Buying a house is a pretty big deal, especially if you’re looking to buy your first home. The process itself can be rather confusing, full of a lot of details and steps. But before you can even get into the process of actually buying the home, there are a few steps that you need to take. Here at Williams Realty Group, we’re dedicated to helping you through every step in the process, even the steps that come before the actual process.
It’s certainly no secret these days that home prices and coincidentally value appreciation have been on a steady upward trajectory since the ‘Great Recession’… WAY UP in many cases!
LET’S GET CREATIVE! WE’RE ON TO PART 3 OF ‘THE 4 MOST WIDELY USED MORTGAGE PROGRAMS FOR BUYING A HOME’. THE QUESTION REMAINS “WHAT IF WE DON’T FIT INTO A CONVENTIONAL OR GOVERNMENT MORTGAGE?” MANY FOLKS AT THIS POINT JUST GIVE UP. BUT TAKE HEART, THERE’S STILL HOPE!
Just like conventional mortgages, government mortgages can be divided into many subcategories. But the basic difference is that rather than a private firm taking on the risk of default in the form of mortgage insurance (PMI), it’s the federal and/or state government that provides the lender with mortgage insurance against a borrower’s default. Additionally, certain governmental departments such as HUD, FHA, and VA play a heavy role in defining the rules and regulations as opposed to banks and investment firms.
Here are a few ways that we suggest you approach your upcoming home sale. These are sure-fire, proven strategies that will get your home sold for top dollar and will increase buyer interest!
So you’ve made the decision that it’s time to enter the home buying process. Congrats!! Chances are, unless you’ve been left an inheritance or you’re a superstar when it comes to saving money, you’ll need financing. It’s important to note right off the bat that mortgages are sorted into several basic categories.
I GET ASKED THE QUESTION ALL THE TIME "SO WHEN ARE INTEREST RATES GOING UP?" AHHH, THE MILLION DOLLAR QUESTION RIGHT?? NEVERTHELESS IF YOU'RE IN THE MARKET TO ANY DEGREE WHETHER TO FINANCE REAL ESTATE OR OTHERWISE, IT'S AN IMPORTANT ONE OF COURSE. TO BE CERTAIN, THIS ISSUE HAS BEEN tabled WITH THE ALL-POWERFUL FEDERAL RESERVE FOR YEARS NOW... LIKE 8 YEARS!!
And for nearly 8 years (with the exception of December 2015), they've kicked the can down the road when it comes to if, when, how, and why to raise rates.
Firstly, you should know that I'm speaking specifically in a context relating to real estate and it's financing only. With that in mind, a 'Rate-Hike' as pitched by the news media and Federal Reserve doesn't necessarily mean mortgage rates. For this article's purpose, it's only important to know that the particular interest rate that the Fed's are alluding to is defined as the FED Funds Rate. The FED funds rate can simply be viewed as the base rate that determines the level of all other interest rates in the US economy. In other words, it's the BIG gorilla. And the bottom line is that the higher the FED Funds rate, the more expensive it is to borrow money... PERIOD. So in sum, while the FED Funds rate doesn't necessarily equate to what interest rate you pay for your mortgage, they ARE indirectly related.
So practically speaking, what does this mean for you in terms of home prices and getting financing for buying real estate? And furthermore, when will these rate hikes really take off? Well, the short answer is, it's anyone's guess and it all depends on the perceived health of the economy in the eyes of the Federal Reserve at any given snapshot in time. Let's face it... right or wrong, these guys are POW-ER-FUL. Let's boil it all down into a few simple factual elements that I really hope will help you make some great decisions.
- Interest rates are ridiculously low right now and nobody knows when they will go up. All indicators are that it will be very soon. I mean, they DID pull the trigger already in December 2015 and hiked upward .25%. It didn't really affect the mortgage market because it was already priced into the equation, but we may not be so lucky in the future. So why on earth wait? Take advantage!
- If you're sell-minded, it may be best to SELL NOW! It's no secret that it's probably a given that when rates really do go up, it will cause your home values to go down or at a minimum taper significantly. Do you really want to place that kind of a bet? It also stands to reason that folks won't be able to qualify for as much when rates go up and that equates to a smaller pool of perspective lookers/buyers.
- If you're buy-minded (and need financing), it may be best to BUY NOW! Yes, prices may come down, but it's all about the interest when you need to get a mortgage. Spending a bit more cash-wise up front is a far better alternative to a significantly higher interest rate. The math wins out. For some thoughts on that front see my blog titled 'Save A Nickel Spend A Dime?'
As always, if you have any thoughts, comment below. We'd love to chat. Our foremost concern is YOU! Let a proven company help shed light on a sometimes dark path.
After 17 years in the real estate sales and finance business, it seems as though I've come across every imaginable financial scenario possible. But there's one thing in particular that continues to plague my mind all too often. And that is the lack of education for kids and young adults specifically as it relates to buying and financing one of the most basic of all needs.... housing!
I've surveyed parents for years asking several simple questions...
- Do your kids get any basic educational benefits in school that specifically relate to buying and/or financing a home?
- Do your kids get any training whatsoever on how to negotiate a simple contract?
- Do your kids get any instruction outside of what they learn at home about credit management?
Unfortunately, almost without exception, the answer is a resounding no! Why??
Given that in Southern California the average debt incurred on a mortgage is a quarter of a million dollars and upward, isn't it of paramount importance that our kids and the younger generations understand at least the most essential components of a mortgage instrument and purchase contract?
So what's the answer? If the educational machine won't step up to the plate, who will? Perhaps as parents we have no other alternative than to dig in ourselves and find solutions and intuitive ways to bring answers to our precious little ones. How satisfying it would be to be able to look back one day and say that part of the legacy left to our children was to instill within them a firm grasp of the wonderful opportunities that the wide world of real estate can provide. And on the other hand, how negligent to ignore the responsibility placed upon our shoulders to do so!
To that end, we'd like to pose the question to you, our clients and readers. What are the solutions? Why is there such a void in the education system when it comes to teaching specific real estate and mortgage principles? We'd love for you to comment!
The mantra over the years has been that if you put less than 20% down on your home purchase, or if you want to refinance and have less than 20% equity, you must pay for private/monthly mortgage insurance (PMI).
But be encouraged! There are a number of positive changes that have been introduced into today's housing market that have aided homeowners nationwide in avoiding the liability of having to pay PMI; or at least in significantly minimizing it's impact on your finances.
Here are a few options:
1) UP-FRONT BUYOUT - Buying out PMI right out of the gate is an outstanding way to eliminate the hefty monthly premiums that so easily hamper a family's ability to afford the necessities of life from a cash-flow perspective. And it's cheaper than one might think. This is especially helpful if the home-owner/buyer plans on staying in the home for an extended period of time (as little as 2 years in many cases). The net savings of this choice can be dramatic over the long haul and can free up monthly reserves in case the little ones need shoes or you'd just like a night out once in a while.
2) MIX IT UP - Hybrid mortgage insurance options allow a buyer or refinance client to pay a smaller portion than a full buyout up front in exchange for a lower monthly premium. Many view this as the win-win avenue in that they don't have to part with a considerable lump sum of money and yet can manage the cheaper premium on a monthly basis.
3) BUMP AND RUN - Another option for the savings-minded individual is really quite clever. This choice allows the home-owner/buyer to bump the interest rate slightly in exchange for eliminating PMI altogether. The thought process is that since mortgage interest is tax deductible, a small bump in rate cancels out any negative effects via the tax break vs. paying PMI. Theoretically, PMI is not deductible so it may make all the sense in the world to take advantage of this option. This is a tricky one and we generally don't recommend it for anyone planning to stay in their home for more than 5-7 years. Since we're not tax experts, it's best to check with your tax preparer to weigh the cost benefit from a tax vantage point.
One final note... With the exception of it's more lenient stance on credit issues (i.e. Bankruptcy, Foreclosure, etc...) FHA is no longer the best deal when it comes to purchasing a home with very little money down. Unless you opt for a 15 year mortgage with FHA, you will pay mortgage insurance for THE LIFE OF THE MORTGAGE....ugh!!! The conventional loan options presented above far and away give you the best bang for you buck with a down payment obligation even less than that of FHA!! We're in this with you for the long haul and want to help you make the right choices when considering the future of your real estate endeavors for you and your family. Let's talk about it. Connect with us!
Well it's definitely been a while since we've been active with our blog. But we're back and dedicated to posting relevant, interesting information regarding real estate and mortgages (...and maybe some other stuff from time to time). So check back every once in a while, or if you'd like, subscribe to the blog below so that you get it in your email inbox whenever a new article is posted. We promise to respect your privacy. We won't sell or share your email address with anyone.