meadowbrook decided to launch its app. Prospective borrowers may use this app with devices that run either on iOS or Android. Through the app, Meadowbrook aims to simplify the mortgage experience.

 

Users get quick and flexible solutions when applying for mortgages. They may use the app to upload their documents, check the status of their applications, or even get in touch with a Meadowbrook representative. The app comes with various features, which include, but are not limited to:

• Mortgage calculators. Borrowers get access to mortgage calculators that they may use to determine if their desired mortgage amount suits their budgets. Alternatives they get to choose from including a purchase calculator, a refinance calculator, and an affordability calculator. They get to enter different variables and then get a detailed breakup of costs. The option to save their calculations exists, so they may refer to them again when comparing their alternatives. If the numbers they see for the house they wish to purchase are up to their liking, they may begin their application process from the same screen.
• Pre-approvals. Once you submit your application, you do not have to wait indefinitely to receive pre-approval. The loan officer gets to view your application through the app, and a pre-approval letter is sent online almost as soon as your application is reviewed.
• Constant communication with your loan officer. If you wish to send a quick message to your loan officer, doing so through the app is easy. Your loan officer can also use the app to get in touch with you. Once you send a message, a notification appears on the recipient’s phone.
• Milestones to keep track of the process. Borrowers get to keep track of the loan process by using the app rather easily. The app also lets you view milestones surrounding your mortgage, giving you a clear indication of where it stands and what you may expect going forward.

 

Conclusion

Technology has played a significant role in how people shop, travel, and bank, and advancements in the field of mortgages are more than welcome. The number of prospective homebuyers who use the internet to look for mortgages and get quotes continues to rise, as do instances of people submitting online applications.

 

Given that not all mortgage companies have jumped on the technology bandwagon yet, there is still some time for the market to become completely digitalized. However, the fact that several mortgage providers continue rolling out various digital innovations does make way for a promising future. It is not out of place to suggest that most existing consumer demands will be met shortly, only to result in even more changes.

Homebuyers in the United States typically need to pay around 10% to 20% of a home’s selling price as a down payment. This requirement serves as a safeguard for lenders, while also indicating to them that you are financially responsible. However, the down payment is often looked upon as a big obstacle to the path toward homeownership. Even in modestly priced neighborhoods, the down payment can amount to thousands of dollars.

 

Fortunately, there are different types of mortgage programs that require little to no down payment. Zero and low down payment home loans are made available to individuals who meet specific eligibility criteria, which include having good creditworthiness. So, what options might you have?

 

USDA Loans

The United States Department of Agriculture (USDA) is responsible for issuing USDA loans through its Rural Development Guaranteed Housing Loan Program. You may think about applying for this zero down payment loan if you are an eligible rural or suburban home buyer. USDA loans come in three forms:

• Loan guarantees. In this scenario, USDA guarantees mortgages issued by participating local lenders. However, if you choose to pay little or nothing toward the down payment, you will need to get mortgage insurance.
• Direct loans. The USDA issues these loans for individuals who fall under the low and very low-income brackets. Where you live might have a bearing on income thresholds. With the right types of subsidies in place, you may look forward to an interest rate as low as 1%.
• Home improvement loans/grants. While not quite a solution for homebuyers, these loans and grants work well for existing homeowners. These loans or monetary grants give homeowners the ability to upgrade or repair their homes. By combining a grant and a loan, you may get the assistance of up to $27,500.

 

One of the benefits of getting a USDA home loan without a down payment is the lower insurance premium when compared to other types of loans. In addition, if you take a look at the USDA eligibility map based on the type of property you wish to purchase, you will notice that most areas outside of the country’s major cities also qualify as rural areas.

 

There is no minimum credit score requirement for a USDA loan. However, you become ineligible if you have existing delinquency of a nontax federal debt. Applicants without adequate credit history may consider applying because other factors are then taken into account. If your credit score is lower than 640, your application goes through a more stringent underwriting process.

 

How much you may borrow through a USDA loan depends on the location of your desired home, and limits vary from one county to the next. Limits in most countries range between $120,000 and $250,000, although they can go up to around $570,000.

 

 

VA Loans

The U.S. Department of Veteran Affairs is responsible for providing VA loans. People who may qualify include existing service members, veterans, as well as eligible surviving spouses. These home loans without down payment also take away the worry of making monthly mortgage insurance payments. However, you need to pay a funding fee that may vary depending on your military category and the type of loan you get. The offerings include:

• Purchase Loans and Cash-Out Refinance. You may apply for a purchase loan to buy a house. If you wish to borrow against the equity you have built in your existing home, you may go the cash-out refinancing way.
• Native American Direct Loan (NADL) Program. Meant specifically for eligible Native American Veterans, this program lets applicants purchase, construct, or improve their existing homes on Federal Trust Land. Applicants may even make use of this program to further reduce interest rates on VA loans.
• Interest Rate Reduction Refinance Loan (IRRRL). The IRRRL is also referred to as the Streamline Refinance Loan. It gives existing VA loan holders the ability to get lower interest rates.
• Adapted Housing Grants. These grants are meant for veterans who suffer from a permanent and total service-connected disability. Applicants may use the funds to build or buy adapted homes or to modify existing homes to make them more suitable for living.

 

While the VA loan program does not have a minimum credit score requirement, it is not unusual for lenders who accept a minimum down payment for home loans to have their own requirements. Most lenders look for credit scores in between 620 and 640, although there are some that accept lower scores. You will also need a valid Certificate of Eligibility (CoE).

 

There is no maximum limit surrounding how much you may borrow through a VA loan. However, there is a limit on the amount that the VA guarantees. For a single-unit property, this limit currently stands at $484,350 in most states across the country. If you are looking at buying a home in a high-cost market, the limit extends up to $726,525.

 

 

FHA Loans

If minimum down payment for home loans is your main criteria in looking for a mortgage, you might benefit by taking a look at what the Federal Housing Administration (FHA) has to offer. FHA was founded in 1934, with the aim of reducing requirements to get a home loan and encouraging homeownership. FHA loans are issued by FHA-approved lenders, and they are insured by FHA.

 

While you cannot get a home loan without down payment through FHA, you might qualify to make a 3.5% or 10% down payment. What makes FHA loans particularly popular is that they offer increased flexibility through the eligibility criteria.

 

Since FHA works as a guarantor on your loan, you need to make mortgage insurance premium payments. This is because if you end up defaulting on the loan, FHA is responsible for repaying the lender the amount you owe toward the mortgage. How long you need to keep paying mortgage insurance premium depends on the loan-to-value ratio as well as the loan term.

 

Conventional 97 Loans

Fannie Mae provides these loans for first time home buyers who wish to purchase primary residences. You need to pay at least 3% as a down payment. Private mortgage insurance remains in place until you acquire at least 20% equity in your home. Most lenders who provide these loans require credit scores of 680 and above.

 

HomeReady Loans

Fannie Mae provides these loans for low and moderate-income earners who wish to purchase primary residences as well as for those who want to refinance existing primary residence mortgages. These loans require 5% down payment. Until you get 20% equity in your house, you keep making payments toward private mortgage insurance. A credit score of 680 or above is typically required.

 

Home Possible Advantage Loans

Freddie Mac provides these purchase and refinances loans to applicants who do not own any other property, although it makes a few exceptions. You need to pay at least 5% as down payment, and private mortgage insurance is part of the parcel. Your credit score needs to be 660 or above.

 

 

Is a Zero or Low Down Payment Home Loan Right for You?

You might benefit by getting a home loan with a low or no down payment if you want to buy a house quickly, but do not have money to put toward the down payment. Given the existing market scenario and mortgage interest rates, this might be as good a time as any to consider going the homeownership way. Some people also get home loans with a low or no down payment so they may continue to have more cash on hand to take care of other expenses or to make investments.

 

 

Can You Go Wrong With a Zero Down Payment Home Loan?

The idea of paying zero or minimum down payment for home loans comes with its share of drawbacks. Even if you get a competitive interest rate, you will, in all likelihood, end up making a higher monthly repayment. Other drawbacks might include:

• Higher mortgage insurance. More often than not, home loans without down payment require that you make ongoing payments toward mortgage insurance. Besides, the lesser you pay as down payment, the more you pay toward mortgage insurance.
• Some home loans without down payment attract funding fees, which can be a tidy sum. Even if the fee is incorporated into the loan, the buyer is still responsible for paying it at some point.
• Financial risk. When you get a zero down payment home loan, you start by having absolutely no equity in the house you purchase. In such a scenario, if the market experiences a downturn, your exposure to financial risk might be significant. This is especially the case if you need to sell the house, and end up getting less than what you paid. Even if you do not sell the house, you still end up owing more toward your mortgage than the actual worth of the house.

 

Conclusion

Several homebuyers look at paying zero or minimum down payment for home loans. Depending on factors such as your income, creditworthiness, and what you do for a living, you might qualify for a home loan without down payment or one that requires you to pay 3% to 10% as a down payment. However, the type of loan you get notwithstanding, it is important that determine if you can afford to make mortgage payments and keep up with other homeownership costs. Once you get that out of the way, all you need to do is contact a reliable lender.

Buying a home is probably the biggest investment you will make. As a result, it is crucial that you know what you’re getting into at the very onset. You don’t want to overlook an important aspect that you may regret later. Fortunately, you can avoid commonly made home buying mistakes if you follow some basic guidelines before and during the process. So, what are the common home buying mistakes to avoid?

 

Not Contacting a Lender Early Enough

It is important that you contact a lender soon after you decide you wish to go the homeownership way. This gives you insight into the types of loans on offer, the down payment you need to pay, interest rates, loan terms, and whether or not you might require private mortgage insurance (PMI). Consider getting pre-approved as this gives you an indication of how much you can afford. It also serves as an indicator that you are serious about making a purchase.

 

Buying While Still in Debt

If you go through first-time home buyer tips, you will notice that thinking about buying a home when you have considerable debt is not the way to go. Think about it this way – would you want to run a marathon with ankle weights slowing you down? Debt has a way of eating into your monthly budget, and it might even cause problems when it comes to keeping up with regular monthly repayments toward your mortgage. If you’re in debt, reduce it, build your savings, and then think about buying a home.

 

Using Credit Carelessly

It is common for lenders to check borrowers’ credit reports at the time of preapproval, and then again at the time of closing. A mortgage provider does this to ensure that there is no change in an applicant’s financial position during this period. Once you apply for a loan, make sure you don’t apply for other new forms of credit until the closing. Refrain from making big-ticket purchases on credit as well. This is because any significant change in your debt-to-income ratio can get an underwriter to reject your application or provide revised terms that are less than favorable.

 

What you should try to do is get your existing outstanding balances to below 30% of your available credit limit, while paying all your bills in full and on time every month.

 

Thinking You Need a Down Payment of At Least 20%

Several first-time home buyers think that they need to pay at least 20% of a home’s selling cost as a down payment. This is not true. However, if you pay 20% or more as down payment, you do not have to worry about getting PMI. The flipside is that it might take you several years to save the required 20%, and you might also limit your cash flow during the period.

 

Depending on the type of loan you get, you can pay as little as 3% down payment for a conventional loan. With some government-insured loans, you can pay even lesser.

 

 

Not Considering Government-Insured Loans

Not taking a look at what different government-insured loans have to offer is among the top home buying mistakes you should avoid. The ones that require your attention include the United States Department of Agriculture (USDA) loans, Federal Housing Administration (FHA) loans, and U.S. Department of Veterans Affairs (VA) loans.

• USDA loans are available for rural homebuyers, suburban homebuyers, as well as buyers looking for homes in towns where populations are below 25,000. These loans are designed for low-to-moderate income earners.
• FHA loans are ideal for borrowers with less-than-perfect creditworthiness. However, they come with mandatory mortgage insurance.
• VA loans are designed for veteran and active-duty military service personnel and their spouses. Veterans have the option of not paying any down payment.

 

Rushing the Process

Getting a mortgage to buy a home can be a complicated process. One of the most important things to avoid when buying a house is to rush through the process of getting a loan. If you rush through things, you get little time to save money for the down payment, and you will probably miss fixing errors on your credit report. Bear in mind that it may take months or even years to repair poor credit. As a result, map out a suitable home buying timeline well in advance.

 

Not Considering Other Costs

Not factoring in costs other than the home’s selling price makes it to the list of home buying mistakes to avoid, and not without reason. There is no dearth of first-time homebuyers who focus on making the down payment and forget to account for closing costs. Typically, closing costs hover between 2% to 4% of a home’s selling price.

 

You need to take the cost of homeownership into account as well. In addition to making repayments toward your mortgage, you will also need to pay property taxes and any applicable home insurance premiums. Ongoing repair and maintenance costs require your attention as well, failing which you might find yourself overshooting your monthly budget. You should ideally aim to set aside around 1% to 3% of the home’s buying price each year for repairs and maintenance.

 

Buying a House Outside Your Budget

It is not uncommon for people to fall in love with homes and buy them even if it requires them to stretch their pockets. This is one of the things to avoid when buying a house, even if you qualify for a mortgage. This is because the mortgage payments, homeowners insurance, and property taxes might add a severe burden on your finances. While the added cost might not seem like much initially, it might turn out to be problematic in the long run.

 

Not Saving Enough

Not saving enough money before you buy a home makes it to the list of home buying mistakes to avoid for different reasons. For starters, while saving money for the down payment is important, you also need to consider ongoing repair and maintenance costs. In addition, spending all or a major portion of your savings toward the down payment is definitely not suggested. While paying 20% or more toward down payment does away with the need for PMI and helps reduce monthly costs, you should have some savings in place to account for unexpected expenses. You should ideally aim to keep an emergency fund with at least six months of living expenses.

 

Not Giving the Neighborhood Enough Attention

Another home buying mistake you should avoid is to give more priority to a house than its neighborhood. Consider this – you find a house that suits all your requirements perfectly, but once you move in you find out that you don’t quite like the neighborhood. Narrowing down on the right suburb or town can make a significant difference when it comes to the lifestyle you lead as well as family development.

 

The neighborhood you select should ideally not be a mismatch with the culture and values you follow. Once you find the right neighborhood, you can always consider buying a house that you can tailor to your needs. Aspects that typically need your attention include school ratings and crime rate as well as access to public transportation and healthcare.

 

Not Carrying Out an Inspection

It is crucial that you have a good idea about what shape a house is in before the closing of a sale. This is because you don’t want to end up with a house that requires unexpected repairs, especially when they burn a hole in your pocket. While inspecting a home on your own gives you a basic indication of its condition, you might be better off using the services of a professional home inspector. This is because they know just what to look for and where, and can end up saving you heartache and money in the long run.

 

Paying Too Much Attention to Aesthetics

It is only natural to want to buy a house that appeals to you visually. However, some cosmetic changes, such as replacing old wallpaper, may well be worth the cost. Not buying a home simply because you don’t like its paint job, landscaping, or carpeting is a rookie mistake you should avoid. If you look for a home with the approach of not minding making a few cosmetic changes, the possibility of landing a good deal increases.

 

Physical appearances can take a backseat if you are getting a house that fits your budget and meets your other requirements such as size and location. Remember that owning a home is usually a long-term proposition, and you can always think about making changes further down the road. Some of the other aspects you need to focus on include the home’s floor plan, it’s roofing, its foundation, as well as its plumbing and electrical systems.

 

Remember that fixing a house on your own or hiring a contractor to do the job is typically more cost effective than buying a house that has recently been fixed by its existing owner. Besides, you can then do up the house according to your own liking.

 

Not Getting a Homebuyer Rebate

One of the most common first-time homebuyer tips that pass the attention of people is to get homebuyer rebates or commission rebates. The rebate can be up to one percent of a home’s selling price. It is deducted from the buyer’s agent’s commission. First-time home buyers can benefit by getting this rebate in most states in the U.S. If you plan to buy a house in a state that allows homebuyer rebates, find out if your agent will offer the rebate before closing. The states that prohibit homebuyer rebates include:

• Alaska
• Alabama
• Iowa
• Kansas
• Louisiana
• Mississippi
• Missouri
• Oklahoma
• Oregon
• Tennessee

 

 

Buying Without a Real Estate Agent

Given the widespread use of the internet and easy access to real estate listings, some prospective buyers feel that can get through the process of purchasing a house on their own. However, using the services of a professional real estate agent might be in your best interest. According to data released by the National Association of Realtors, 87% of buyers bought their homes through real estate agents or brokers in 2018.

 

Typically, the seller pays the buyer’s agent’s commission, so this is an aspect you don’t have to worry about.  In addition, a real estate agent can:

• Help you determine what types of homes you can expect to find within your budget
• Give you access to a wide range of homes in your desired neighborhood based on your requirements
• Give you an edge over other prospective buyers who are without buyers’ agents
• Provide valuable assistance at the negotiating table

 

Not Getting All the Details on Paper

Not getting all the details surrounding a purchase in writing makes it to the list of buying mistakes to avoid for good reason. There have been instances of homebuyers assuming that the kitchen appliances they see during their inspections are part of the deal, only to find kitchens bereft of any equipment after the deal is done.

 

Expect a home’s previous owner to take all that can be detached away once you buy the house. This can include hot tubs, bath fixtures, light fixtures, washers, dryers, ceiling fans, and other home appliances. Make sure you go through the contract in great detail before the closing. It any of the items you think come with the house are missing, get them added before signing on the dotted line.

 

Conclusion

Buying a home might seem like a daunting task, although carrying out a little groundwork ensures that you minimize the possibility of getting a bad deal. The best place to start is to contact a lender and establish how much you can afford to borrow. Then, make a list of what you require from the new home and the locality, and look for homes accordingly. Do not hesitate to seek professional assistance because doing so makes the process considerably simpler.

It is not uncommon for people who have started families or have reached a certain age to get pressured into buying homes. While expectations can come from different quarters, basing a decision as big as buying a home is not something you would want to rush into. After all, living on rent does come with its share of pros. So, when it comes to buying or renting a home, which way should you go?

 

Are You Looking at the Purchase as Your Main Investment?

One of the biggest arguments in favor of home buying is that the property serves as an investment. However, it is not uncommon for people to miscalculate or overestimate their return on investment. Besides, homes don’t necessarily work as appreciating assets all of the time.

 

According to Robert Shiller, a Nobel Prize winner and a Yale economist, real inflation-corrected prices of homes from 1890 to 1990 remained “virtually unchanged”. Analysis of Shiller’s data revealed that home prices had grown at a compound annual rate of as little as 0.3%, adjusted for inflation, during a 100-year period.

 

When you decide to buy a home, it is important that you do not put all your financial eggs in one basket. This requires that you hang on to some of your investable assets. It is also crucial that you look at your purchase as a right to housing instead of a long-term investment that will yield great dividends.

 

According to most experts, housing may work well as an investment, but not as a great investment. As a result, if your main aim in buying a home in investment, you might be better off putting your money in a well balanced and diversified portfolio of stocks and bonds.

 

 

The Cons of Buying a Home

Buying a home comes with its shares of pitfalls and limitations, which you should know about at the very onset. This way, you may prepare yourself to avoid or overcome any nasty surprises down the road.

 

Moving Out is Not as Easy

When you live on rent, you may choose to move out when the contract expires or by providing the required notice period. This gives you the freedom to move from one neighborhood to another, and even relocate to another city. When you buy a house, moving out becomes harder because you may not find a suitable buyer when you want. Alternatively, you might end up selling your home for lesser than it is worth simply because you are in a hurry.

 

If you think you might have to relocate because of work or because of family obligations, it might be in your best interest to continue living on rent. Ideally, consider buying a home if you plan to live in it for at least five years.

 

You Need to Make a Down Payment

Depending on the type of home loan you seek, your credit score, and the mortgage provider you select, you will need to make a down payment of 5% to 20% of the home’s selling price. You typically need to pay this amount in one go, before the lender disburses the loan amount.

 

Making a down payment that is as large as financially viable for you is the best way forward. This is because a larger down payment reduces the amount you end up paying as interest in the long run. However, this also requires that you come up with a significant amount of cash at one time. As a renter, you have a lot less financial responsibility.

 

The Lure of a Mortgage

You do not have to buy a house just because you qualify for a mortgage, and this is a mistake some people end up making. Before you buy a home, take time to look at your spending habits and existing debt carefully. If you have significant debt, you might want to reduce your financial burden before you think about getting a home loan. This is because not paying your mortgage in a timely manner will have an adverse effect on your creditworthiness. However, if you have a low debt-to-income ratio, you might consider going the homeownership way.

 

The Risk of Depreciation

It is common for people to expect their homes to appreciate in value over time, but this is not always the case, especially if you do not prepare yourself for the long haul. If you wish to sell a house when it’s value is down, there is a good chance that you will have to settle for less than its original price. This can also be a problem if you wish to refinance your mortgage through a different lender because you might not qualify for the amount you expect. As a result, think hard about buying a house if you don’t plan to live in it for at least five years.

 

The Risk of Foreclosure

If you don’t plan your finances right, or if you experience a financial setback, you might not be able to keep up with your mortgage payments. In such a scenario, you risk losing your house to foreclosure. While a foreclosure might leave you financially drained, it also has a significant negative impact on your creditworthiness.

 

Ongoing Costs

When preparing to buy a home, think about long-term costs that come within the form of home repairs and renovations. If you are stretching your budget to buy a home, keeping up with the ongoing home maintenance costs might seem challenging. In addition, if you do not spend much time in the house you purchase, you might need to spend even more to hire a caretaker.

 

 

Why Should You Buy a Home?

If you feel you are emotionally and financially ready to buy a home, you may get the process underway and look forward to the benefits that home ownership has to offer.

 

Spending Less

While buying a home might seem expensive, it can actually turn out to be more affordable than renting in the long run. Depending on where you live, you might even end up spending lesser each month if you buy an affordable home and get a USDA loan or a VA loan. What also helps with these loans is that you do not have to worry about making a big down payment.

 

A 2017 research carried out by Trulia, a popular American real estate website, showed that it was more affordable to buy a home than to rent in all the 100 biggest metropolitan areas in the United States. However, renting remains more affordable in some of the country’s larger cities such as New York, Seattle, and San Francisco.

 

Building Equity

When you buy a home with the long term in mind, you work in building equity. When you pay rent, it is money you will never get back. Making monthly mortgage payments, on the other hand, helps you build equity. As the amount you owe toward your loan reduces, the equity you hold in your home increases. If you wish to sell your home at a later stage, the home improvements can increase the value of your home, and the equity in your home, and you still may be able to recoup some of the money spent when you sell your home or refinance.

 

Getting a Tax Break

During the initial years of repaying your mortgage, most of your payments go toward paying off the interest. The government allows you to deduct a percentage of the amount you pay as interest when you file your tax returns. While this might not seem like much, it does add up to a tidy sum over the years.

 

Increased Stability

A big pro of owning a house and living in it is that you do not have to worry about looking for a new place because your existing landlord wants you to move out. When you live in a house that you call your own, you can look forward to a set neighborhood and don’t have to worry about changing schools or hospitals.

 

Increased Flexibility

Living in a rented house does not provide the same flexibility that owning one does. For instance, if you want to modify your home’s kitchen or bathroom, you can do so as and when you want without seeking your landlord’s permission. Remodeling the interior of your home, carrying out a landscaping project, or using wallpapers of your liking is easy to do when you own your home. 

 

 

Are You Ready to Buy a House?

Finding out if you are actually ready to buy a home is not difficult. All you need to do is answer some basic questions.

• Do you have money for the down payment? You should ideally be able to pay around 20% of the home’s value as down payment. However, there are some types of loans that require lower down payments.

 

• Can you keep up with the mortgage payments? Repayments toward fixed-rate mortgages do not change over the entire loan term, which gives you an easy way to predict if you will be able to keep up with payments in the future. With an adjustable rate mortgage, you need to factor in that your monthly repayments may increase at almost any time.

 

• Are you secure in your job? If you have job security and feel that you will stick to your existing job or will find a new one easily, you may consider buying a home. A steady source of income will ensure that you keep making your mortgage repayments on time while continuing to build equity in your house. If you have switched jobs recently or plan to do so in the near future, you might want to hold on to your home buying plan for some time.

 

• How good is your credit score? Your creditworthiness plays an important role in your ability to secure a loan and get a favorable interest rate. For instance, while an excellent credit score typically results in a competitive interest rate, a low credit score could result in you paying a noticeably higher interest tare. Typically, a credit score of over 720 will get you the best rates.

 

• Are you willing to fix your credit score? If you have a poor credit score, you might want to improve it before applying for a loan. You may do this by making all your repayments on time, reducing your debt, getting inaccuracies in your credit report fixed and avoiding getting new forms of credit.

 

• How favorable is the credit and real estate market? Take a look at existing interest rates and consider expert opinion surrounding whether real estate prices are expected to rise or fall. Consider this – averaged interest rates for 30-year fixed mortgages dropped to 4.06% in March 2019, down from 4.40% a year ago. This resulted in the second highest weekly increase in demand for purchase mortgage applications over the preceding 12-month period. Refinancing activity also increased, which led to the highest rise in demand for overall mortgages since the fall of 2016.

 

• Are you committed to staying put? With all the costs associated with buying a home, it is imperative that you commit to staying in it for a few years. In your plan to move out in the first couple of years and wish to sell the house, you might end up losing a tidy sum. Bear in mind that selling the house also comes with its fair share of costs.

 

Conclusion

Whether you should buy a home or continue living the life of a renter depends on your individual circumstances. If you are unsure about your financial situation or plan to relocate in the near future, you might be better off living on rent. If you, on the other hand, have your finances in order and plan to stay put in the same place for a few years, buying a home might work well for you. If you do plan to buy a home, looking for a suitable mortgage lender and getting pre-qualification before you begin your search is a good idea.

The spring season, more often than not, sees the real estate market buzzing with more activity than usual. For sale signs displayed on posts become a fairly common sight, with buyers and real estate agents scouting local neighborhoods for possible leads. The market is typically filled with inventory, and buyers are found looking for great deals. Given the widespread use of the internet, this medium simplifies the entire process considerably.

 

When is Spring?

Spring does not come at the same time in all American states. For instance, while spring in New York and most of the United States extends from late March to the end of June, this is not the case in all parts of the country. In Minnesota, the spring home-buying season gets underway pretty much as soon as the snow starts to melt and might continue until May. In Sacramento, it’s usually January to May.

 

One of the main reasons behind people wanting to sell during the spring season is the vacation period of July to August that follows. Between the four months, April tends to find the most amount of home buying activity.

 

Tips to Buy a Home in Spring

If you plan to make an offer for a home during the spring season, it is important that you prepare yourself to make a quick decision. This is because the market is typically awash with competition at this time, and even a little indecisiveness can result in you losing out on the home you wish to buy. While conventional home buying tips apply even during the spring season, there are other aspects that require your attention too.

 

Review of Credit History and Consolidate Debt

You need to ensure that your finances are in order even before you start looking for a home. Emergency funds you keep to tide over unforeseeable circumstances should be kept aside and not included in your budget. Go through your credit report carefully and look for any possible errors. If you spot any, work on getting them corrected.

 

Think about consolidating your debt. With lower monthly payments, you end up improving your debt-to-income ratio. This is an important aspect lenders look at and it can help you get a better interest rate.

 

 

Select the Right Lender

If you wish to get a home loan, you get to choose from a plethora of options. These essentially come in the form of banks, credit unions, mortgage bankers/lenders, mortgage brokers, and hard-money lenders. To determine which one will work best for you, you need to pay attention to your individual circumstances and requirements. The basic aspects you need to address include interest rate, fees, flexibility in terms and conditions, as well as customer service.

 

Get Preapproved

Given the competition that you might face during the spring season in the form of other probable buyers, getting preapproval for a home loan gives sellers an indication that you are serious about making a purchase. The lender you select should ideally have adequate experience with home mortgages and should have different types of loans on offer.

 

If your monetary savings do not account for much, it is crucial that you start saving and minimize your expenses as much as possible. If you are expecting a raise, wait for it to happen before you seek pre-approval. This is because any extra spending power works in your favor, be it through a higher loan amount or better interest rates. What’s important is that you meet your lender early in the process.

 

Get Alerts

New properties hit the market regularly during the spring season. As a result, setting up email or text alerts based on the type of home you seek and your budget can work well for you. This way, you get notified of new listings as soon as they hit the market. The sooner you find out about a home that is up for sale, the sooner you can present your offer and close the deal. When sellers receive multiple offers, it is not uncommon for them to pay more attention to the ones they receive first.

 

Check Listing Websites

While setting up alerts is a good idea, it is also important that you check listing websites regularly. A significant number of homebuyers now turn online to carry out searches, which is why real estate listing websites find several takers. If you come by a listing that you find interesting, visit the property as soon as possible, and make a quick decision. If you like what you see, do not hesitate to make an offer immediately.

 

Don’t Focus on the Seller

When buying a home, try not to focus on what you feel about its owner, good or bad, or it may affect your ability to make a rational decision. You do, after all, wish to buy a home, and not forge a long-term relationship with its owner. Don’t let foreclosures and short sales deter you from buying a home. What you need to focus on, instead, is determining if the house you select meets your requirements.

 

 

Work With a Real Estate Agent

Do not rely on the internet too much. During the busy spring season, some properties find buyers even before they are listed online. As a result, consider using the services of a real estate agent. Work with someone who has experience and has worked in the locality in which you wish to purchase a home. This is because local knowledge often plays a key role.

 

Real estate agents can do more than just help you find a suitable home. They can provide information about local taxes as well as insurance costs. Since you might have to interact with your real estate agent for an extended duration, select someone you are comfortable with and one who has good communication skills. You also need to be able to voice out of concerns without feeling reluctant. Some questions you may ask when narrowing down on a suitable real estate agent include:

• What areas do you work in?
• How many homes have you bought/sold?
• Do you have a specific field of expertise?
• What type of buyers do you usually deal with?
• Do you have any offer strategies?
• How can I get in touch with you?

 

While you would want your real estate agent to be easily contactable, reliable, and friendly, he or she should also be tactful and assertive, especially when it comes to the negotiation table.

 

Offer More Than the Listing Price

It is not uncommon for buyers to offer more than the listing price during the spring home buying season. However, this approach does not work for everyone, especially when people hope to buy homes toward the upper end of their budgets. In such a scenario, you may consider looking for homes that are a little below your price range, so your offer may be slightly above the listing price.

 

If nothing else, prepare yourself to pay at least the list price. Some buyers pay more attention to how much the asking price of the home is instead of its actual worth. This is where your real estate agent can help, by providing details of comparable sales that give you means to arrive at a home’s actual value. Simply comparing values of asking prices is not the way to go, because sellers may ask for any amount they feel is right. Besides, if you find a home you like that is priced within your budget, paying a couple of thousand dollars more will not make a significant dent in the overall scheme of things.

 

Exceed the 20% Down Payment Requirement

When you are willing to put 20% or more as a down payment, it sends a clear message to sellers that you are serious about buying a home. Setting aside extra money for the down payment not only shows sellers that you have your finances in order, doing so also reduces your loan burden. People who are willing to make a significant down payment tend to have preapproval in place, which gives them a further edge. This is why older people who have more cash or equity stand a better chance when compared to younger people who have trouble putting up 20% or more as a down payment.

 

Offer the Seller Something Unique

Given that the spring season sees several homebuyers competing against each other, it pays to give the seller a unique proposition. The purchase offer comes with various terms and conditions. Use it to your advantage by giving the seller a benefit that has no adverse effect on your situation. Negotiations, after all, are not just about money. This is another aspect where you can turn to your real estate agent for guidance. You could, for instance, give the seller a few extra days to move out.

 

Are You New in Town?

If you have recently moved to a new city, town, or neighborhood, you might want to start doing some basic groundwork before the spring season begins. Talk to the people you meet in the neighborhood where you plan to purchase a home. Drive through the locality at different times of the day, and if possible, at different times during the week. Check if the area fits your needs when it comes to schools, hospitals, and public transport.

 

Visit multiple real estate agents to narrow down on someone who makes you feel comfortable. Do the same when it comes to looking for a reliable lender. If you are a first-time homebuyer, it is all right to be a little apprehensive about the process. What helps is that you trust your instincts. Since you tend to have more competition during the spring, do not take too long to make an offer on a property you like.

 

 

Is There a Better Time Than Spring Season?

During the spring season, Easter Sunday can work well for you. This is because not as many people are out looking at homes or making offers on this day. If you find a home that you like on Easter, consider writing an offer on the same day, because come Monday, there may well be more competition. However, this approach might not have the desired effect in non-Christian neighborhoods. Easter typically falls in between the last week of March and the last week of April. It is celebrated on the first Sunday that follows the ecclesiastical moon after the vernal equinox.

 

Outside of the spring season, buying a home on Christmas Day might work in your favor. This is because there are noticeably low numbers of buyers in the market in December, and Christmas tends to witness a virtual lull. The best way is to carry out your research a few days or weeks in advance, so you get to position yourself well. Considering buying a home during the holiday season may work well for you because of multiple reasons:

• Sellers are typically in good moods because of the festivities.
• Sellers might be inclined to be more generous in their negotiation because it’s the season to give.
• Competition tends to remain particularly low.
• Prices are usually lower than at other times of the year.
• People who wish to sell their homes around Christmas are serious about selling, giving you an advantage when it comes to negotiations.

 

What’s important in such a scenario is to find a real estate agent who is willing to work on Christmas and the days before. The agent should also be persuasive enough to get the seller to spare the much needed time on Christmas.

 

Conclusion

Buying a home during the spring season may seem like a daunting task, mainly because of the competition that buyers have to face. Fortunately, following a few simple steps and paying attention to some important aspects can simplify the process considerably. Make sure you have your finances in order ahead of time, work with a reliable and trustworthy lender, and select a real estate agent who makes you feel at ease. The rest should then just fall in place.