Fall is typically not a popular time to buy a home. With several people expecting bonuses in the New Year – and with the holidays and cold weather to boot – many prospective homebuyers opt to wait for springtime or even summer. Data shows that home sales tend to drop during the fall months, only to pick up again around spring. However, if you are okay with shifting base in cold weather, buying a home during the fall might be worth your while.

Buying a home during the coming fall requires that you pay attention to different aspects. Ask yourself these questions so you may experience a smooth home buying process.

How Do Home Buying Seasons Work?

Come summer, you may expect the real estate inventory to heat up. It is common for sellers to place their homes in the market during summer. Prospective home buyers typically have the freedom to work around their schedules during this period, and they also look forward to favorable weather conditions. As a result, competition can be stiff, and bidding wars are not uncommon.

As fall begins to set in, people tend to get busier with their day-to-day affairs. While buyers usually drop in numbers, sellers try to take extra measures to sell their homes.  Quite like the weather, the market cools. For some, this can be an opportune time to buy a home.

What is the Interest Rate Scenario?

Existing interest rates on home mortgages make this a favorable time to buy a home. According to data released by Freddie Mac, the average interest rate on a 30-year fixed-rate mortgage stood at 2.88% as of Aug 8, 2020. This was 0.72% lesser than the same time last year. In the week that ended on September 11, 2019, the average interest rate was 3.56%. Interestingly, the average interest rate on a 30-year fixed-rate mortgage neared a peak of around 5% in the fall of 2018.

If the interest rate continues to drop in the coming months, fall might be a good time to get a loan for purchasing a home.  Even if interest rates begin an upward trend, the possibility of any steep rise by fall seems rather unlikely. Waiting until next year, though, might not be the best way forward. With 2021 being an election year, there is no way to predict which way the market might swing, and interest rates may well increase again.

By getting a low-interest rate, you get to repay less through the course of your loan. Also, reduced monthly payments can translate into you being able to afford a more expensive home.

What Are Sellers Thinking or Doing?

More often than not, homes that are up for sale during the fall were put on the market in the preceding months. These are usually homes that have not managed to find buyers through the summer.  One reason for this to happen is overconfident sellers who ask for more than what buyers are willing to pay. With their homes sitting on the market for months, most sellers begin to rethink their strategies.

It is common for sellers with unrealistic expectations to drop their expected selling prices during the fall. This is because they become eager to sell their homes, and might choose to accept lower-than-expected offers instead of waiting for six more months. By October, some sellers are willing to accept less than the market value of their homes.

Sellers are known to look at the tax consequences of keeping their homes on the market in the New Year. Since some may want to take advantage of their gains or losses in the ongoing tax year, you might find sellers who are inclined to get their homes off the market before the end of the year.

Do I have Many Options?

Inventory of homes up for sale tends to add up from the beginning of spring. As a result, several homes remain on the market through fall, and even up to winter. In winter, though, several sellers choose to take their homes off the market to minimize or avoid time-on-market penalties. If you feel you might have limited options from which to choose, carrying out some basic research will show you just how many homes are up for sale during this time of the year.

Will I Face Much Competition?

Most prospective homebuyers who have time to check property listings and attend open houses during the summer tend to get busier during the fall. What this means for you is reduced competition. Given that the school year gets underway and a new business quarter begins, fewer buyers remain in the market.  This becomes apparent when you attend open houses and do not come across many prospective buyers.

If you are wary about going through bidding wars when buying a home, fall becomes a suitable time to make your purchase. What also helps is that you get the ability to spend some one-on-one time with the seller, and you may use this opportunity to work your way to a better deal.

What Can I Expect From My Real Estate Agent?

Real estate agents usually go through a slow period from September through February. This makes them all the more eager to drive revenue. With time on their hands, it is common for real estate agents to go that extra mile to strike deals during the fall. While real estate agents should help buyers identify and avoid common home buying mistakes, they also need to provide situation-specific expertise. What you may expect from your real estate agent includes:

• Finding listings based on your specific requirements
• Selecting a home inspector
• Being a part of the home inspection process
• Addressing any repair requests
• Communicating with your attorney and the seller’s agent
• Negotiating an offer
• Finalizing the closing

What Do I Need to Know About Negotiating?

The market typically favors sellers during the summer months, where they get to set the terms. Come fall, prospective buyers dry up, giving you an upper hand at the negotiation table. This is because there is an increased possibility of motivated sellers making concessions during the colder months. Some sellers might give you enough time to go through the negotiation process and even offer to make arrangements that are convenient for you once they know you are a serious buyer.

Can I Benefit Through Tax Breaks?

Once you decide to move from being a renter to a homeowner, you may look forward to some tax benefits. New homeowners who know of applicable tax deductions can use their homes as legitimate tax shelters. If you plan to buy a home during the fall, property tax and mortgage interest deductions apply to your income for the entire year, even if you purchase in December. What you need to understand is that all the payments you make before the loan’s closing are tax-deductible. Since these amounts can be significant, you can look forward to some serious savings through your taxes.

Does the Fall Make Flaws More Apparent?

Yes, colder months offer a truer picture of what homes actually look like. Consider this – you look at home in May and it appears picture-perfect, with plants in full bloom. However, unknown to you, the foliage manages to provide excellent camouflage to a cracked wall and peeling paint. When you look at the same home in the fall, without its green cover, you get to see a completely different picture. Besides, this also gives you an indication of how a household up when the going gets tough, either in the form of rain or chilly temperatures. When you carry out a home inspection during the fall, you decrease the possibility of getting nasty surprises months after you make your purchase.

Will I Get a Clear Picture of the Neighborhood?

Several people tend to go on vacation during summers when schools are out. This might lend an appearance of emptiness to some neighborhoods. Once the school year gets underway in September, people return to their regular routines. This makes it a good time to get a clearer picture of a neighborhood, be it through driving around, checking local schools and health care centers, or even shopping for basic necessitates.

Will I Get the Professional Help I Need to Get Through the Process?

Quite like real estate agents, most of the professionals associated with the real estate industry tend to experience a lean period during fall and winter months. As a result, they remain enthusiastic about any work that comes their way. For instance, finding a mover to help you move over a weekend is much simpler in fall than in summer, because summer makes for a much busier period. This also applies to services provided by home inspectors, contractors, painters, plumbers, and electricians. Other than quicker availability and more attention, you may also look forward to discounted or lower prices when seeking professional services in the fall.

If you need to shop after moving into your new home, the holiday season is the perfect time to look for bargains. No matter whether you need home appliances or furniture, you stand to benefit through a range of seasonal specials thrown your way.

Are There Any Tips That Can Help Me Buy the Right Home?

Following some basic home buying tips can simplify the process and help you avoid some of the common pitfalls.

• Check your creditworthiness. You need to look at your creditworthiness at the onset because your credit score has a direct impact on the interest rate you get on your mortgage. You stand to get the best rates if your score is over 750. Scores between 700 and 750 also tend to get competitive rates. If your credit score is any lower, you may expect to pay higher interest.
• Choose the right type of loan. Depending on whether you qualify, you might benefit by getting a government-backed loan. For instance, the United States Department of Agriculture (USDA) provides home loans for rural homebuyers as well as for homebuyers in suburban areas of large cities. The Department of Veterans Affairs (VA) provides loans for veterans as well as their families. When selecting the right loan, you also need to educate yourself about different types of interest rates and loan terms.
• Think about the down payment. You need to determine just how much money you can put toward the down payment of your home. Bear in mind that the more you pay toward the down payment, the lesser you pay in interest through the course of the loan. However, while conventional knowledge suggests paying at least 20% of a home’s selling price as down payment, some people get on the homeownership path by paying little to nothing as a down payment. Examples of no down payment loans include USDA loans and VA loans.
• Get cash to the table. With adequate inventory to go through, buyers tend to stand at an advantage when negotiating. You can further swing the momentum in your favor by using cash to make your initial payment. Other than helping you seal a deal quickly, a cash payment can also wipe out any apprehension a seller might have when accepting a check issued by a third-party lender. A cash payment gives a seller the peace of mind of having secured the required funds, and the risk of losing out on a deal during the closing stages all but disappears.

Conclusion

If you have been thinking about buying a home, this fall may be as good a time as any to put your plan into action.  Interest rates are at all-time lows, several sellers are keen to get their properties off the market, and you don’t have to worry about too much competition. If you wish to start the process, consider getting a pre-approval by contacting one of our loan officers.

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 the United States Census Bureau, millennials, those born between the early 1980s and early 2000s, now make up the country’s largest living demographic. Their numbers, without a doubt, are bound to have an impact on the housing market. While this generation has been slow to enter the housing market, millennial home-buying trends in Long Island go to show they have set the wheels in motion.

 

The Story So Far

Until recently, most millennials had to deal with student loan debts, unemployment, high rentals, as well as limited to no credit histories. The number of 18 to 34-year-olds now married stands at 30%, down from 47% in 1983.

Incidentally, while there are reports of people leaving Long Island, it appears that millennials are making a beeline toward here. A report released by the Long Island Association suggests that the population of those between 20 to 34 years increased by 7.6% from 2010 to 2015. Some of the reasons that are drawing millennials toward the Long Island housing bubble include job opportunities, larger homes, and good education.

According to a survey surrounding “the next generation of Long Islanders” that was part of a Newsday project funded by a Rauch Foundation grant, more than 60% of the millennials who took part felt that Long Island has a bright future. Around 85% said they feel proud when telling others that they live in Long Island. The same report also suggests that the main reason for millennials moving out of Long Island is the cost of living.

 

Long Island Real Estate Trends

The housing market in Long Island was doing considerably well before the onset of the Covid-19 pandemic. Data released by the Multiple Listing Service of Long Island shows that home sales in Nassau and Suffolk counties accounted for around $15.8 billion in the previous year. Long Island’s median home price in January 2020 stood at $480,000, which was 6.4% higher than it was a year ago. Nassau County’s home prices seemed to peak, almost getting at par with home prices in Suffolk County.

The good news for prospective homebuyers in Long Island is that the region’s home prices have risen more slowly when compared to the national average. While the Covid-19 pandemic managed to create a cloud of uncertainty even in the real estate market, low-interest rates and the fact that a home is a tangible asset are factors that millennials need to consider.

 

Long Island Real Estate Forecast 2020

The number of home sales in March 2020 dropped by more than 19% in Nassau County and by around 16.5% in Suffolk County when compared to the same month last year. Over the next few months, the number of sales is expected to remain low. Some real estate experts are of the opinion that Long Island home prices will remain largely stable, whereas some others feel they might drop by up to 5% before the end of the year.

Factors that have been working in favor of the highly competitive markets of Nassau and Suffolk include low inventory coupled with favorable mortgage rates. The proximity to New York City is also a factor that is affecting millennial home buying trends in Long Island.

The median selling price of homes in Suffolk County saw a 2.5% year-on-year increase from June 2019 to June 2020. The median selling price of homes in Nassau County increased by 0.2% during the same period. Incidentally, it looks like increasing prices in the five boroughs are driving millennial buyers toward Long Island, where prices still remain more affordable.

 

The Road Ahead

Millennials typically have a different take on long-term investments and homeownership when compared to previous generations. Several choose to focus their energies on careers instead of family life. However, with access to money, millennials are now buying homes not just to live in, but also as a means of investment.

Reasons why you, like other millennials, may consider looking at what the Long Island housing market has to offer include:

• Affordability
• Typically, larger homes than in the boroughs
• Open floor layouts
• Proximity to work
• Good schools
• Easy access to public amenities
• Newer homes are more energy efficient

 

Millennial Home Buying Trends

According to a report released by Realtor.com, millennial homebuyers continue expanding their mortgage share despite the Covid-19 outbreak. It suggests that millennials appear to be more rooted in place when compared to baby boomers and Generation X. The report highlights that millennials are now spending as much as baby boomers when buying primary homes with mortgages, and also taking larger loans because of low down payments.

 

Going Suburban

Data released by the National Association of Realtors shows that only 15% of all millennial homebuyers purchased houses in urban areas last year. The number stood at 17% in the preceding year, and at 21% in the year before. This goes to show that an increasing number of millennials are choosing to move away from the inner city.

Zillow, a prominent real estate company, recently reported that close to 50% of all millennial homebuyers prefer suburbs or rural areas as opposed to the city. Incidentally, one of the main reasons that many millennials consider moving outward is the rising prices of real estate in the city.

Buying a house in Long Island gives a buyer the ability to make the most of what the region’s indoor-outdoor alternatives have to offer. For starters, this generation brings with it a typical appreciation of nature. In addition, millennials tend to care about their overall wellbeing and prefer living in homes that come with outdoor spaces. It is not without reason that bringing nature into homes is attributed to improving health.

 

Size Matters

An article in the Realtor Magazine points out that several millennials are moving beyond typical starter homes and opting for homes that are bigger and pricier. More than 30% of homes purchased by millennials were priced at 300,000 or more, which is a considerable step up from the $150,000 to $250,000 bracket that most first-time homebuyers prefer for their first homes.

However, there are other millennial buyers in the Long Island housing market who prefer smaller well-designed functional homes that suit their lifestyles. In this scenario, they look forward to benefits in the form of lesser maintenance, reduced expenses, as well as increased energy efficiency.

 

Technology All-Around

Until not so long ago, homebuyers found real estate professionals through the Yellow Pages, referrals, or by simply attending open houses. Millennials have grown up around technology, and they make the most of the online world to find just about everything, from an automobile to a holiday destination, to even a life partner. There’s no reason for them to approach the house hunting process any differently.

A report about home buying and selling trends in 2019 released by the National Association of Realtors highlights that more than 80% of older millennials found homes they purchased through mobile apps.

The use of technology does not limit to finding homes. An increasing number of millennials, most of who are tech-savvy, wish to benefit through the changing landscape so they may make their lives more efficient and comfortable. As a result, technology-driven millennials tend to look for automated features that give them the ability to control aspects such as security, lighting, media, and temperature control through mobile apps.

 

Pets

It is common for homebuyers to address the needs of their families when making decisions about which homes they should purchase. In the case of millennials with young children, and even ones who haven’t started their families, their pets get due priority. This is why several millennial homebuyers look for outdoor space, which is easy to find across Long Island.

Millennials who make the shift from high-end rentals to townhouses or single-family homes in the suburbs realize that they might have to give up on some features when it comes to making their pets feel more at home. Some even prefer outdoor space for their pets over parking space.

 

Customizable and Multi-Functional

It is common for millennial homebuyers to look for open layouts, efficiency, simplicity, and the ability to customize. As a result, not many favor the typical single-family home with a fixed number of bedrooms and bathrooms along with a dining room, a living room, and a kitchen. Instead, they prefer homes with rooms that do not have any predetermined purpose.

Walls don’t play an important role for millennials, which is why they look for homes with open floor plans. For instance, young families want open spaces so their children may run around freely. This generation also likes to entertain, which is why they prefer homes that combine the kitchen, the dining room, and the living room into a single functional space.

The ability to customize is considerably important for millennial homebuyers. According to a study carried out by Ketchum Global Research & Analytics, Hanley Wood, Metrostudy, and TRI Pointe Group, more than 70% of millennials feel that the ability to customize a new home is very or somewhat important.

 

Energy-Efficient Homes

Millennials are fairly conscious of the environment and the role they play in their degradation. They have, after all, grown up in an atmosphere that is rife with talk about climate change. Homes become important targets, given that they are energy-intensive. In the United States, homes account for around 20% of the country’s total energy consumption. Several millennial homebuyers in Long Island don’t mind paying a little extra money to buy energy-efficient homes that will result in long-term savings.

Some of the aspects that millennials take into account when buying energy-efficient homes include:

• Solar energy
• Use of sustainable building material and non-toxic paint
• Energy-efficient appliances
• LEED-compliant lighting
• Smart thermostats

While energy-efficient homes result in long-term savings, their owners also feel that they are doing their bit toward helping the environment. From the point of view of a builder or a seller, transparency surrounding the materials and products used becomes especially important.

 

Fixer-Upper Homes

While Long Island house prices are lower when compared to prices of homes in the city, not everybody can afford to buy a great looking home. When it comes to millennials who are looking for entry-level homes, which is most of them, even average house prices in Long Island might seem out of their reach. This is why some millennials have already started looking for fixer-upper homes. These homes are typically priced lower than existing market rates.

Usually, these properties find favor with people who want to purchase fixer-uppers, carry out the required repairs, and then sell them for a profit. However, given their relatively lower selling prices, some millennials are now looking at buying these homes and renovating them for their own use.

 

Desired Amenities

A survey carried out by the National Association of Home Builders showed that around 80% of millennial homebuyers thought of patios as desirable or essential in homes. More than three-fourths of those who participated in the survey desired that their homes have Energy Star rated windows. Having a laundry room topped the list of desired amenities, with hardwood front door exteriors taking the second spot. Other top features that millennials look for in homes include:

• Garage storage
• Walk-in pantry
• Exterior lighting
• Ceiling fans
• Front porch
• Table space for dining
• Double sink
• Deck
• Central Island
• Shower stall and tub in the master bathroom
• Drinking water filtration

Amenities that made it to the least desired list include:

• Elevators
• Cork flooring
• Laminated countertops and flooring
• Wine cellar and wine cooler
• Bathroom aids

Conclusion

Given that a large number of millennials have come of age and many more are on their way, it is only natural for them to make inroads into the real estate market. The positive millennial home buying trends in Long Island, as a result, do not come as a surprise.

If you plan to look at what the Long Island housing market has to offer, it might be in your best interest to seek professional help. This way, you can benefit through expert advice when it comes to selecting the right property and you also get to narrow down on the mortgage that suits you best.

 

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.

When you take a home loan, you end up repaying significantly more than you borrow. This is because the loan attracts a tidy sum as interest, as well as fees in different forms. The amount you borrow, the loan term, and the interest rate have a direct bearing on your monthly repayments. If you, as a probable or existing homeowner, wish to reduce your home loan expenses, you may do so in different ways.

New Home Owners

If you wish to keep costs low when getting a home loan, you must compare multiple mortgage providers. While selecting the right mortgage lender requires that you pay close attention to interest rates and fees, you also need to consider aspects such as flexibility in terms and customer service. There are other ways in which new homeowners may reduce the financial burden of their home loans.

Select a Suitable Loan Term

This aspect works in two ways. If you wish to keep your monthly repayments low, consider opting for a longer loan term. However, while this reduces the amount you need to pay each month, you end up paying more through the course of the loan in the form of added interest.

If you, on the other hand, wish to lower the overall cost of your loan, selecting a shorter loan term may work better for you. This way, while you end up paying lesser in interest, you need to make higher monthly repayments.

Make a Big Down Payment

Some people might qualify for a home loan without making a down payment, or by paying less than the usually required 20%. However, consider paying as much as you can if you wish to lower the cost of your home loan. Making more than a 20% down payment comes with the following benefits:

• Less interest to pay through the course of the loan
• Reduced upfront fees
• Lower monthly repayments
• No need to pay for private mortgage insurance (PMI)
• Possibility of getting a more competitive interest rate

Get an Interest-Only Mortgage

If you wish to keep your monthly repayments low during the early years of the loan, getting an interest-only mortgage might work well for you. A typical interest-only mortgage is broken down into two phases. In the first stage, you make payments only toward the interest of the loan, and this helps keep your initial repayments low. In the second stage, you make repayments toward the principal and the interest. Bear in mind that these mortgages offer no more than temporary respite. In the second phase, you will be burdened with a higher than usual repayment.

 

Lower Your Closing Costs

The money you end up paying toward closing costs can be significant. In most cases, closing costs account for around 3% to 6% of the loan amount. So, if you borrow $300,000, you may pay $9,000 to $18,000 as closing costs. If you pay close attention to the process, you may take measures to reduce the closing costs.

• Compare loan estimates. Compare loan estimates provided by different lenders because these give you a good indication of how much they charge as closing costs in the form of various fees. Make sure you get legally binding loan estimates, and not just closing costs or fee itemization worksheets.
• Identify probable savings. If the service is one that you’re allowed to shop for, choose the service provider that works best for you and that may help reduce fees. The types of services that you may be able to shop for the service provider include title search, title insurance, settlement services, pest inspection, and surveys. Comparing service providers across these realms may lead to savings. If you plan to compare title and settlement service providers, remember that they usually require adequate time to carry out research and prepare documents.
• Pay close attention to fees. Some lenders charge separate fees for services such as loan origination and underwriting, and other lenders may combine these types of charges under a single fee. This is normal. However, if you come across any fees on the Loan Estimate that you do not understand, you have reason enough to be wary. If you’re unsure about why you should ask the lender why itis charging the particular fee. Do not hesitate to ask.
• Get the seller to contribute. If the market is not favorable for sellers, you might be able to convince a seller to contribute toward closing costs. However, this might not happen when inventories are low, and there is stiff competition between buyers.
• Finance your closing costs. If you don’t have enough money to cover closing costs, you might consider financing the closing costs into the loan amount. This may help if you plan to get a mortgage to buy a new home, and even if you wish to refinance your existing mortgage. In this case, you don’t need to pay the closing costs when you get the loan. Instead, the amount you need to pay as closing costs is added to the principal amount. In some instances, closing costs are replaced with a higher interest rate on the loan.
• There is often room for negotiation when it comes to closing costs, especially if you take the time to understand all the fees and discuss them with your lender. Comparing multiple offerings from various lenders puts you in a better position at the negotiating table. Also, some lenders are known to provide incentives for home loans to existing customers. These may come in the form of discounted fees or more competitive interest rates.

Existing Home Owners

Existing homeowners who wish to bring down the costs associated with their home loans may use a different way to get the results they seek.

Think Forbearance

If you’re having trouble making your monthly payments on time, consider applying for mortgage forbearance. If your lender or loan servicer approves your application, you delay making your monthly payments or make lower payments for a predetermined time. Bear in mind that forbearance only provides temporary relief and interest continues to accrue on the amount you owe. Also, once the forbearance period is complete, you will need to start making payments.

You may qualify for mortgage forbearance in instances that include major illnesses, natural calamities, or loss of employment. Whether or not the forbearance is reported on your credit report depends on the terms and conditions laid down by your lender and/or applicable laws and regulations. If you’re facing financial hardship, consider applying for forbearance before you miss a payment.

 

Refinance

Refinancing your home loan can lower the cost of your loan in two different ways.

• Extend loan term to reduce monthly payments. If you wish to refinance your home loan to lower your monthly repayments, consider opting for a longer loan term. For instance, if you have a 15-year mortgage, refinancing to a 30-year loan will result in a significant drop in monthly payments. If you have an existing 30-year mortgage and have paid it off for a few years, refinancing to another 30-year loan may also have a similar effect. However, this will mean that you end up paying more interest in the long-term.
• Reduce loan term to reduce interest. If you’re looking at long-term savings, refinancing into a reduced loan term might be the way to go. While this results in lesser interest accruing through the course of the loan, you will need to make higher monthly repayments.

Make Extra Repayments

For most mortgage loans, it is well within your rights to make an extra payment toward your home loan at any time during the year. When you make extra payments, you need to specify that the money is to be applied toward the principal. Remember that the extra payment does not automatically go toward the principal. In the absence of your specific instructions, your extra payments will go towards the next regular principal and interest payment and may not pay off the loan as quickly.

You may choose to make a lump sum payment at any time, you may make larger than required monthly payments, or you may simply make one extra payment each year. At existing rates, making one extra payment each year toward a 30-year mortgage can reduce the loan term by around four years. In addition, you would also save a tidy sum as interest you don’t have to pay.

If you have less than 20% equity in your home, making extra repayments can help you get to the 20% mark faster. By doing this, and depending on the type of loan you have, you may no longer have to pay for mortgage insurance. FHA loans, for instance, have mortgage insurance for the life of the loan. However, you can drop the mortgage insurance on an FHA loan if you refinance into a conventional loan, where private mortgage insurance can be canceled after you build 20% equity.

Switch From Monthly to Bi-Weekly

Several lenders give borrowers the ability to choose between making monthly and bi-weekly payments. Opting for the latter gives you an easy way to repay your mortgage faster. This, in turn, results in lesser interest that you need to pay through the course of the loan.

How this works is simple. When you make monthly payments, you end up making 12 payments in a year. When you switch to bi-weekly payments, you essentially make half a payment every two weeks. This amounts to 26 “half payments” in a year, or 13 complete payments in all. What you do when you switch from monthly to bi-weekly payments is add an extra payment each year.

Work on Cancelling Your PMI

If you have a zero or low down payment loan, or if you’ve paid less than 20% toward the down payment of your home, you keep paying for private mortgage insurance (PMI) until you build at least 20% equity in your home. Bear in mind, though, that the mortgage insurance might remain in place for longer depending on the type of loan you have, with FHA loans being a prime example. As a result, the first step is to contact your lender and determine if you still need to keep paying for mortgage insurance.

If you have a conventional loan, you need to build at least 20% equity in your home and then you can ask your loan servicer to cancel the mortgage insurance. With a conventional mortgage, once the loan to value (LTV) ratio drops to 78%of your home’s original appraised value, PMI cancels automatically. If a new home appraisal puts your LTV ratio to below 78%, the PMI also cancels.

 

Consider a Loan Modification

If you feel you might fall behind in keeping up with your regular mortgage payments, think about asking your lender if you qualify for a loan modification. You may also think about requesting a loan modification if you do not qualify for a refinance loan.

If your lender approves your application, you may be able to modify certain terms surrounding aspects such as monthly repayment amount, loan term, and even interest rate. More often than not, a loan modification results in a lower monthly repayment.

Loan modification might involve changing the type of your loan from a fixed-rate mortgage to an adjustable-rate mortgage (ARM), or vice versa. It may result in an extension of the loan term, a temporary or permanent reduction in interest rate, or bundling all past due amounts and the principal, to be amortized over a new loan term.

The benefits of opting for a loan modification program include lowering monthly payments, resolving a delinquency status, and avoiding foreclosure.

Look at the Property Tax You Pay

Take a close look at how much you pay as property tax. According to statistics released by the National Taxpayers Union, around 30% to 60% of all property in the U.S. is over-assessed. Simply put, this leads to inflated property tax bills. Unfortunately, less than 5% of taxpayers think about challenging their assessments. Incidentally, many people who do tend to get partial refunds.

If you feel your property might be over-assessed, you need to file a formal appeal to dispute this. The process varies from one state to another, and in some cases, even from county to county. While you might be able to file your appeal online in some states, others may require that you appear physically in court. In case you think that the discrepancy is huge, it might be worth your while to seek professional legal assistance.

No matter whether you need a loan to purchase a home or already have an existing home loan, there are steps you may take to reduce your financial burden. However, what you need to determine ahead of time is if you are looking for short-term relief or long-term gains. This is because lowering your monthly payments usually translates into a more expensive loan.

If you need a new home loan or are thinking about refinancing an existing loan, contact our experts to check if you might be able to save some money in the process.

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.

An increasing number of homeowners across the country who have existing mortgages are thinking about going the refinancing way. The main reason behind this move is that mortgage rates have continued to slide in recent weeks owing to the ongoing Covid-19 pandemic. People who are thinking about refinancing their existing mortgages may also benefit by shortening the term of their mortgages, changing the type of mortgage they have, or even tapping into the equity they’ve built over time.

The Interest Rate Scenario

Financial markets in the U.S. have shown some stability in the last fortnight when compared to prior weeks. It seems like mortgage rates have bottomed out, and look to be increasing again. Freddie Mac reports that the average 30-year fixed-rate mortgage was 3.33% on April 2. It stood at 3.29% on March 5. However, compared to a year ago, it’s down by 0.75%.

The 15-year fixed-rate mortgage averaged at 2.82% on April 2. This was a slight increase when compared to the 2.79% average on March 5. In comparison to a year ago, the average interest rate dropped by 0.74%.

Even the 5/1 adjustable-rate mortgage average has experienced an increase since March 5, going from 3.18% to 3.4%. Over the last 12 months, the average has dropped by 0.26%.

Bear in mind that these are not the interest rates you will get if you choose to refinance your existing mortgage. The interest rate you get depends on multiple factors such as the lender you select, your creditworthiness, the equity you’ve built in your house, and a steady source of income.

Is Now a Good Time to Refinance?

Given that interest rates have stopped their downward spiral for now, there is no telling just how long the low interest rate atmosphere might prevail. As a result, waiting for rates to fall even further might be foolhardy.

It might make sense to get your application out of the way, because a number of lenders already have to deal with overworked employees. While the increased demand has resulted in some lenders hiring more employees, other lenders are choosing to play wait and watch – unsure of what role the new employees would play when interest rates increase again.

The existing interest rate atmosphere might work as a blessing for some homeowners, even if there is no further drop in rates. Data released by Black Night, an integrated technology and data and analytics solutions company, suggests that more than 11 million American homeowners could save around $270 each month by refinancing their mortgages.

Is Refinancing Right For You?

If your existing mortgage attracts 4% or more as interest, and if your credit score is above 720, you might benefit by refinancing your mortgage. However, there are several aspects you need to consider because even seemingly good deals can result in losses at times.

The Time Factor

Time plays different roles when it comes to thinking about refinancing a mortgage. For starters, just how long you plan to maintain your loan has a bearing on whether or not you should refinance. If you don’t plan to live in the house in question for the next five years or more, refinancing might not be the best way forward. This is because any savings you incur could be offset by the fees you end up paying.

Homeowners who plan to live in their existing homes for the long-term might benefit by refinancing their mortgages. The savings can be even more pronounced if you switch from a 30-year mortgage to a 15-year mortgage. In such a scenario, you would need to pay a higher monthly repayment. However, you could also potentially save tens to hundreds of thousands of dollars form of interest over the life of your loan.

Consider this – you have a 30-year fixed-rate mortgage of $100,000 with an interest rate of 9%. If you get a 15-year mortgage with a 5.5% interest rate, your monthly repayment would experience a negligible increase, rising from around $805 to around $817. On the other hand, if your 30-year fixed-rate mortgage for the same amount comes with a 5.5% interest rate, and the new 15-year mortgage charges 3.5% as interest, your monthly repayment would increase from around $570 to around $715.

You may use an online calculator to see which time period works better for you when it comes to affordability of monthly repayments. What works in favor of a shorter loan term other than having to pay lesser interest is that you build equity faster. This enables you to apply for a reverse mortgage or a renovation loan with ease, if you ever need one.

How Much Will You Save?

The usual rule-of-thumb suggests that you should refinance a mortgage only if the new interest rate is at least 1% lower than your existing interest rate. However, that’s as traditional a thought as the one that suggests requiring at least 20% down payment to buy a house, whereas it is possible to buy a house even without making any down payment.

Refinancing a mortgage might lead to savings even if there’s a 0.5% drop in the interest rate. Interest rates may vary from one lender to the next, which is why you need to compare as many alternatives as possible. The fees that you need to pay to refinance your loan require your particular attention, because these might have a significant impact on the overall cost. Some lenders offer better rates to borrowers who pay more toward closing costs.

If you have a 30-year loan of $300,000 at 4.5% interest, you would be paying around $1,520 each month in principal and interest. The total repayment would be around $547,200. If the same loan attracts 3.5% as interest, the monthly repayment drops to around $1,345, and the total repayment falls to around $484,970. This results in savings of around $175 each month, and around $62,200 over the course of the loan.

The Fees You Need to Pay

Just how much you end up paying in the form of refinancing costs depends on the state in which you live as well as the specifics of your mortgage. Typically, the cost to refinance a home loan hovers in between 2% to 5% of the loan amount. The costs come in different forms, such as:

• Prepayment penalty. When you refinance your existing loan, you are basically repaying it ahead of time, and replacing it with a new one. Repaying your loan before its term comes to a close might require that you pay a prepayment penalty. The penalty you need to pay might be a fixed amount, a percentage of the outstanding loan amount, or based on how long you’ve had the mortgage.
• Application fees. Depending on the lender you select, you might need to pay an application fee of anywhere between $75 and $300. This fee is usually non-refundable, even if you don’t qualify for the loan.
• Loan origination fees. These fees cover the administrative costs that a lender bears when generating a new mortgage. It can vary from 1% to 1.5% of the loan amount.
• Appraisal fees. Your new lender might want to get your house appraised to determine its existing market value. The appraisal fee varies between $300 and $500.
• Title search and insurance. Lenders rely on title searches to verify your homeownership status, and to check if there are any judgments or liens against your property. The insurance is in place to safeguard the search’s validity. This would set you back by $400 to $900.

Are You Refinancing to Change the Type of Mortgage?

A number of homeowners are thinking about converting the type of interest rates their mortgages attract – from adjustable-rate mortgages (ARMs) to fixed-rate mortgages, and vice-versa.

With ARMs, the interest rate during the initial period is lower than that of fixed-rate mortgages. However, subsequent interest rates hikes through the course of the loan can get the interest rate to exceed that of fixed-rate mortgages. In such a scenario, converting an ARM to a fixed-rate mortgage can lead to a noticeably lower interest rate, resulting in sizeable long-term savings.

The converse holds true for people who don’t plan to stay in their homes for long and want to convert their fixed-rate mortgages to ARMs. In this case, you could benefit through the existing low-interest-rate atmosphere as well as lower monthly repayments.

If interest rates fall further, opting for ARMs might make more sense. This is because the periodic adjustments on ARMs can lead to decreased rates and lower monthly repayments, thereby taking away the need to think about refinancing every time there is a drop in interest rates. This, though, would not be the case if interest rates start to rise again.

If you have an adjustable-rate mortgage and are planning on making a switch, you need to pay attention to a few important aspects. These include knowing what index your interest is linked to and how often the rate adjusts, as well as the first, the annual, and the lifetime cap. To determine if a fixed-rate mortgage is better for you, it is important to do the math ahead of time.

Are You Refinancing to Consolidate Your Debt?

Whether or not you should refinance your home to consolidate your debt depends on your existing financial situation. Refinancing your mortgage with the sole aim of consolidating your debt might not be in your best interest if you don’t have your finances in order. While repaying your high interest debt using proceeds from a low interest mortgage might seem like a logical move, there are pitfalls you need to consider.

One downside is that you basically transfer your unsecured debt from credit cards and personal loans into a secured debt that uses your house as collateral. If you end up defaulting on your repayments, you stand to lose your home. While not repaying your unsecured debt does come with unfavorable consequences, you don’t have to worry about losing your home.

Another problem comes in the form of debt that you feel you have repaid, but what you’ve essentially done is simply transferred it to another loan. With your credit cards seemingly all paid off, you might be tempted to spend again, and create even more debt in the process.

Has Much Has Changed Since Your Last Closing?

Has there been any significant change in your creditworthiness since the closing of your last mortgage? If your credit score has improved considerably, you might qualify for an even lower interest rate.  However, if your credit score has dropped, it might have an adverse effect on the rate you get. If you’re still thinking about refinancing, you might want to take some measures to fix your credit first.

The Pros and Cons of Refinancing

Refinancing a home loan is not a foolproof process, and it comes with its share of benefits and drawbacks.

Possible Pros

• Lower interest rate
• Lower monthly repayments
• Decrease loan term by paying it off sooner
• Change the type of mortgage you have
• Consolidate your debt
• Make use of the equity you’ve built to take cash out

Possible Cons

• Completely resetting the mortgage may lead to a longer loan term
• High closing costs
• Further drop in rates might result in you going through the entire process again
• Can take anywhere between 15 to 45 days to fall through

Conclusion

With interest rates showing slight signs of revival as of now, people who are thinking about refinancing their mortgages might have to make some quick decisions. However, there is no sure fire way to tell which way interest rates will move in the coming future. What can be said with certainty, though, is that a low interest rate atmosphere gives existing mortgage holders the ability to potentially save some money by going the refinancing way.

To make sure you choose the right lender, look at more than just the interest rate on offer. Other aspects that need your attention include the fees you need to pay, customer service levels, as well as flexibility in terms and conditions.

 

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.

Mortgage rates fell to record lows in the first week of March. This is mainly because investors and the Federal Reserve fear an unchecked spread of the coronavirus, and the latter is looking for ways to create a stimulus.

As concerns about the effect of the virus on the global economy intensify, mortgage rates have dropped to their lowest ever according to Freddie Mac’s survey of mortgage providers, which began in 1971.

 

Number Speak

According to Freddie Mac, the 30-year fixed-rate mortgage stood at 3.29% in the week that ended on March 5. It fell by a significant 16 basis points from the preceding week when the interest rate was 3.45%. Around the same time last year, the interest rate was 4.41%. The previous record low was 3.31%, in November 2012, when the country was firmly gripped in recession. To put the existing interest rate further into perspective, the 30-year fixed-rate average was 8.15% at the turn of the last century.

The 15-year fixed-rate mortgage also experienced a fall of 16 basis points, dropping to 2.79%. However, the 5/1 adjustable-rate mortgage averaged at 3.18%, with a drop of just two basis points.

While the 10-year Treasury’s downward trend is evident by the recent drop in mortgage rates, it appears that the spread between the two is widening to some degree. Lenders, after all, have different reasons for not wanting to reduce rates rapidly. For instance, maintaining their margins remains crucial, and reducing rates would well eat into their profits.

 

The Lack of Homes

Even with the rates currently on offer in the market, getting a mortgage may work well for prospective home buyers. A problem, though, is that they need to find suitable homes.

A recent report shows that the inventory of homes for sale fell by 14% in January 2020. When it comes to homes priced below $200,000, the supply reduced by almost 20%. While a higher demand from buyers is one of the reasons for this drop in inventory, a bigger problem is that the country still hasn’t overcome the lackluster home construction activity that began during the recession. 

The problem was further compounded because several investors purchased single-family homes during the downturn and converted them into rentals.

There is no doubt that there has been a revival in construction activity since the summer of 2019, but it looks like it’s not happening fast enough to meet the rising demand. Besides, if the impact of the coronavirus on the economy worsens to a point where it affects the job market, the housing market might not be able to hold its own.

 

How Will Existing Conditions Affect Buyers and Sellers?

Opinion surrounding whether or not the drop in interest rates will encourage some homeowners to sell their homes is divided. This is because many people who have existing mortgages feel they are rate-locked. This means that the interest rate on their mortgage is so low, that it works as a deterrent when it comes to selling their homes and buying new ones.

The decision of a homeowner to sell a home is usually based on major life events, such as having children, retiring, or simply wanting to downsize. As a result, people who wish to sell their homes may well move forward with the process.

The overall state of the country’s economy might prevent some prospective home buyers from taking advantage of the existing low-interest-rate atmosphere. If the spread of the coronavirus affects the economy significantly, buyers might feel jittery and back out despite the probable savings. Given that buying a home is among the most important decisions people make in their lives, it is only normal to be cautious, or even nervous.

If interest rates fall below their existing record lows, borrowers may expect delays in getting mortgages. With lenders receiving more than usual applications, longer turnaround times might become the norm. Borrowers can do their part in the smooth sailing of their applications by keeping all the required documents in order.

 

The Effect on Existing Homeowners

Many existing homeowners might benefit by going the refinancing way, all the more so if there is a further drop in interest rates. Black Night, a company that provides integrated technology as well as data and analytics solutions, estimates that over 11 million homeowners in the U.S. can save an average of around $270 per month if they refinance their mortgages.

Existing mortgage holders whose credit scores are over 720 any are paying anywhere over 4% as interest are ideal candidates for refinancing.

Waiting for much longer to get an existing mortgage refinanced might not be the best way forward, as there is no surety that rates will drop any further. Several lenders are already stretched beyond their capacity in terms of the number of applications they can process. While some have boosted hiring because of the rise in demand, others are being wary of what they will do with the extra staff when the rates increase in the future.

In the event that the spread of the virus causes the government to issue a shelter in place orders, getting to the lender would be a challenge. In such a scenario, lenders will need to devise ways to manage all the work remotely, without causing any friction in their systems.

 

Should You Refinance?

Refinancing a home loan is not foolproof. Bear in mind that getting a new mortgage comes with its fair share of fees, and making a wrong decision might have a negative impact on your potential savings. Fortunately, paying attention to a few simple aspects gives you the ability to determine if refinancing might work well for you.

 

Time Period

Repaying a mortgage is usually a long drawn affair. In addition, most of the money you repay during the initial period goes toward the interest, and not the principal. Consequently, time is an important factor when determining if you should consider refinancing your existing mortgage.

Ideally, the time you plan to keep the loan should be long enough so that your monthly savings exceed the closing costs you will incur, which may vary noticeably depending on the fees. If you plan to move into a new home within the next five years, you might be better off sticking with your existing mortgage, taking into account the fees you will need to pay.

If you plan to stay in your existing home for years to come and have a 30-year mortgage, you might benefit significantly by switching to a 15-year mortgage. While you will need to make a larger monthly repayment, you will save a tidy sum in the form of interest you don’t need to pay. With a 15-year mortgage, you also get to build equity in your home faster. This gives you the ability to get a renovation loan or a reverse mortgage in the future, should the need arise.

 

Savings

If you hope to save money by refinancing your mortgage, the new interest rate should be at least 50 basis points lesser than the interest rate of your existing mortgage. Rates offered by different lenders are known to vary, which makes it important that you compare your options well. While interest rates need your attention, you also need to take into account how much you will need to pay in the form of fees, as these affect overall closing costs. If you are willing to pay more as closing costs, you may look forward to an even more competitive interest rate.

 

Mortgage Insurance

People who take home loans are required to pay mortgage insurance in two scenarios. One is if they get conventional loans and pay less than 20% as a down payment. The other is when borrowers take the Federal Housing Administration (FHA) loans.

If you’re thinking about refinancing, you need to determine how much equity you hold in your home and the types of loans you may get. Refinancing does not make much sense if you hold less than 20% equity in your home, because you will then need to get mortgage insurance. Without mortgage insurance, you might increase your overall savings when refinancing even if you fall outside the 50 basis points threshold.

In case you don’t have 20% equity in your house, you might still consider refinancing your mortgage if you have adequate savings that you can put toward a cash-in refinance. This way, you meet the 20% down payment requirement and do not have to get mortgage insurance.

 

Financial Stability

Data released by Lending Tree shows that one in four applications for refinancing failed to meet the cut in 2018. A very high debt-to-income ratio was the reason behind more than a quarter of the rejected applications. Around 25% of applications were rejected because of poor creditworthiness. More than 15% were rejected because the appraised value of homes was too low when compared with the requested loan amount.

As a prospective candidate for refinancing, you need to have a desirable debt-to-income ratio as well as a good to excellent credit score. The best place to start is by reducing your non-mortgage debts that come in the form of credit cards, personal loans, and auto loans. You also need to take a close look at your credit report. If you find any errors, you need to get them corrected as they affect your credit score negatively.

Improving your credit score before refinancing your mortgage not only increases the possibility of approval, excellent scores are also privy to better interest rates.

 

Choosing the Right Lender

Comparing different lenders is crucial when looking for a mortgage because not all suit the needs of different people equally well.  Aspects that you need to consider include:

 

Interest Rate

No matter whether you are a first-time homebuyer or a homeowner looking for refinancing alternatives, there is a good chance that you will get different interest rates from different lenders. Calculating the effect of the interest on the overall cost of the loan shows you how even a seemingly small difference in interest rates can lead to a significant dollar-value saving. Unfortunately, not many people compare the interest rates offered by different loan providers.

 

Fees

The fees you need to pay may vary considerably depending on the lender you select. This aspect requires your particular attention if you plan to refinance your mortgage because the fees you end up paying might eat into any probable gains. Mortgage fees can come in the form of application fees, credit report fees, loan processing fees, closing fees, and document preparation fees.

 

Customer Support

Given the typical long-term nature of home loans, you need to work with a mortgage provider that does not falter on the customer support front. One way to determine how any lender fares in this department is to take a look at what previous customers have to say. You also need to work with a lender that is easy to contact, both online and over the phone.

 

Flexibility

If the effect of the coronavirus amplifies, you might need to limit your search to lenders that carry out the entire loan application process online. Fortunately, several lenders already give their customers the ability to upload their documents using the internet.

Some lenders are known to provide flexible repayment schedules, giving borrowers the option to make weekly, fortnightly, or monthly payments. Depending on your lender, you might be able to make extra repayments without incurring added fees, and this also applies if you wish to repay your loan ahead of schedule.

 

Conclusion

If you’ve been thinking about buying a home, now might be as good a time as any, especially if you wish to live in the house you purchase. The same also holds if you plan to refinance your existing mortgage. There is no telling how long the coronavirus effect on the economy or interest rates will last. On the other hand, it is only a matter of time before interest rates begin their upward movement again.

 

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.

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.

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.

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.

Before you think about how to use tax refund wisely, consider what’s at stake. Data released by the Internal Revenue Service (IRS) shows that it received more than 135 million returns in 2017. It ended up processing more than 128 million of these returns. The total amount refunded stood at over $268 billion, and the individual average refund was $2,932.

What you do with your tax refund is your prerogative, no doubt. However, among the best uses for tax refunds is to use the money to fulfill your dream of becoming a homeowner or paying your mortgage off ahead of time.

Buy a New House

While the housing crisis of 2006-2009 left a telling effect and resulted in a significant dip in mortgage originations, the last couple of years have shown signs of revival. For instance, while $1.4 trillion worth of new mortgages were issued in 2008, the number crossed the $2 trillion mark in 2016 – for the first time since the recession. One of the smart ways to spend your tax refund, as a result, is to use it for buying a new home.

If you have thought about buying a new home, your tax refund may give you an easy way to get the ball rolling. What also helps is that you no longer need to pay a steep deposit to get your first home loan. The median American home buyer puts down 5% of the property’s price as a down payment. Until a around decade ago, you would have to put down at least 20%.

Consider this – you wish to purchase a home that costs $100,000 and you need to pay 5% as down payment. That amounts to $5,000. You may, of course, pay a higher down payment if you can afford it as it will help lower your interest rate, or you could put as little as 3% down if you qualify for a Fannie Mae Home Ready loan.

Reduce Your Mortgage’s Existing Principal Payment

If you have an existing mortgage and are wondering how to use your tax refund wisely, consider using the money to bring down the principal amount that you owe. When you make extra payments toward the principal amount, you work in getting rid of your debt faster. Even if you make as little as one additional payment toward the principal each year, you can reduce the loan term by five to seven years!

In addition, the quicker you build equity in your home, the sooner you may be able to stop paying for private mortgage insurance. What you need to consider, though, is if there are any prepayment penalties you might need to pay.

Refinance Your Mortgage

Home loan interest rates in the United Stated hovered between 3.9% and 4% from August 2017 to January 2018. Since then, there has been a steady increase in interest rates and experts predict that the trend will continue through till 2022. This, as a result, may be a good time to refinance your existing mortgage and take advantage of lower interest rates. Refinancing a home loan can be beneficial if you are troubled with high monthly repayments. If you choose to go the cash out refinancing way, you may even borrow against the equity you have built.

Remember that while the best uses for tax refunds may vary from one person to the next, using the money to achieve financial stability is always a good idea. If you are still not sure about how to use your tax refund wisely, do not hesitate to seek professional assistance.

Please note that the above article is general in nature and for informational purposes only. It is not intended to be relied upon or interpreted as a legal opinion or advice. Kindly consult your tax advisor or attorney for more information.