home buying Archives - Hanover Mortgages

May 5, 2021

Managing Your Money, Together

To learn more about how our Minters are achieving their financial goals, we reached out to everyday Mint users, just like you, to hear their stories. Whether it’s paying off student loans, or working toward buying a home, we’re so inspired by the dedication this community has shown in working toward your goals and dreams.

One of the Minters we connected with is Jordan. He shared with us how he’s used Mint to reach a number of his financial goals. Check out his #EmpowerMint story:

My wife and I have been interested in getting out of debt ever since the day we took on student loans. With the desire to pay those loans off, we strived to learn more about budgeting and personal finance.

As we grew in our journey, there were many financial things we questioned that felt ‘normal.’ We heard so many messages that emphasized the need to have the newest toys to be happy, that having debt is normal, and that most people live paycheck to paycheck. We realized that we didn’t feel comfortable with any of that, and that we found satisfaction in being content with what we have.

Knowing that money issues were often a problem area for couples, my wife and I started using Mint shortly after we got married in 2010 to ensure transparency and partnership from the beginning. We found Mint to be a terrific tool for us to have a complete picture of our financial situation. During this time, I was working full-time and my wife was finishing up her last year in nursing school. Mint was an immediate help in keeping track of where our money was going and in starting budget discussions that have proved to be invaluable in our marriage. It also helped initiate discussions on both near-term and long-term goals, which have been so key in helping us plan both strategically and aspirationally.

As time went on, Mint was instrumental in helping us achieve so many of our goals including:

Paying off student loans

Paying for grad school with cash

Preparing for kids

Starting a 529

Saving for a down payment

Buying a home

Our current goal is to complete our 15-year mortgage in under 5 years. A combination of Mint, aggressive savings, overtime shifts, and side hustles have helped put us in a position to achieve this goal within the next 12 months. Once that goal is complete, we’re excited to have a little fun and celebrate this accomplishment, and then prepare for the next chapter in our financial journey.

In addition to this goal, we also have various net worth milestones we would like to achieve in the next 1-, 5-, and 10-year periods. We are very excited about the concept of financial independence, and would like to be in a position where we have the opportunity to focus our attention on things outside of work, such as further investing in our family and causes that are important to us. With Mint, we can see how the choices we’re making are helping move us closer to achieving these goals.

Today, we check Mint on a daily basis in order to stay on top of our expenses and monitor for any fraudulent activity. Years ago, Mint helped me identify a fraudulent charge almost immediately, enabling me to notify our bank and get the issue resolved. Reviewing our expenses enables us to stay within our budget, catch fraudulent activity, and follow the ‘every dollar’ budgeting rules that have been so helpful for us. In addition, linking our accounts has automated what would otherwise be a very manual and time-intensive process.

I have also loved using the trends feature to have full visibility into exactly how our money is being spent and to help ensure we’re always partnering as we work towards our financial goals, rather than feeling like one person is pulling the other along. We can budget with transparency and not feel any need to hide transactions for personal expenses and rewards or small splurges.

The trends feature has also allowed us to get a sense of what our typical spending has been in different categories. We periodically review our budget, and being able to easily see our historical spending in different categories has helped us set realistic targets, as well as track our progress when we are attempting to change habits. Lastly, being able to see changes in our net worth over the years has been inspiring, as we have been able to see in real-time how decisions to save or forego immediate gratification can have long-term benefits.

Beyond that, we have found a great deal of joy in doing things ourselves, whether it is cooking meals for the week, doing our own car maintenance, or trying to fix something ourselves before calling someone. Additionally, the satisfaction has compounded as we’ve seen that making these choices has helped us not only learn new things, but also in achieving our goals.

Knowing what we know now, we’re really excited to pass these values on to our kids, and we’re happy to discuss them with anyone who asks. Additionally, I can see a ‘life’ after work that involves volunteering in some form in the personal finance field, whether that is teaching folks about budgeting or just encouraging them in their financial journey.

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Source: mint.intuit.com

May 4, 2021

5 Tips for Approaching the Open House

In this article:

For decades, sellers and their agents have been using open houses to help generate interest in their listings. Open houses give the general public the chance to view a home without scheduling a private showing. While open houses do get a lot of curious neighbors and casual browsers, they can be a good opportunity for serious buyers to decide if a home is worth pursuing further, or a way to get a better grasp on neighborhood home values.

In fact, 59% of home buyers attended an open house during their shopping process last year and 43% of buyers said attending the open house was very or extremely important to determining if the home was right for them.* On average, home buyers attended 2.6 open houses before buying.

Whether you’re a sincere buyer or simply curious about the inside of a home, you should know how open houses work and understand how you can be a good open house attendee.

Note: If open houses are restricted or unavailable due to public health concerns, work with your agent to arrange a private tour or video tour. All Zillow-owned homes include a self-tour option — just use our app to unlock the door and tour at your convenience.

What is an open house?

An open house is an event during which potential buyers can tour a home that’s on the market. It’s usually hosted by the seller’s listing agent, or by the seller themselves, in case of a for-sale-by-owner (FSBO) listing. Open houses usually take place on weekends, during a set range of hours — typically midday.

Open house benefits for buyers

No scheduling required: Unlike a private showing, you don’t need to set up a specific appointment to see a home. Simply show up during the open house hours and view the home at your own pace.

Scope out the competition: If you’re interested in a home, attending the open house can help you gauge interest from other buyers. This can be helpful when determining how quickly you need to submit an offer and how much you should offer.

Understand current home values: Seeing what homes are selling for in your area and what you can buy at a particular price point can be helpful if you’re just starting your search.

Redefine your nonnegotiable home features: Checking out homes in person can help you redefine your list of must-haves: Do you really need that extra bedroom? What does a backyard of this size really look like?

How do open houses work?

Not every seller or listing agent will hold one, but here’s the typical process for sellers setting up an open house:

The seller and their agent determine a day and time for the open house.
The agent lists the open house on the local MLS.
The agent advertises the open house on social media, online and with print ads or flyers.
The agent prepares for the open house — purchasing refreshments, printing flyers, setting up signs and adding little touches to make the home feel welcoming to buyers. (Yes, as a shopper, you can eat the cookies.)
The agent hosts the event, greeting buyers and answering questions about the property and community.
Buyers remove their shoes, tour the home, take pictures and video (if allowed) and jot down important notes.
Any buyer who liked the house will contact their own agent. They’ll then set up a private showing to see the home again or they’ll submit an offer right away — the latter is common in fast-moving real estate markets.

Who hosts an open house?

The person hosting an open house could be any one of the following:

Listing agent: As the person hired to sell the home, the listing agent should be an expert on the property.
Listing agent’s team member or associate: A busy listing agent may also send another agent in their place — either someone on their team or another agent in their office. They should be experts in the local market, but may not be as familiar with the individual home.
Homeowner: If a home is for sale by owner (FSBO), the homeowner will be hosting their own open house. They’re undoubtedly the expert on the home, but their local market expertise may be limited.

How to prepare for an open house

There are times when you might just stumble upon an open house while you’re on a walk or running errands. But if you’re intentionally looking for open houses as part of your home-buying strategy, try these tips.

Seek out relevant open houses

If you plan to visit multiple open houses in one day, make sure you’re focusing on listings that fit your criteria for budget and location. It’s not worth wasting time looking at homes outside your budget or those that are too far from your work or school.

Tip: With Zillow’s home search tool, buyers can filter by homes with upcoming open houses (this filter can be applied in addition to other search filters like price, bedrooms, bathrooms, square footage and location). When you use the open houses filter in conjunction with filters for your other criteria, you can easily find the right open houses for your search.

You can also tour most Zillow-owned homes any time between 6 a.m. to 8 p.m., any day of the week — just select the tour option on the listing. Although the listing agent will not be present, you can avoid a busy open house and rest assured the property is in move-in ready condition.

Do research on the market beforehand

With help from your agent or on your own, find out how each home you’re planning to visit stacks up against others nearby. Is the price in line with similar listings in the area? Are there any defects? Has it gone under contract recently and then returned to the market? Are there a lot of other interested buyers? Has it been sitting on the market for a long time? (“Days on market” is an indicator of a stale listing, but the standard number of days on market can vary based on where you live.)

Stay open-minded

If you’re searching on a tight budget in a hot neighborhood, there’s a good chance that the home that fits the bill will need some TLC. Fortunately, attending an open house can give you a better idea of the home’s condition and potential, while also giving you the opportunity to ask renovation-related questions — e.g., the location of load bearing walls and the details of local regulations.

How to attend an open house

Now that you’ve done your research and are prepared to add some open houses to your home search, here’s what you should do once the day arrives.

Ask questions

An open house is your best opportunity to ask the listing agent (or their associate) your questions — don’t be shy. Ask questions that you wouldn’t be able to answer just by reading a home’s listing description, such as:

What are the HOA restrictions?
Has the seller done a property tax appeal?
Have there been any recent renovations or repairs?

Tip: If you’re not currently working with an agent and you ultimately decide you aren’t interested in a particular home you tour, the open house could help you see if the listing agent might be the right person to represent you — many agents represent both buyers and sellers.

Be honest

If anyone other than the listing agent or the homeowner is hosting the open house, they’re likely an agent hoping to find potential buyer clients. If you’re already working with an agent (or if you have no real interest in buying), be honest.

Check for damage and disrepair

Professional or edited photos can make a home look a lot better online than it is in person. At an open house, take the opportunity to closely evaluate a home’s condition and take note of any potential defects that would factor into your offer price.

Assess the windows: Look for flaking paint, misaligned sashes and condensation due to air leaks. These could be signs of windows that need replacement.

Check for water damage: Look for warped baseboards, ceiling stains and musty smells.

Make note of cracks: Noticeable cracks in the ceiling or drywall could indicate foundation issues.

Test functions: Open cabinets, doors and drawers. Run the faucets. Check the water pressure. An open house is a good opportunity to make sure every part of the home is in good working order.

Gauge potential renovation needs: Home improvements can really add up. As you walk through a home, keep an eye out for urgent renovation needs like floors, fixtures or large repainting projects.

Open house tips for buyers

Whenever you attend an open house, put yourself in the seller’s shoes — you’re letting a bunch of strangers walk through your home while you’re not there. While every seller wants their open house to net a buyer, they also want to keep their home safe and their furnishings free of damage.

Do

Take off your shoes or wear booties if requested.
Greet the host and provide your name.
Sign in if necessary or requested (this is a safety issue for the seller and their agent).
Take notes on your phone about your likes, dislikes and follow-up questions.
Ask if you can capture a video (if the listing doesn’t already include a video).
Respect other buyers and guests.
Wait for others to exit a room before you enter.
Provide feedback if requested.
Thank the person hosting the event.

Don’t

Refuse to comply with an agent or homeowner’s house rules.
Criticize the home or the owner’s style.
Listen in on other visitors’ conversations.
Touch the owner’s belongings.
Let kids run around without supervision.
Bring food or beverages in (except water).
Reveal information that would compromise your negotiating power, like your budget or level of interest in the home.
Bring pets.

*Zillow Group Consumer Housing Trends Report 2019 survey data

Source: zillow.com

May 3, 2021

Pros and Cons: Payable on Death (POD) Accounts

Pros and Cons: Payable on Death (POD) Accounts – SmartAsset

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Payable on death accounts can help streamline the process of transferring certain assets to loved ones after you pass away. Also referred to as a POD account or Totten trust, a payable on death account can be established at a bank or credit union and is transferrable to the beneficiary of your choosing. There are different reasons for including a payable on death account in your estate plan and it’s helpful to understand how they work when deciding whether to create one. Estate planning is best done with the counsel of a financial advisor, who can help you coordinate your investment goals with your end-of-life wishes.

Payable on Death Account, Explained

A payable on death account is a type of bank account that can be used for estate planning purposes. You can create this type of account at a bank or credit union and your bank may also let you convert any existing accounts you have to a POD account.

The difference between a traditional bank account and a POD account is that the latter has a named beneficiary. This is someone you choose to receive any assets held in the account when you pass away. Depending on your bank, you may be able to name multiple beneficiaries for the same account or choose a primary beneficiary, along with one or more successor or contingent beneficiaries.

How a Payable on Death Account Works

A payable on death account is simply any bank account that has a named beneficiary. For instance, a POD account can be a:

What makes a bank account a payable on death account is having a named beneficiary. It’s up to you to decide who to name. If you’re married, your spouse might be a logical choice. But if you’re unmarried, divorced, widowed or separated you might choose an adult child, sibling or another relative instead.

During your lifetime, you have control over the assets held in a POD account. So if you name a beneficiary for your checking account, for instance, you’d still be able to spend money in the account as you normally would.

Once you pass away, the assets held in a payable on death account would be transferred to the beneficiary. Typically, they’d need to show proof of identification and a copy of the death certificate before the transfer can be completed. State laws vary, so it’s important to understand how the process works when choosing a beneficiary.

Pros of Payable on Death Accounts

There are several benefits associated with using POD accounts to transfer assets. First, assets that are passed to someone else through a POD account are not subject to probate. The probate process, which is a legal process in which your assets are inventoried, debts are paid and remaining assets distributed to your heirs, can be time-consuming and costly. Setting up a payable on death account allows the beneficiary you name for that account to sidestep it for any assets held in that account.

That’s an advantage if you want to ensure that your beneficiary is able to access cash quickly after you pass away. Even if you have a will and a life insurance policy in place, those don’t necessarily guarantee a quick payout to handle things like burial or funeral expenses or any outstanding debts that need to be paid. A POD account could make it easier for your loved ones to get the funds they need right away to pay for those and other expenses.

It’s important to keep in mind that beneficiaries can’t access any of the money in a POD account while you’re alive. On one hand, that could be seen as a pro since you don’t have to worry about them spending down the assets without your knowledge. But it also has the potential to be a con in certain situations.

Cons of Payable on Death Accounts

As mentioned, beneficiaries of a POD account can’t tap the money while the primary account owner is still living. That could be problematic if you become incapacitated and your loved ones need money to help pay for medical care. In that instance, having assets in a trust or a jointly owned bank account could be to your advantage.

Another con is that you can’t change the beneficiary of a POD account once you name someone. So if they pass away before you do and there are no other beneficiaries named to follow after them, the account would be subject to the normal probate process.

Payable on Death Account vs. Trust

You may be wondering whether payable on death accounts are better than trusts for estate planning. Trusts allow you to transfer assets to the control of a trustee on behalf of one more beneficiaries. You can act as a trustee or have someone else fulfill that role during your lifetime and after you pass away.

Technically, POD accounts are a type of trust. Again, banks may reference them as Totten trusts, informal trusts or tentative trusts. The difference is that they’re easier and less expensive to set up than a traditional living trust. And of course, they only focus on assets held in a bank account.

Setting up a payable on death account could make sense if you want to make sure your beneficiaries have a source of ready cash when you pass away. But you may still need a living trust if you have other assets you want to transfer, such as real estate, vehicles, investments or business assets.

How to Set Up a Totten Trust or POD Account

If you’re interested in creating a payable on death account, the first step is contacting your bank. They can tell you whether it’s possible to add a beneficiary designation to any existing accounts you have or whether you’d need to create a new account. From there, you’d need to decide who you want to add as a beneficiary. Remember that once you make a beneficiary designation it cannot be changed. So you need to be reasonably sure that the person you choose will outlive you and manage any assets they receive responsibly.

Next, you’d want to let the person you’re naming as beneficiary know that you’re creating a POD account. This way, they can familiarize themselves with what they’ll need to do to claim any assets in the account once the time comes.

Finally, compare the terms of the POD account with the terms specified for those assets in your will. In most cases, a payable on death account can override a will so reviewing your wishes can help avoid any potential conflicts among your heirs after you pass away.

The Bottom Line

Whether you call it a payable on death account or a Totten trust, this type of account can serve a useful purpose when creating an estate plan. If you’re not sure whether you need a POD account, your financial advisor may be able to shed some light on when it makes sense.

Tips for Estate Planning

Consider talking to a financial advisor about the best ways to pass on bank accounts, investment accounts and other assets. If you don’t have a financial advisor yet, finding one doesn’t have to be complicated. SmartAsset’s financial advisor matching tool makes it easy to connect with professional advisors in your local area. If you’re ready, get started now.
Until you know what you’ll have to retire on no estate plan can be complete. A free, easy-to-use retirement calculator can give you a quick and accurate idea of whether you have reached your financial goals.
A transfer on death account automatically transfers its assets to a named beneficiary when the holder dies For example, if you have a savings account with $100,000 in it and name your son as its beneficiary, that account would transfer to him upon your death.

Photo credit: ©iStock.com/monkeybusinessimages, ©iStock.com/eyetoeyePIX, ©iStock.com/vaeenma

Rebecca Lake Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She’s worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.

How to Find Your Dream Home

Ready to start searching listings and hitting open houses? Save yourself some time by first identifying exactly what you need and want in a home.

You’ve been pre-approved and know what you can afford, so it’s time to start home shopping. But the hunt for your dream home will stall rapidly if you don’t know what that “dream” looks like.

It’s easy to talk in generalities about wanting a “big” house or an “older” home. But in order to better target your real estate search, you must think specifically about your dream dwelling. Will your “big” house be 2,400 square feet or 5,000? When you say “older” home, do you mean one built pre-1900, or pre-1980?

Before you visit another open house, sit down and make a list of your needs and wants — and yes, those are two different things. You may want a pool, but you probably could live without it. (Plus, it’s worth considering that having a pool could raise your home insurance costs.)

Understand that your requirements list will likely change as you learn more about your housing options. Proximity to the beach may start as a priority, for example, but once you see the size of ocean-front homes you can get in your price range, you may decide a short drive to the water is quite bearable. Unless you have an unlimited budget, it’s likely you’ll need to make compromises along the way.

Use these questions to help make your very own list of housing requirements.

You should also take time to rank specific home features as “Must Have,” “Like to Have” or “Don’t Care” using this printable checklist. Identifying your priorities will help you find the perfect property.

Once you know what you’re looking for in a home, you’ll be ready to find the right agent to partner with for your search.

Related:

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Source: zillow.com

April 28, 2021

What Are Comps? Understanding a Key Real Estate Tool

Whether you’re buying or selling a home, comparing similar homes can yield a wealth of helpful information.

“Comps,” or comparable sales, is a term anyone on either side of a real estate transaction should know well. It refers to homes located in the same area and very similar in size, condition and features as the home you are trying to buy or sell.

Buyers look at comps when deciding what price to offer on a home, and sellers use comps to figure out how to best price their home for the market. Real estate agents look at comps all day long as a way to keep on top of their local market. If you are a buyer or seller, it’s helpful to have a strategy to analyze comps, because all comps aren’t created equal.

Location is the highest priority

If you are trying to price a home or figure out its value, you need to look nearby. The market is based on location, so keeping as close to the subject property as possible — meaning, within the same neighborhood — is the most effective approach.

If you can’t get enough comps nearby, it’s fine to keep expanding out. But there will always be a boundary, like a school district, that you need to stay within.

Timeframe matters

The best comps are homes that are currently “pending.” Why? Because a pending home is a piece of live market data. A pending home means that a buyer and seller made a deal, and that deal will reflect the most up-to-the-minute stats on the market.

A good local real estate agent, leveraging her network, can get a fairly accurate idea what the ultimate sale price or range is for a pending deal. Try to stick with sales in the past three months, and never go more than six months, because older data is not reflective of the current market.

Factor in home features

Once you have location and timeframe, it is key to look for homes with similar features that have sold, as opposed to comparing price per square feet. While the latter is helpful, it won’t consider factors like views, a new designer kitchen or a finished basement vs. unfinished.

If you have all three bedrooms on the top floor, look for something similar. Try to compare your subject property to like properties when it comes to traits like total size, the number of bedrooms and bathrooms, and the size of the lot. You can make adjustments once you have found similar homes.

Don’t overanalyze the comps

Putting your trust in a good local agent will keep you from agonizing over the petty details of each comparable home. Your agent is likely familiar with some of the recent sales, and can help shed light on why one comp fares better than another. You may not know that one home was next to a fire station or across from a parking lot, or that another didn’t have a real backyard, but your agent will. These small nuances will affect the home’s value.

Find your home on Zillow to see your Zestimate^® home value with your comps.

Related:

Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

Source: zillow.com

April 23, 2021

Why Is the Housing Market So Hot?

Real estate Q&A: “Why Is the Housing Market So Expensive Right Now?”

If you asked me this same question a few years ago, I would have had the same basic answer I’m about to explain.

And since that time, home prices have surged much, much higher, which basically tells me the same fundamentals have been at play for quite a while now.

Additionally, they may continue to more years to come.

Similar to a market downturn, when things are hot, they remain hot for years, which is why it can pay to hold on, just like those who didn’t sell their bitcoin at first-profit.

Reason #1: There Is Very Limited Inventory and Lots of Buyers

The top reason why the housing market is so high right now has to do with limited inventory, or supply.

It’s one of those fundamental concepts even a child can comprehend. When you have a small or finite amount of something, and people want it, its value goes up.

This is basically what’s been going on with real estate since the market bottomed in 2012.

In reality, supply has been tight ever since the market peaked and the foreclosure crisis took hold because banks were careful to flood the market.

Even back then, it was difficult to scoop up a property because many of them were either foreclosure sales, which aren’t for novice home buyers, or short sales, which took bank approval and months and months to close.

I remember looking at homes in 2012 and it wasn’t much different than today. Sure, home prices were significantly lower, but inventory wasn’t all that great.

Much of what was listed either needed work or wasn’t in the most desirable area. For me, that hasn’t changed over the past decade.

Yes, a good property comes on the market here and there, but if and when it did/does, it becomes a “hot home” and a bidding war ensues.

It’s for this main reason that home prices are at all-time highs nationwide, with the median home valued at roughly $273,000, up from $215,000 in early 2007, per Zillow.

Reason #2: Record Low Mortgage Rates

Despite a recent uptick mortgage rates are lower than they were a year ago
This has allowed purchasing power to stay strong while home prices rise
The only increased burden is a higher down payment for prospective buyers
It may remove some buyers from the picture but not enough to lower prices

Now if reason number one weren’t reason enough for real estate to be booming, sprinkle in some record low mortgage rates.

To get this straight, there’s a short supply of something people want and it’s on sale from a financing point of view. No wonder everyone is going wild.

While the listing price might be quite a bit higher than it was five or 10 years ago, the fact that mortgage rates are roughly half the price they were then is huge.

This has kept home purchasing power intact despite a big run-up in home prices, basically only making the required down payment an issue for some prospective buyers.

And remember, because there’s a limited supply of homes available, it doesn’t really matter if some would-be buyers are shut out of the market due to affordability constraints.

There are still enough willing and able buyers to come in and pick up any slack, of which there isn’t much of to begin with.

So the bidding war might only have 20 participants instead of 30 – that’s not going to make any impact whatsoever on the final sales price.

Reason #3: Rising Incomes and Inflation

home price affordability

Lastly, we can’t simply look at unadjusted (nominal) home prices and say whoa, they’re even higher than they were back in 2006 when real estate was in a massive bubble. They must crash!

Yes, unadjusted home prices are about 22.2% above the peak seen in 2006 when the housing market last boomed, per First American (see the blue line above).

But that alone isn’t enough to determine whether the market is overvalued or not.

Ultimately, you have to factor in inflation, mortgage rates, and wages to get a complete picture.

Speaking of wages, median household income rose 6.2% year-over-year in January and is up 74.8% since January 2000.

Meanwhile, real house prices (those adjusted for inflation) were about 25.6% less expensive to begin the year than in January 2000.

And so-called “house-buying power-adjusted house prices” are still 47.8% below their 2006 housing boom peak, meaning rather incredibly, there’s still a lot of room to run.

Just check out the chart above – from October 1993 to December 1994, nominal home prices barely budged one percent, but the Real House Price Index (RHPI green line) increased over 20% because purchasing power decreased by 16% due to rising mortgage rates.

Then from January 2005 to March 2006, nominal house prices surged about 13% while mortgage rates remained mostly steady, pushing the RHPI up a big 15%.

At that time, affordability was eroded because nominal home price appreciation far outpaced purchasing power.

Finally, nominal home prices increased more than 13% year-over-year in January 2021, but house-buying power (yellow line) jumped 19% as the RHPI fell nearly five percent.

Why did housing affordability improve despite rising home prices? Because median household income increased and the 30-year fixed fell from 3.62% in January 2020 to 2.74% in January 2021, per Freddie Mac.

In other words, you can’t look at nominal home prices in a vacuum, aka firing up the Redfin app and saying OMG, that $500,000 home from last year is now selling for $600,000!

You need to consider the big picture and factor in wages and how cheap/expensive financing is.

If you look back at that chart, nominal home prices (blue line) have risen steadily since around 2012, and are now above the scary 2006 housing peak levels.

But the RHPI has reached its lowest point since the series got started in 1990, and at the same time the House-Buying Power Index has surged higher, especially recently.

All of this may explain why despite double-digit year-over-year gains and nominal home prices that might be up nearly 100% from 2006, the buyers are still coming. And they’re bidding over asking!

It also supports the idea that the next housing crash (or beginning of a decline) won’t happen for a while still, perhaps my longstanding prediction of 2024.

In other words, if you’re a prospective home buyer, don’t get your hopes up for a discount anytime soon, though if mortgage rates do rise, we might see a moderation in home price appreciation and perhaps less competition.

But the only real relief will come from increased home building, which is beginning to ramp up as housing starts and housing completions are both up significantly year-over-year.

As to how real estate could go from red hot to ice cold again, picture a scenario a few years out when home builders overshoot the mark and mortgage rates are back at 4-5% for a 30-year fixed.

Oh, and asking prices are up another 10-20% from today’s levels. That’s where you can start to imagine another major correction, especially if the wider economy hits another snag.

Tips for Getting Approved for a Mortgage

When you start your home buying journey, you’ll notice advertisements of beautiful homes accompanied by happy families that make it seem like there is an abundance of lenders waiting to hand you the keys to your new home.

The truth is, getting approved for a mortgage is not always easy, and getting financed for such large amounts of money can be risky. If your home-buying fantasies have been interrupted by application denials, it’s time to take control of your borrowing power and find out what you can do to turn those “no’s” into a “yes.”

1. Document Your Income

Borrowers mistakenly downplay the importance of a stable income history, especially if they have a high credit score or large bank balance. No matter how favorable your credit and financial status may seem, you will be subject to income scrutiny. Be prepared to prove your income by providing tax documents for the last two and three years and paycheck stubs from the past few months. You may also be asked to provide a list of all your debts, including auto loans, credit cards, alimony, and student loans, and a list of your assets, including investment accounts, auto titles, real estate, and bank statements.

In addition to proving that you have adequate income to cover the loan, lenders will verify that you’ve been working in the same field for at least two years – the longer you’ve been working for the same employer, the better.

Getting a Mortgage

2. Shine Up Your Credit History

Maintaining a positive history while you apply for home loans is especially important. Lenders want to see that you have a good record of paying your bills on time. Before you apply for a mortgage, review your credit report. Give your credit a boost by keeping your credit card utilization below 30%. If you have any past debts, pay them. Lenders want to see a flawless credit history for the past 12+ months – the longer you go without a negative mark on your report, the better.

Keep in mind that lenders may re-check your credit score during the application process, so make sure all your accounts are on-time and current and avoid any other large purchases that could affect your score until after you receive an approval.

For credit repair assistance, contact Credit Absolute.

3. Two is Better than One

If you don’t have income high enough to qualify for type of loan you need, a cosigner with an adequate amount of disposable income to be considered on your mortgage may help your approval rating – regardless of whether this person will be helping you make your payments or living with you. In some cases, a cosigner with a positive credit history can help someone with less-than-perfect credit. However, he/she should keep in mind that they are guaranteeing to your lender that the mortgage payments will be paid in full and on-time.

4. Offer a Larger Down Payment

If you can pay for a percentage of the home on your own, your application for the rest of your home financing just may tilt in your favor. The larger personal investment you have in the house, the less likely you will walk away from the property and let it go into foreclosure.

Having a significant amount of cash is also a strong indicator of how you handle your finances. Banks don’t just want to hand anyone a loan; they want to provide financing to people that are guaranteed to pay them back.

5. Consider a Smaller Loan

While your pre-approval may indicate that you qualify for a loan up to $250,000, you want to tread carefully in asking for the highest loan amount. In fact, the closer you get to your limit, the more difficult it is to get approved.

If you don’t qualify for the mortgage that you want and you aren’t willing to wait, try setting your sights on a less-expensive property. Consider a townhouse instead of a house, accept fewer bathrooms and bedrooms, or move to a neighborhood further away to give you more options. For a more drastic approach, consider a different area of the country where homes are more affordable until you can trade up or build your financial history.

Source: creditabsolute.com

April 16, 2021

Will Low Mortgage Rates Hurt Home Sales?

Last week, I argued that the super low mortgage rates could actually be contributing to strategic defaults.

The general idea being that the current low mortgage rates today make it even less desirable to hold a “high-rate” mortgage from the past.

The only positive from this assumption is that homeowners in this position may buy a new home and bail on the old one.

That’s a positive for them, minus the credit score hit, but a negative for the housing market and mortgage lenders (another foreclosure, more overpriced inventory that is difficult to unload).

And now it has occurred to me that the promise of low mortgage rates for the foreseeable future may have the unintended consequence of hurting home sales, at least in the near term.

Only 33% of Americans See Mortgage Rates Rising

You see, a new poll from mortgage financier Fannie Mae revealed that just 33 percent of consumers expect mortgage rates to rise in the next 12 months.

That figure is down from 45 percent a month ago, and is the lowest number Fannie has recorded since their monthly tracking began.

At first glance, it sounds like great news. Mortgage rates are going to stay at or near their record lows for longer than we thought.

Low mortgage payments for everyone who decides to dive in! Can’t argue with that.

But wait, why isn’t anyone buying a home? Well, if mortgage rates aren’t going anywhere fast, why not simply take a “wait-and-see” approach.

Kick back, see how the economic uncertainty plays out, watch for more home price declines, and buy next year instead.

You see, Americans also expect home prices to decline further. On average, they see a 1.1 percent decline over the next 12 months, which is the highest expected decline to date in the survey.

And only 18 percent believe home prices will increase over the next year, the lowest number reported to date.

So it’s a bit of a dilemma. If home prices are expected to keep slipping, and mortgage rates are forecast to hold steady, why buy now if you don’t have to?

[Home prices vs. mortgage rates]

Might as well just rent a little bit longer (or hang out in your parent’s basement) before making a move, especially since a lot of homeowners are pricing their homes higher as a result of the insanely low mortgage rates.

Of course, it’s still a relatively attractive time to buy as a first-time home buyer. And trying to time the bottom of the market is a pretty trick endeavor, if not impossible.

But with the traditionally slower portion of the home buying season ahead of us, holding out may lead to a discount over today’s prices.

Read more: Should you buy a house now or wait?

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com

April 16, 2021

When Will the Next Housing Market Crash Take Place?

I’ve noticed a trend lately. Everyone’s a real estate expert.

It seems the most recent crisis and recovery has turned just about every single person into a guru on all things to do with home buying and selling.

I suppose part of it has to do with the fact that the massive housing bubble that formed a decade ago swept the nation and was front page news.

It also directly affected millions of Americans, many who serially refinanced their mortgages, then found themselves underwater, then eventually short sold, were foreclosed upon, or held on for the ride back up to new heights.

It’s a common conversation piece these days to talk about your local housing market.

Thanks to greater access to information, folks are scouring Redfin and Zillow and coming up with theories about what that home should sell for, or what they should have listed it for.

Neighbors are getting upset when nearby listings are not to their liking for one reason or another. What were they thinking?!

A New Housing Bubble Mentality

Real estate is red-hot again thanks to limited supply and intense demand
It can feel like an ominous sign that we’re headed down a dark road again
But that alone isn’t reason enough for the housing market to crash again
There have to be clear catalysts and financial stress for another major downturn

All of this chatter portends some kind of new bubble mentality in my mind, though it seems everyone is just basing their hypotheses on the most recent housing bust, instead of perhaps considering a longer timeline.

One could look at the recent run-up in home prices as yet another bubble, less than a decade since home prices bottomed around 2012.

After all, many housing markets have now surged well beyond their previous lofty levels seen about 15 years ago when home prices peaked.

For example, Denver area home prices are about 86% higher than they were in 2006. And back then, everyone felt home prices were completely out of control.

In other words, home prices were haywire, and are now nearly double that.

Meanwhile, the typical U.S. home is currently valued around $273,000, per Zillow, which is about 27% higher than the peak of $215,000 seen in early 2007.

It’s also nearly 70% higher than the typical home price of $162,000 back in early 2012, when home prices more or less bottomed.

So if want to look at home prices alone, you could start to worry (though you also have to factor in inflation which will naturally raise prices over time).

But they say bubbles are financially driven, and we’ve yet to see a return to shoddy underwriting.

I will say that there’s been a recent return of near-zero down financing, with many lenders taking Fannie and Freddie’s 97% LTV program a step further by throwing a grant on top of it.

This means borrowers can buy homes today with just 1% down payment, and even that tiny contribution can be gifted from someone else.

So things might be getting a little murky, especially if you consider the increase in prices over the past four or five years.

One could also argue that affordability is being supported by artificially low mortgage rates, which history tells us won’t be around forever.

There’s also a general sense of greed in the air, along with a feeling amongst homeowners that they’re getting richer and richer by the day.

That type of attitude sometimes breeds complacency and unnecessary risk-taking.

But When Will Home Prices Crash Again?!

real estate cycle

If you believe in cycles, which seem to be pretty evident in real estate and elsewhere
We will see another housing crash at some point relatively soon
There appears to be an 18-year cycle that has been observed for the past 200 years
This means the next home price peak (and then bust) might begin in 2024

All of those recent home price gains might make one wonder when the next housing market crash will take place.

After all, home prices can only go up for so long before they drop again, right?

Well, the answer to that age-old question might not be as elusive as you think.

The real estate market apparently moves in cycles that some economists think can be predicted to a relatively high degree.

While not a perfect science, there seems to be “a steady 18-year rhythm” that has been observed since around the year 1800.

Yes, for over 200 years we’ve seen the real estate market follow a familiar boom and bust path, and there’s really no reason to think that will stop now.

It puts the next home price peak around the year 2024, followed by perhaps a recession in 2026 and a march down from there.

How much home prices will fall is an entirely different question, but given how much they’ve risen (and can rise still), it could be a long, long way down.

And we might not have super low mortgage rates at our disposal to save us this time, which is a scary thought.

You’ll Never Get Back Into the Housing Market…

There are four main phases in a real estate cycle
A recovery period and an expansion period
Followed by hypersupply and an eventual downturn
Don’t believe the hype that if you don’t buy today, you’ll never get the chance!

Another housing bust in inevitable, despite folks telling us we’ll never get back in again if we sell our home today, or don’t buy one tomorrow.

There are four phases to this predictable cycle, including a recovery phase, which we’ve clearly experienced, followed by an expansion phase, where new inventory is created to satisfy demand. This is happening now.

At the moment, home builders are ratcheting up supply to meet the intense demand in the market, with some 45 million expected to hit the average first-time home buyer age this decade.

The problem is like anything else in life, when demand is hot, producers have a tendency to overdo it, creating more supply than is necessary.

That brings us to the next phase, a hypersupply period where builders overshoot the mark and wind up with too much new construction, at which point prices plummet and a recession sets in.

The good news (for existing homeowners) is that according to this theory, we won’t see another home price peak until around 2024.

That means another three years of appreciation, give or take, or at least no major losses for the real estate market as a whole.

So even if you purchased a home recently and spent more than you would have liked, it could very well look cheap relative to prices a few years down the line.

The bad news is that the real estate market is destined to stall again in just three short years, meaning the upside is going to diminish quite a bit over the next few years.

This might be especially true in some markets that are already priced a little bit ahead of themselves, which may be running out of room to go much higher.

But perhaps more important is the fact that home prices tend to move higher and higher over time, even if they do experience temporary booms and busts.

So if you don’t attempt to time the market you can profit handsomely over the long term, assuming you can afford the underlying mortgage.

And remember, there’s more to homeownership than just the investment.

Source: thetruthaboutmortgage.com

April 16, 2021

What is Tax Assessed Value, Tax Appraised Value, and Market Assessed Value?

What is the value of your home? It depends on what you mean by “value.”

Tax assessed value

This figure varies throughout the U.S. since it is determined by the taxing authority of the city, county, or state where you live. Sometimes it is the same as the market assessed value and other times counties will multiply the market value by an assessment ratio to get the tax assessed value, which is often lower than the market assessed value.

For example, suppose where you live, homes are assessed at 100 percent of market value. If you have a home that has a market value of $150,000, your home will be assessed at $150,000. However, if your taxing authority assesses homes at 70 percent of value, your $150,000 market value home will have a tax assessed value of $105,000.

Tax appraised value

This is the value of real or personal property based on the valuation established by a government tax assessor.

Market assessed value

This is the price the government tax assessor estimates the property would sell for on the open market as of the effective date for the assessed value for the year in question. The assessor’s market assessed value is based on actual historical sales of similar properties for a specified study period.
For example, a market assessed value with an effective date of January 1 may have been determined considering comparable sales during the previous 12 months ending September 30 of the previous year. Sales study periods vary by assessment jurisdiction. Because historical sales are used, assessed values are typically less than current market values.

Related:

Source: zillow.com

What is an open house?

Open house benefits for buyers

How do open houses work?

Who hosts an open house?

How to prepare for an open house

Seek out relevant open houses

Do research on the market beforehand

Stay open-minded

How to attend an open house

Ask questions

Be honest

Check for damage and disrepair

Open house tips for buyers

Do

Don’t

Payable on Death Account, Explained

How a Payable on Death Account Works

Pros of Payable on Death Accounts

Cons of Payable on Death Accounts

Payable on Death Account vs. Trust

How to Set Up a Totten Trust or POD Account

The Bottom Line

Tips for Estate Planning

Categories

Location is the highest priority

Timeframe matters

Factor in home features

Don’t overanalyze the comps

Reason #1: There Is Very Limited Inventory and Lots of Buyers

Reason #2: Record Low Mortgage Rates

Reason #3: Rising Incomes and Inflation

Only 33% of Americans See Mortgage Rates Rising

About the Author: Colin Robertson

A New Housing Bubble Mentality

But When Will Home Prices Crash Again?!

You’ll Never Get Back Into the Housing Market…

Tax assessed value

Tax appraised value

Market assessed value