Why Owning a Home Is a Powerful Financial Decision

 

In today’s housing market, there are clear financial benefits to owning a home: increasing equity, the chance to build your net worth, and appreciating home values, just to name a few. If you’re a renter, it’s never too early to think about how homeownership can propel you toward a stronger future. Here’s a dive into three often-overlooked financial benefits of homeownership and how preparing for them now can steer you in the direction of greater financial security and savings.

1. You Won’t Always Have a Monthly Housing Payment

Personal finance advisor Dave Ramsey explains:

“Every payment brings you closer to owning the house. When you pay your rent, that money is spent. Gone. Bye. Not returning. But when you pay your mortgage, you work toward full ownership.”

As a homeowner, you can eventually eliminate the monthly payment you make on your house. That’s a huge win and a big factor in how homeownership can drive stability and savings in your life. As soon as you buy a home, your monthly housing costs begin to work for you as forced savings in the form of equity. When you build equity and grow your net worth, you can continue to reinvest those savings into your future, maybe even by buying that next dream home. The possibilities are truly endless.

2. Homeownership Is a Tax Break

One thing people who have never owned a home don’t always think about are the tax advantages of homeownership. The same article states:

“You have tax advantages. Many of the costs of owning a home—like property taxes—are tax deductible. And if you’re paying off a mortgage, you’ll get to count your mortgage interest as a deduction when you file your tax return.”

Whether you’re living in your first home or your fifth, it’s a huge financial advantage to have some tax relief tied to the interest you pay each year. It’s one thing you definitely don’t get when you’re renting. Be sure to work with a tax professional to get the best possible benefits on your annual return.

3. Monthly Housing Costs Are Predictable

A third benefit is the fact that monthly costs start to become more predictable with homeownership, something that doesn’t happen if you’re renting. Ramsey also notes:

“Rent rates will go up. Even if you found a killer deal in a hot area, inflation, competition, and rising property values will cause your rent to go up year after year.”

With a mortgage, you can keep your monthly housing costs relatively steady and predictable. Your monthly costs are most likely based on a fixed-rate mortgage, which allows you to budget your finances over a longer period of time. Rental prices have been skyrocketingsince 2012, and with today’s low mortgage rates, it’s a great time to get more for your money when purchasing a home. If you want to lock-in your monthly payment at a low rate and have a solid understanding of what you’re going to spend in your mortgage payment each month, buying a home may be your best bet.

Bottom Line

If you’re ready to start feeling the benefits of stability, savings, and predictability that come with owning a home, let’s connect to determine if buying sooner rather than later is right for you.

Is Right Now the Right Time to Sell? [INFOGRAPHIC]

 

Some Highlights

• If you’re on the fence about selling your house, now is a great time to take advantage of sky-high demand, low supply, and fierce buyer competition.
• With buyer demand rising and historically low inventory for sale, if you’re in a position to move, your house may really stand out from the crowd.
• Let’s connect today to get your listing process underway.

How to Make the Dream of Homeownership a Reality This Year

 

In 1963, Martin Luther King, Jr. inspired a powerful movement with his famous “I Have a Dream” speech. Through his passion and determination, he sparked interest, ambition, and courage in his audience. Today, reflecting on his message encourages many of us to think about our own dreams, goals, beliefs, and aspirations. For many Americans, one of those common goals is owning a home: a piece of land, a roof over our heads, and a place where we can grow and flourish.

If you’re dreaming of buying a home this year, start by connecting with a local real estate professional to understand what goes into the process. With a trusted advisor at your side, you can then begin to answer the questions below to set yourself up for homebuying success.

1. How Can I Better Understand the Process, and How Much Can I Afford?

The process of buying a home is not one to enter into lightly. You need to decide on key things like how long you plan on living in an area, school districts you prefer, what kind of commute works for you, and how much you can afford to spend.

Keep in mind, before you start the process to purchase a home, you’ll also need to apply for a mortgage. Lenders will evaluate several factors connected to your financial track record, one of which is your credit history. They’ll want to see how well you’ve been able to minimize past debts, so make sure you’ve been paying your student loans, credit cards, and car loans on time. If your financial situation has changed recently, be sure to discuss that with your lender as well. Most agents have loan officers they trust and will provide referrals for you.

According to ConsumerReports.org:

“Financial planners recommend limiting the amount you spend on housing to 25 percent of your monthly budget.”

2. How Much Do I Need for a Down Payment?

In addition to knowing how much you can afford on a monthly mortgage payment, understanding how much you’ll need for a down payment is another critical step. Thankfully, there are many different options and resources in the market to potentially reduce the amount you may think you need to put down.

If you’re concerned about saving for a down payment, start small and be consistent. A little bit each month goes a long way. Jumpstart your savings by automatically adding a portion of your monthly paycheck into a separate savings account or house fund. AmericaSaves.org says:

“Over time, these automatic deposits add up. For example, $50 a month accumulates to $600 a year and $3,000 after five years, plus interest that has compounded.”

Before you know it, you’ll have enough for a down payment if you’re disciplined and thoughtful about your process.

3. Saving Takes Time: Practice Living on a Budget

As tempting as it is to pass the extra time you may be spending at home these days with a little retail therapy, putting that extra money toward your down payment will help accelerate your path to homeownership. It’s the little things that count, so start trying to live on a slightly tighter budget if you aren’t doing so already. A budget will allow you to save more for your down payment and help you pay down other debts to improve your credit score.

A survey of millennial spending shows, “68% reported that shelter in place orders helped them save for their down payment.” Danielle Hale, Chief Economist at realtor.com, also notes:

“If there is any silver lining to the current economic landscape, it’s that mortgage rates are hanging around record lows…Additionally, shelter-in-place orders helped many who were fortunate enough to keep their jobs save for a down payment — one of the largest hurdles of buying a home. The combination of low rates and the opportunity to save is enabling many millennials to move up their home buying timeline.”

While you don’t need to cut all of the extras out of your current lifestyle, making smarter choices and limiting your spending in areas where you can slim down will make a big difference.

Bottom Line

If homeownership is on your dream list this year, take a good look at what you can prioritize to help you get there. To determine the steps you should take to start the process, let’s connect today.

What Does 2021 Have in Store for Home Values?

According to the latest CoreLogic Home Price Insights Report, nationwide home values increased by 8.2% over the last twelve months. The dramatic rise was brought about as the inventory of homes for sale reached historic lows at the same time buyer demand was buoyed by record-low mortgage rates. As CoreLogic explained:

“Home price growth remained consistently elevated throughout 2020. Home sales for the year are expected to register above 2019 levels. Meanwhile, the availability of for-sale homes has dwindled as demand increased and coronavirus (COVID-19) outbreaks continued across the country, which delayed some sellers from putting their homes on the market.

While the pandemic left many in positions of financial insecurity, those who maintained employment and income stability are also incentivized to buy given the record-low mortgage rates available; this is increasing buyer demand while for-sale inventory is in short supply.”

Where will home values go in 2021?

Home price appreciation in 2021 will continue to be determined by this imbalance of supply and demand. If supply remains low and demand is high, prices will continue to increase.

Housing Supply

According to the National Association of Realtors (NAR), the current number of single-family homes for sale is 1,080,000. At the same time last year, that number stood at 1,450,000. We are entering 2021 with approximately 270,000 fewer homes for sale than there were one year ago.

However, there is some speculation that the inventory crush will ease somewhat as we move through the new year for two reasons:

1. As the health crisis eases, more homeowners will be comfortable putting their houses on the market.

2. Some households impacted financially by the pandemic will be forced to sell.

Housing Demand

Low mortgage rates have driven buyer demand over the last twelve months. According to Freddie Mac, rates stood at 3.72% at the beginning of 2020. Today, we’re starting 2021 with rates one full percentage point lower than that. Low rates create a great opportunity for homebuyers, which is one reason why demand is expected to remain high throughout the new year.

Taking into consideration these projections on housing supply and demand, real estate analysts forecast homes will continue to appreciate in 2021, but that appreciation may be at a steadier pace than last year. Here are their forecasts:

Bottom Line

There’s still a very limited number of homes for sale for the great number of purchasers looking to buy them. As a result, the concept of “supply and demand” mandates that home values in the country will continue to appreciate.

Why Selling Your House on Your Own in 2021 Is a Mistake

 

There are many benefits to working with a real estate professional when selling your house. During challenging times, like what we face today, it becomes even more important to have an expert you trust to help guide you through the process. If you’re considering selling on your own, known in the industry as a For Sale By Owner (FSBO), it’s critical to consider the following items.

1. Your Safety Is a Priority

Your safety should always come first, and that’s more crucial than ever given the current health situation in our country. When you FSBO, it is incredibly difficult to control entry into your home. A real estate professional will have the proper protocols in place to protect not only your belongings but your health and well-being too. From regulating the number of people in your home at one time to ensuring proper sanitization during and after a showing, and even facilitating virtual tours, real estate professionals are equipped to follow the latest industry standards recommended by the National Association of Realtors (NAR) to help protect you and your potential buyers.

2. A Powerful Online Strategy Is a Must to Attract a Buyer

Recent studies from NAR have shown that, even before COVID-19, the first step 43% of all buyers took when looking for a home was to search online. Throughout the process, that number jumps to 97%. Today, those numbers have grown exponentially. Most real estate agents have developed a strong Internet and social media strategy to promote the sale of your house.

3. There Are Too Many Negotiations

Here are just a few of the people you’ll need to negotiate with if you decide to FSBO:

• The buyer, who wants the best deal possible
• The buyer’s agent, who solely represents the best interest of the buyer
• The inspection company, which works for the buyer and will almost always find challenges with the house
• The appraiser, if there is a question of value

As part of their training, agents are taught how to negotiate every aspect of the real estate transaction and how to mediate the emotions felt by buyers looking to make what is probably the largest purchase of their lives.

4. You Won’t Know if Your Purchaser Is Qualified for a Mortgage

Having a buyer who wants to purchase your house is the first step. Making sure they can afford to buy it is just as important. As a FSBO, it’s almost impossible to be involved in the mortgage process of your buyer. A real estate professional is trained to ask the appropriate questions and, in most cases, will be intimately aware of the progress being made toward a purchaser’s mortgage commitment. You need someone who’s working with lenders every day to guarantee your buyer makes it to the closing table.

5. FSBOing Is Becoming More Difficult from a Legal Standpoint

The documentation involved in the selling process is growing dramatically as more and more disclosures and regulations become mandatory. In an increasingly litigious society, the agent acts as a third-party to help the seller avoid legal jeopardy. This is one of the major reasons why the percentage of people FSBOing has dropped from 19% to 8% over the last 20+ years.

6. You Net More Money When Using an Agent

Many homeowners think they’ll save the real estate commission by selling on their own. Realize that the main reason buyers look at FSBOs is because they also believe they can save the real estate agent’s commission. The seller and buyer can’t both save on the commission.

A study by Collateral Analytics revealed that FSBOs don’t actually save anything by forgoing the help of an agent. In some cases, the seller may even net less money from the sale. The study found the difference in price between a FSBO and an agent-listed home was an average of 6%. One of the main reasons for the price difference is effective exposure:

“Properties listed with a broker that is a member of the local MLS will be listed online with all other participating broker websites, marketing the home to a much larger buyer population. And those MLS properties generally offer compensation to agents who represent buyers, incentivizing them to show and sell the property and again potentially enlarging the buyer pool.”

The more buyers that view a home, the greater the chance a bidding war will take place, potentially driving the price higher, too.

Bottom Line

Listing on your own leaves you to manage the entire transaction by yourself. Why do that when you can hire an agent and still net the same amount of money? Before you decide to take on the challenge of selling your house alone, let’s connect to discuss your options.

Did You Outgrow Your Home in 2020?

It may seem hard to imagine that the home you’re in today – whether it’s your starter home or just one you’ve fallen in love with along the way – might not be your forever home.

Many needs have changed in 2020, and it’s okay to admit if your house no longer fits your lifestyle. If you’re now working remotely, facilitating virtual school, trying to exercise at home, or simply just spending more time in your own four walls, you may be bursting at the seams in your current house.

According to the latest Home Price Insights from CoreLogic, prices have appreciated 7.3% year-over-year. At the same time, the National Association of Realtors (NAR) reports that inventory has dropped 22% from one year ago.These two statistics are directly related to one another. As inventory has decreased and demand has increased, prices have been driven up.

This is great news if you own a home and you’re thinking about selling. The equity in your house has likely risen as prices have increased. Even better is the fact that there’s a large pool of buyers out there searching for the American dream, and your home may be high on their wish list.

Bottom Line

If you think you’ve outgrown your current home, let’s connect to discuss local market conditions and determine if now is the best time for you to sell.

The Do’s and Don’ts after Applying for a Mortgage

 

Once you’ve found the right home and applied for a mortgage, there are some key things to keep in mind before you close. You’re undoubtedly excited about the opportunity to decorate your new place, but before you make any large purchases, move your money around, or make any major life changes, consult your lender – someone who is qualified to tell you how your financial decisions may impact your home loan.

Below is a list of things you shouldn’t do after applying for a mortgage. They’re all important to know – or simply just good reminders – for the process.

1. Don’t Deposit Cash into Your Bank Accounts Before Speaking with Your Bank or Lender. Lenders need to source your money, and cash is not easily traceable. Before you deposit any amount of cash into your accounts, discuss the proper way to document your transactions with your loan officer.

2. Don’t Make Any Large Purchases Like a New Car or Furniture for Your New Home.New debt comes with new monthly obligations. New obligations create new qualifications. People with new debt have higher debt-to-income ratios. Higher ratios make for riskier loans, and then sometimes qualified borrowers no longer qualify.

3. Don’t Co-Sign Other Loans for Anyone. When you co-sign, you’re obligated. With that obligation comes higher ratios as well. Even if you promise you won’t be the one making the payments, your lender will have to count the payments against you.

4. Don’t Change Bank Accounts. Remember, lenders need to source and track your assets. That task is significantly easier when there’s consistency among your accounts. Before you transfer any money, speak with your loan officer.

5. Don’t Apply for New Credit. It doesn’t matter whether it’s a new credit card or a new car. When you have your credit report run by organizations in multiple financial channels (mortgage, credit card, auto, etc.), your FICO® score will be impacted. Lower credit scores can determine your interest rate and maybe even your eligibility for approval.

6. Don’t Close Any Credit Accounts. Many buyers believe having less available credit makes them less risky and more likely to be approved. Wrong. A major component of your score is your length and depth of credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both of those determinants of your score.

Bottom Line

Any blip in income, assets, or credit should be reviewed and executed in a way that ensures your home loan can still be approved. If your job or employment status has changed recently, share that with your lender as well. The best plan is to fully disclose and discuss your intentions with your loan officer before you do anything financial in nature.