Are You Better Off As a Renter or a Homeowner?

Are You Better Off As a Renter or a Homeowner - Meadowbrook

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

 

Are You Looking at the Purchase as Your Main Investment?

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

 

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

 

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

 

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

 

The Cons of Buying a Home - Medowbrook

 

The Cons of Buying a Home

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

 

Moving Out is Not as Easy

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

 

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

 

You Need to Make a Down Payment

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

 

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

 

The Lure of a Mortgage

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

 

The Risk of Depreciation

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

 

The Risk of Foreclosure

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

 

Ongoing Costs

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

 

What Should You Buy a Home - Explained by Meadowbrook

 

Why Should You Buy a Home?

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

 

Spending Less

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

 

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

 

Building Equity

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

 

Getting a Tax Break

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

 

Increased Stability

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

 

Increased Flexibility

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

 

Are You Ready to Buy a House - by Meadowbrook

 

Are You Ready to Buy a House?

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

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Conclusion

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

A Guide to the Spring Home Buying Season

Guide to the Spring Home Buying Season - Meadowbrook NYC

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.

 

Guide to the Spring Home Buying Season - Meadowbrook2

 

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.

 

Guide to the Spring Home Buying Season - Meadowbrook NYC

 

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.

 

Guide to the Spring Home Buying Season - Meadowbrook New York

 

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.

3 Smart Ways to Spend Your Tax Refund

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.

Our First Annual Company Picnic

meadowbrook

Softball, cocktails, potato sack races and…Margaritaville?!

That was the recipe for Meadowbrook Financials’ first annual company picnic in Eisenhower Park. If you know Meadowbrook, you know no stone is left unturned when it comes to creating memorable company events and gatherings. Whether it’s a company get together inside of the office or out, you can guarantee you’ll leave with a full belly and a story to tell.  

This year the company decided to do something different for its annual Summer Kickoff.

A team of dedicated employees helped turn Eisenhower Park into a Margaritaville-inspired wonderland. From the balloons and blow-up palm trees to the bar and mini-umbrellaed cocktails, it definitely felt like 5’o clock somewhere. (okay, almost)

Country music, cornhole games, and cold margaritas set the tone for an afternoon under the shade of the trees.

It also helped that the weather was beautiful!

After loading up on the usual picnic snacks of various chips and dips, the very athletic, competitive (and brave) Meadowbrook employees took to the field in their company t-shirts to show their softball skills and fight for victory. This was no light game of softball, either. There were home runs, wipeouts, and lots of dirt-covered players.

Don’t forget the not-so-brave employees that chose to serve as cheerleaders on the sidelines either. (We’re important, too!) Because with every wipeout, we provided laughter. With every home run, our hands went up. And each time a co-worker stepped up to the plate…we shouted their name embarrassingly loud and proud!

A well-earned victory and huge congratulations goes out to the Black team for holding the first official Meadowbrook Financial softball game-winning title!

The softball game itself seemed to be a fan favorite amongst all employees because it gave everyone the opportunity to bond over an activity that we normally would not have experienced together…and provided laughter for hours.

At any Meadowbrook party, food seems to be the talking point…with an array of salads and heroes for lunch, plates were filled and it suddenly became much more silent as everyone devoured what was in front of them.

We also had a very special visit from the Kannoli Kings in Massapequa. If you’re a cannoli lover, this place is for you. With an assortment of flavors ranging from Reese’s peanut butter to birthday cake and pumpkin pie, your sweet tooth will be satisfied. We went with the dessert flavors but were shocked to find out they also make savory cannoli’s?!? (spinach dip, truffle mac n’ cheese and BBQ chicken to name a few!)

As Meadowbrook’s picnic came to an end, it felt more like an elementary school field day once the potato sacks came out. Several employees joined in and hopped their way to the finish line…maybe even a little too high that they crash landed on the ground.

All in all, Meadowbrook Financial’s first company picnic was an ultimate success and fun was had by all. Special thanks to the owner, Danny Nicolo for making it all possible. His generosity knows no limits. You may even see him joining in on the potato sack races and softball game if you watch the video below!