206-999-1690
larryreichle@remax.net
LOGIN | REGISTER

Larry & Kathy Reichle

Issaquah Real Estate | Call: 206-999-1690

What to Expect When Getting Pre-Approved

by Leave a Comment

Getting “pre-qualified” today when preparing to buy a home is so 80’s. Getting pre-qualified then meant talking to a loan officer over the phone or in an office and having a conversation about various aspects of your financial life. The loan officer asks about your job, how long you’ve worked there and how much money you make. The loan officer asks about your general credit history, whether it’s excellent, good or maybe needs a little work.

What about other debt? What sort of monthly payments are you obligated to pay each month? The loan officer would then take that information, plug in current market rates (back in 1981 the average 30 year rate hovered around 17%. No, really) and give you an amount you can qualify for. Maybe even the loan officer typed up a prequalification letter you could carry around.

Not anymore. If all you have is a prequalification letter it’s possible your real estate agent will ask that you go back to your loan officer and get pre-approved. The terms do sound somewhat alike but sellers, lenders and real estate agents alike know the difference.

A preapproval ups the qualification game by verifying the conversation you had with your loan officer. Instead of a conversation over the phone, you’ll be asked to submit a completed loan application. The key word here is “complete.” Well, almost. You don’t have a property picked out yet so you’ll leave that part blank. What you can expect to provide is proof of your income instead of a conversation. This means the most recent copies of your pay check stubs. To make sure you’ve been working for at least two years, your W2 statements for the last two years will also be reviewed.

If you’re self-employed, you may not have pay check stubs. Regardless, you’ll need to provide your last two years of income tax returns, both personal and business.

In addition, a year-to-date profit and loss statement should also be prepared. This P&L doesn’t necessarily have to be completed by an accountant or otherwise certified, you can put one together on your own if you want.

Regarding your credit history, you’ll also be asked to sign a Borrower’s Authorization form which allows the lender to pull your credit report and credit scores. You’ll need funds for a down payment and closing costs so copies of recent bank statements must be at the ready.

In short, you need to get your preapproval application to the point where all you need is a property to buy along with a signed sales contract. Now, not only can you shop in confidence, but the sellers and the seller’s real estate agent can put you at the top of the list when considering your offer.

Today, absolutely everyone should be shopping for a home with a solid preapproval letter in hand. There’s no question about it.

Written by: David Reed

Don’t Let Loan Conditions Worry You

by Leave a Comment

 

When you first apply for a home loan and submit your loan application, your loan officer will provide you with a list of items needed to include with your loan file. In a completed loan application, there is information provided by you and information provided by third parties. Your paperwork will include items such as your pay check stubs covering a 30 day period and your last two years of W2 forms. If you’re self-employed, you can expect to provide the last two years of both personal and business returns along with a year-to-date profit and loss statement. Once you submit all of your documentation to accompany your loan application, it can get a little quiet on your end. But that doesn’t mean nothing’s happening. Far from it.

The lender then proceeds to order necessary third party documentation. There are multiple service providers that help complete the loan application so the loan file can be submitted to the underwriter who ultimately approves the loan. A credit report will be ordered and so will an appraisal. Title insurance is needed so a title insurance policy is ordered, and so on. You will be provided an estimate of who all these other people are and what they’re going to charge for their services. Once completed, the file goes to underwriting.

The underwriter will review the application and determine whether or not the documents and the application submitted conform to the guidelines included with the selected loan program. Once the loan meets these guidelines, loan documents are prepared and sent to your settlement agent. But sometimes, in fact most times, there will be “loan conditions.”

There are two types of loan conditions, a “prior to document” condition and “prior to funding” condition. A “prior to doc” condition means the underwriter needs something else before loan documents can be ordered. This stops the loan process. But it’s not something to be afraid of. It doesn’t mean there’s something wrong and you can’t close on your home, but it’s more likely the file is missing something important. Maybe there’s an old lien on the property that hasn’t been released or maybe the underwriter wants to see one more comparable sale in the appraisal.

A prior to funding condition means the loan papers can still be delivered to the settlement agent but the lender won’t deliver the funds for the mortgage until this condition is fulfilled. For example, credit documents within a loan must be no older than 30 days. That means a pay check stub submitted might be more than 30 days old and you need to provide a copy of your latest. A prior to funding condition is typically minor. If there were anything bigger than that, documents wouldn’t have left the lender in the first place.

WRITTEN BY

Just how much more bang for your buck do you get tacking 15 minutes on your commute?

by Leave a Comment

You don’t have to get far out of Seattle to reap the reward.

Your money typically goes further outside Seattle. But is that change in commute worth the extra money?

A new report from Zillow and HERE Technologies looked at exactly how much homeowners could save by adding 15 minutes on to their commute. As it turns out, it may be worth a bit of compromise.

In the Seattle metro, the typical home becomes 11.3 percent less expensive when it’s shifted 15 minutes away from downtown, or about $54,599. For renters that number is more like a 6.2 percent drop in monthly rent, or around $125 per month.

That places Seattle as one of the top cities that see the greatest home value savings by moving at least 15 minutes further from the city core (others include Washington, D.C. and Chicago).

Of course which direction you take your 15 minutes will affect both your commute and your home: Heading north or east from downtown puts you smack in some of the priciest and most sought after neighborhoods in the city right now.

So where’s the best bang for your buck according to Zillow? If you’re a homeowner that’ll be Highline, where the current median home value is $387,700, and the median commute time in a car during rush hour is 38 minutes.

Which makes the first-time-on-the-market, Mid Century Modern above, which is listed for $599,000, on the higher end of the market.

Almost any neighborhood south of Seattle is going to see more “bang for your buck” than the neighborhoods to the north.

Then again, if you want to remain a renter you should be looking elsewhere, according to Zillow’s report: The best “bang for your buck neighborhood” for renters are South Park and Georgetown, in the 98108 zip code. There the current median rent is $2,356, while the median commute is 27.2 minutes in rush hour.

By Zosha Millman, SeattlePI

How much house can I afford to buy?

by Leave a Comment

If you’re thinking of making the move from renter to homeowner, simply diving into home shopping is the wrong first step. What you need to do is first answer the question:

“How much house can I afford?”

The best way to determine your spending ability is to do a step-by-step calculation. While there are alternate rules of thumb for figuring out your housing budget — such as a ceiling of 2.5 times your annual salary or limiting your housing payments to a third of your gross monthly income — you should not take shortcuts on a financial decision as important as this.

Calculating ‘how much mortgage can I afford?’

Here are the major factors you will need to consider to determine how much house you can afford to buy:

Income. 

First, add up the income that will be used to qualify for the mortgage, including bonuses and commissions. Make sure you have the documentation to prove every source of income; otherwise it cannot be counted when you meet with a mortgage lender.

Debt. 

Add all the payments you make each month for car loans, credit cards, student loans and any other debt. Based on your income, there are limits on how much debt you’ll be allowed to carry, including your mortgage. These debts will limit how much mortgage you can borrow.

DTI ratio.

When a mortgage lender calculates your level of debt based upon how much money you make, it is known as your “debt-to-income (DTI) ratio.” Debt-to-income ratios are the province of mortgage calculators. One important ratio, referred to by mortgage professionals as your “front-end” or “top-end” ratio, is calculated by taking your proposed housing expense divided by your gross (before-tax) income. Many mortgage calculators set 28 percent as the desirable value for this ratio. The other ratio involves all of your loan payments – your housing expenses and your monthly debts (but not utilities or other living expenses) — divided by your gross monthly income. A home affordability calculator frequently set this number at 36 percent. This is called your “back-end” or “bottom-end” ratio.

Monthly obligations.

While your mortgage lender cares about your auto and credit card payments, they really don’t care whether you have cable TV, the latest iPhone or even that you eat on a regular basis. Those monthly expenses are up to you to include, and cable, smartphones and a few trips to the grocery store can easily add up to several hundred dollars each month.

Down payment. 

The minimum down payment for an FHA loan is 3.5 percent; for conventional loans, the minimum is 3 percent for certain buyers and 5 percent for most buyers.

Taxes.

Today, it’s easy to get an idea on a home’s property taxes by looking at the listing online. You can also get in contact with the county tax office or ask a local Realtor to investigate for you. Most homeowners will have their property taxes paid from an escrow account attached to their monthly mortgage payments. One percent in taxes is equal to $1,000 per year for a $100,000 home.

Insurance.

Lenders require homeowners insurance to cover your property. Contact an insurance company or ask a Realtor to estimate your homeowners insurance costs which will vary according to the type of property, cost and features of the home, and its location. To get a rough idea, you can ask a family member or friend what they pay for insurance (if their home is similar to the home you are interested in buying).

Homeowners association dues.

If the property you purchase includes monthly dues, don’t forget to include those fees in your monthly payments.

Mortgage insurance.

If you make a down payment of less than 20 percent on a conventional loan, you will need to pay mortgage insurance. You can utilize HSH.com’s mortgage insurance calculator to see how much this could cost each month. For FHA loans, there is an upfront and annual mortgage insurance premium.

Interest rate.

You can check today’s mortgage rates at HSH.com, but remember that your rate will depend on your credit score, the type of property you are buying, and the choices you make regarding fees and points. A lender will be able to give you a customized mortgage quote given your situation.

Loan term.

While many buyers opt for a 30-year home loan, if you can afford higher monthly payments, you may want to consider a shorter loan term. Shorter loans have lower interest rates and cost you less over the life of the loan.

As a homeowner, you need to have enough money set aside in an emergency fund — at least three months worth of expenses – in case you lose your job or have a medical emergency, and enough reserves set aside to pay for maintenance and unexpected repairs.

Considering all your financial goals and your monthly comfort level with your mortgage payment is the key to accurately calculating how much house you can afford. It’s smart never to borrow the maximum amount you can qualify for so that you leave yourself some financial breathing room.

Keith Gumbinger

Here are 3 ways parents can help their grown kids to own a house

by Leave a Comment

When responsible first-time homebuyers need help buying a home, the family bank sometimes can lend a hand.

Younger homebuyers face a mountain of obstacles, including rising home prices and interest rates, too few homes for sale and unpaid college debt. Student debt is a major source of trouble. When the National Association of Realtors surveyed recent homebuyers who had problems saving up a down payment, 53 percent of those in the youngest group (37 and younger) blamed student loan debt for their difficulty.

Families appear to be pitching in to help, according to the results of that survey in the 2018 NAR Home Buyer and Seller Generational Trends Report. Among homebuyers who made a down payment, 23 percent of those 37 and younger used a gift and 6 percent a loan from family or friends — the highest proportion for either type of assistance among all age groups.

Family assistance like this works best when the kids qualify for a mortgage on their own and parents make the purchase more affordable with, for example, a bigger down payment or a lower interest rate, says Jeremy Heckman, a certified financial planner with Accredited Investors Wealth Management in Edina, Minnesota.

FIRST, THE GROUND RULES

To create a businesslike distance for these transactions, Heckman suggests that parents:

• Consider disclosing the assistance to all immediate family

• Consider treating all siblings equally

• Use contracts

• Document gifts

Formal agreements offer important benefits, says San Francisco real estate attorney Andy Sirkin. They define obligations and minimize misunderstandings. And if parent lenders die or become incapacitated, all their heirs can view the transaction and its history.

WAYS TO HELP

Here are three ways parents can help make it more affordable for new homebuyers to purchase a home:

1. GIVE MONEY

A gift of money is often best, Heckman says. Parents can write a check for any amount they choose. That’s it — no contract or ongoing commitments. Or they can pay all or part of an expense such as mortgage closing costs. Providing down-payment assistance can help new borrowers avoid paying for private mortgage insurance, which helps keep their monthly payment low.

HOW IT WORKS

Strict rules dictate how cash gifts are used in a home purchase, and they vary by mortgage type, lender and lender offer, says Mark Case, a senior vice president at SunTrust Mortgage.

Lenders like to see money gifts — easily traceable checks, bank transfers or wire transfers — in a borrower’s bank account three or four months before applying for a mortgage, Case says. Givers and recipients may need to sign letters confirming that the money isn’t a loan.

When it comes to taxes, anyone can give any other person a gift up to $15,000 in value (money or, say, stocks) in 2018 without filing the gift-tax return IRS Form 709 . So a parent with two children can give each of them — and even the children’s partners — up to $15,000 this year without having to complete Form 709. A tax professional can confirm how the rules apply to individuals’ specific circumstances.

2. FINANCE THE MORTGAGE

Parents with cash to invest can become the mortgage lender, offering extra-easy terms, like no closing costs or no down payment. Heckman says they can charge a higher rate of interest on their money than it earns in a savings or money market account and still offer kids a lower-than-market mortgage rate.

“I said, ‘This could be a win-win for both of us,’” says Jay Weil, an attorney in Wayne, New Jersey. He and his wife, Judy, have financed two mortgages for their son Matt and Matt’s wife, Allison.

HOW IT WORKS

Jay and Judy fully funded the younger couple’s first home, a Columbia, Maryland, townhouse. They decided to use a service that facilitates family loans. They worked with National Family Mortgage, which charges one-time setup fees of $725 to $2,100, depending on the loan size; provides all necessary forms and documents to meet state, local and IRS requirements; guides families through the settlement and filing process; and connects borrowers with loan servicers.

Then in 2017, the Weils lent the kids money again, for a $579,900 house in Laurel, Maryland. Matt and Allison got two loans. One was a primary mortgage from SunTrust Mortgage for $259,900, at 3.875 percent. His parents provided a second mortgage for $260,000 at 1.98 percent. They used money earned from the sale of their first home to make a down payment.

Family lenders must charge at least the Applicable Federal Rate , the minimum interest rate required to keep the assistance from being considered a gift.

3. CO-BORROW

Although riskier for parents, co-borrowing is another option. Mortgages with co-borrowers were nearly a quarter of all new-purchase mortgages in the third quarter of 2017, according to ATTOM Data Solutions, a real estate data company.

Co-borrowing helps borrowers overcome a limited credit history or a too-high debt-to-income ratio, says Case, of SunTrust Mortgage.

HOW IT WORKS

Parents apply for the mortgage, too. They must meet the lender’s credit requirements and sign loan papers with their kids at closing.

Aside from the mortgage itself, a separate family contract can define expectations and details such as who gets how much equity when the home sells and what happens in case problems arise, says Sirkin, the real estate attorney.

For parents interested in being co-borrowers, there are some things to keep in mind:

• Not all loans allow co-borrowers, so it’s good to confirm the option when shopping for mortgages

• Some lenders may call this step co-signing, which may have different parameters, but the outcome is the same: Parents and children are equally responsible for the loan and any missed mortgage payments

• Parents’ credit could be affected, making it hard to finance another big purchase later, even if children make payments on time

With all the headwinds facing first-time homebuyers, family help sometimes makes all the difference.

By MARILYN LEWIS
NerdWallet


Buy your First Home in One Year: A Step-by-Step Guide

by Leave a Comment

An ultimate timeline ensures the smoothest transitions.

 

A real yard. Closets bigger than your average microwave. The freedom to decorate however you darn well please! Making the switch from renting to owning is exhilarating, but many rookie homebuyers find the process trickier to navigate than they expected.

This is why we created our First-Time HomeBuyer Checklist. The 12-month timeline will help you sidestep common mistakes, like paying too much interest or getting stuck with the wrong house. (Yep, it happens!)

12 Months Out

Check your credit score.Get a copy of your credit report at annualcreditreport.com. The three credit bureaus (Equifax, Experian, and TransUnion) are each required to give you a free credit report once a year. A Federal Trade Commission study found one in four Americans identified errors on their credit report, and 5% had errors that could lead to higher rates on loans. Avoid last-minute bombshells by checking your score long before you’re ready to make an offer. And work diligently to correct any mistakes.

Determine how much you can afford. Figure out Lenders are happy to lend you as much as your debt load allows. But will that amount make you house poor? Ask yourself, how much house do I really want to afford?Read More In5 Surprising (and Useful!) Ways to Save for a Down Paymenthow much house you can afford and want to afford. Lenders look for a total debt load of no more than 43% of your gross monthly income (called the debt-to-income ratio). This figure includes your future mortgage and any other debts, such as a car loan, student loan, or revolving credit cards.

There are plenty of calculators on the web to help you determine what you can afford. If you’re pushing the limits, start reducing your debt-to-income ratio now. To get a reality check on what you may actually be spending every month, use this worksheet.

Make a down payment plan. Most conventional mortgages require a 20% down payment. If you can swing it, do it. Your loan costs will be much less, and you’ll get a better interest rate. If, however, you’re not quite able to save the full amount, there are many programs that can help. FHA offers loans with only a 3.5% down payment. But they require mortgage insurance premiums, which will drive up your monthly payments. The U.S. Department of Housing and Urban Development (HUD) provides a list of nonprofit homebuying programs by state. Also check with credit unions; and your employer might even have an assistance program.

As you’re planning your savings strategy, keep in mind that banks like you to “season” your money. That is, they like to see that you’ve had stable funds in your account for 60 to 90 days before applying for a loan. Don’t worry: You can still use a financial gift from a family member or bonus received near the time you buy.

9 Months Out

Prioritize what you most want in your new home. What’s most important in your new home? Proximity to work? A big backyard? An open floor plan? Being on a quiet street? You’ll make a much better decision on what home to buy if you focus on your priorities. If it’s a joint decision, now is the time to work out any differences to avoid frustration and wasted time. Perhaps most important: Know what trade-offs you’re willing to make.

Research neighborhoods and start visiting open houses. But now’s when the fun begins, too. Use property listing sites, such as realtor.com, to find out about neighborhoods, public transport, and cost of living.

Start visiting open houses to get an idea of what kind of homes are in your price range and what neighborhoods appeal the most. Seeing potential homes will also keep you motivated to continue reducing your debts and saving for your down payment.

Budget for miscellaneous homebuying expenses. Buying a home has some miscellaneous upfront costs. A home inspection, title search, propery survey, and home insurance are examples. Costs vary by locale, but expect to pay at least a few hundred dollars. If you don’t have the cash, start saving now.

Start a home maintenance account. Speaking of saving, start the good habit now of putting a little aside each month to fund maintenance, repairs, and home emergencies. It’s bad enough to have to call a plumber. It’s worse if you’re paying credit card interest on that plumbing bill.

6 Months Out

Collect your loan paperwork. Banks are very particular when it comes to mortgage loans. They demand a lot of paperwork. What they’ll want from you includes:

  • W-2 forms — or business tax return forms if you’re self-employed — for the last two to three years
  • Personal tax returns for the past two to three years
  • Your most recent pay stubs
  • Credit card and all loan statements
  • Your bank statements
  • Addresses for the past five to seven years
  • Brokerage account statements for the most recent two to four months
  • Most recent retirement account statements, such as 401(k)

If you start collecting these documents now, it’ll lessen the stress when it’s time to get your loan. Bonus: Looking closely at your loan documents each month will also help you stay focused on saving for your down payment and keeping your debt-to-income ratio low.

Research lenders and REALTORS®. Start interviewing REALTORS®, specifically buyers’ agents. A buyer’s agent will work in your best interest to find you the right property, negotiate with the seller’s agent, and shepherd you through the closing process. Your agent also can be instrumental in finding a lender who’s familiar with first-time home buyer programs.

Even better, look for a mortgage broker, who will shop for a competitive loan rate for you among multiple lenders, unlike a bank, which can only offer its own products.

3 Months Out

People touring an open house

Get pre-approved for your loan. At this point, if you’ve been following this timeline, your credit score, paperwork, and down payment should be on track. You’ve done your research on lenders and buyers’ agents. Now it’s time to start working with them. First you’ll need to get pre-approved for a mortgage.

Make an appointment with your lender or mortgage broker and bring all your paperwork. He’ll run a credit check on you and tell you how much of a loan you’re approved for. It often makes sense to borrow less than the maximum the lender allows so you can live comfortably. Draft a budget that accounts for mortgage payments, insurance, maintenance, and everything else you have going on in your life.

Start shopping for your new home. One you’re pre-approved, the buyer’s agent you’ve chosen will be able to target homes that meet your priorities in your price range. This way you won’t be wasting time looking at homes you can’t afford.

2 Months Out

Make an offer on a home.It usually takes at least four to six weeks to close on a home. So if you have a firm move-out date, allow enough time to deal with any hiccups that can delay closing.

Get a home inspection. One of the first things you’ll want to do after an offer is accepted is have a home inspector look at the property. If the home inspector finds something that needs repair, that’s a common example of something that can delay closing.

In the Last Month

Triple-check that all your financial documents are in order and review all lending documents before closing. You’re in the home stretch! If you’ve been keeping your documents up to date, and your down payment is in reserve, these final steps are the easiest. Reviewing the mortgage documents is probably the most difficult. Your agent can help guide you through them.

Get insurance for your new home. Don’t forget to secure insurance before closing. You’ll need to bring proof of insurance to closing.

Do a final walk-through. Do a final walk-through of your new home, usually a day or two before closing, to make sure the home is in the shape you and the seller have agreed upon.

Get a cashier’s check or bank wire for cash needed at closing. Make sure you get an exact amount of cash needed for closing. You’ll get that number a few days before closing so you can secure a cashier’s check or arrange to have the money wired. Regular checks aren’t accepted.

That’s it. Congratulations!

JENNIFER NELSON

How to Save Enough for a Down Payment

by Leave a Comment

 

There comes a point for many first-time homebuyers when nearly everything you do becomes focused on saving for that purchase. Even when you’ve been putting money away regularly for years, you find yourself willing to cut out that beach vacation you had been planning, eating in more and even considering a part-time job to help close the gap between you and homeownership.
But even when you’re levelheaded about what you can afford and will qualify for in terms of monthly mortgage payments, the down payment remains a hurdle most first-time buyers struggle with.
As housing inventories remain low in major markets across the U.S. and home prices continue to rise, the difficulty of saving enough money for a down payment only grows.
A Zillow report released in November found homebuyers have to continuously save more for a down payment to keep up with the rising price of property throughout the U.S. The median home price is expected to be $6,275 more in a year, the report says, which means buyers will need to save an additional $105 per month simply to make up for the difference in a 20 percent down payment between now and then.
You’re Not Doomed
There is, of course, some respite for first-time homebuyers when it comes to borrowing options, with the growth of low down payment mortgage programs. Mortgage options requiring less than 20 percent down – with loans through the Department of Veterans Affairs, the Federal Housing Administration, the Department of Agriculture or the purchase of private mortgage insurance – allow homebuyers to get financing with as little as 3 percent (or even zero percent) down.
These options are becoming an “underlying trend within the first-time homebuyer,” says Tian Liu, chief economist for Genworth Mortgage Insurance. Genworth recently released its third-quarter 2017 report, which notes 601,000 first-time buyers purchased single-family homes between July and September. Of those purchases, 467,000 of them were financed with low down payment mortgages, which is up 5 percent from the same time period a year ago.
The growth in low down payment programs is a turnaround from the recession, when lenders wouldn’t move on many deals without perfect credit and 20 percent down. But Liu says the need for a more attainable option has always been necessary to help first-time homebuyers get in the door, not just in the current climate of rising home values.
“It’s really a life cycle story, that you have very little saving to begin with, and as you get into the labor force you start to earn some money, and you earn more than you spend, and therefore you have savings as you go on,” Liu says. “For your first home, you will have very little in assets – typically our borrowers have very small amount of assets, liquid assets in particular – to afford a 20 percent down payment.”
With a 3 percent down payment for a $300,000 house or condo, you’ll need just $9,000 in cash instead of $60,000 required for the standard 20 percent down payment, which gets you much closer to obtaining your goal. The mortgage insurance required with most types of low down payment programs increase your monthly payment, but they still make saving up easier. However, a smart homebuyer will need to save even more to make up for potential increases in value as you move toward homeownership, as well as account for any type of emergencies you may have. The last thing you want is to move into a house with no money in the bank only to sustain roof damage in a storm three weeks later.
Consider What You’re Willing to Go Without
What are your saving options? For the most part, they’re the same standard options people opt for when they need extra cash for any other reason: taking a bag lunch to the office instead of eating out every day, cutting out cable or online subscriptions and canceling a gym membership.
Forty-one percent of respondents to the Open Listings survey noted they would get a second job to save up for their home purchase. Thirty-four percent reported being willing to give up a vacation, 19 percent would bring in a roommate to reduce current living costs and 15 percent opted to go even further and move back in with their parents.
As you save for the home you want, also keep in mind that not everyone qualifies for the same mortgage program. It would be upsetting to save up for a 3 percent down payment on a townhouse in a specific neighborhood, only to find out you don’t qualify for a 3 percent down payment program when you’re ready to start seriously shopping. Speaking with a financial advisor or housing counselor can help you determine the best possible route for you while you’re still saving. The U.S. Department of Housing and Urban Development has a list of approved housing counseling agencies that offer free services to residents.
For that reason, it’s also important to keep an open mind about the type of house you’d like to buy. Consider adjacent neighborhoods, fixer-uppers or fewer bedrooms to make it more affordable. Offsetting the cost of owning a home after you purchase is where Schoenholtz says “the creativity steps in.” Rather than buying a single-family home, he sees younger buyers looking for a property with an apartment that can be rented out, or a garage studio where a hairdressing business can operate.
“It’s not their forever home, it’s their five- to seven-year home, so we see millennials not just hacking the savings, but also where they’re targeting to actually purchase,” Schoenholtz says.By Devon Thorsby

3 steps to figure out how much mortgage you can afford

by Leave a Comment

Follow this three-step process to help you determine how much you should spend on a home.

1. Prepare a budget

In order to determine the mortgage payment you can afford, you need to first prepare a budget. It is critical to include the proper short-term savings and long-term investing in your budget before you establish the amount to allocate toward a mortgage payment. While owning a home can help build your net worth, it is an extremely illiquid asset that is not easily converted to cash. You should make certain that you have enough in short-term savings to pay your mortgage for at least six months in the event of an unforeseen financial setback. Also, make certain not to reduce your long-term savings goals for things such as retirement or your children’s future college education expenses.

2. Account for increased expenses

The good news is many of your budgeted items will not change with the purchase of a new home. For example, dining, food, clothing, and travel expenses will likely remain as they were before the move. However, some items like homeowners insurance, lawn care, pool maintenance, HOA dues, and utilities may increase when you purchase a residence. Property taxes will also likely increase, so just plugging in the amount the current owner pays may result in errors. If your purchase price is higher than the value listed on the tax rolls (as is commonly the case), you should recalculate the property tax based on the purchase price you will pay. It may take up to a year for the taxing authority to update the tax rolls, but eventually the purchase price will be used to determine your property tax due.

Economists say to expect more people to be looking to buy homes in 2017 despite higher mortgage rates. Sean Dowling (@seandowlingtv) has more. Buzz60

3. Determine your optimal mortgage payment

Once you have prepared a new budget, it will become apparent how much of a mortgage payment you can afford. If the amount you can afford is less than the amount you want to borrow, it may be necessary to adjust other budget items. Focus on reducing discretionary (non-essential) expenses. For example, you might consider reducing the amount you spend on vacations, entertainment, dining out, hobbies, and even your monthly television subscription so you can allocate more toward your new home. It is also a good idea to shop around for your auto insurance policy at the same time you are getting new homeowner insurance. Bundling these two policies with the same insurance company can often reduce your monthly premium by as much as 20%. All of these little changes to your budget can add up to a tidy sum that can help you purchase the home of your dreams.

Buying a home is no small feat, and there are many financial ins and outs to navigate as you prepare for this step in your life. As parting tips, don’t forget that you’ll need cash for your down payment (which will also influence the amount of your loan), and it’s helpful for you to check your credit report before speaking to a lender so you understand whether your lender will view you as a high-risk or low-risk borrower. Planning is key, and the more thought and energy you put into the process ahead of time, the more smoothly the home-buying process will go.

Clark Randall, Credit.com

When Does It Make Sense To Work With A Financial Advisor?

by Leave a Comment

 

 

Consider the following scenarios: You’ve worked hard all your life, been careful with your finances and are now looking forward to retirement. You have a general sense of how your assets are performing, but could use some additional guidance. Or, perhaps you haven’t been much of a saver and you are now playing catch-up and have fears of running out of money in retirement. Both scenarios are ideal for consulting with a financial advisor. Yet – many people don’t. Perhaps there is an underlying fear that they don’t have enough money to even qualify for speaking with a financial advisor, or that they are in such bad financial shape that it makes no sense for them to reach out to an industry expert. The important thing to remember is that if someone is willing to take the step to meet with an advisor, it can be advantageous for them to do so, as they might pick up a few tips and strategies they would not have otherwise been exposed to.

So…when does it make sense to work with a financial advisor? In a 2014 survey, people ages 50-59 were only saving $78/month towards retirement, and another 50% that were questioned think they needed less than $500,000 in retirement savings to be financially secure. These are scary statistics and saving this little each month does little for retirement security; you would be looking at working until 70 or 75 to ensure you had a solid nest egg built up. $500,000 will only generate about $25,000 worth of income in retirement; most people need more than that to live in the Northeast.

With that in mind, you should consider working with a financial planner if:

  • You have concerns you may run out of money in retirement. This is the number one concern of Americans when they discuss retirement: Do I have enough? What is my ROI? How much do I need to be saving to live the retirement I envision?
  • You would benefit from a structured retirement income strategy. For some people, it is better for them to have a concrete plan when it comes to their finances and future goals. This type of plan helps decide what part of your money you are going to spend first in retirement, what accounts can be left alone until later, and what (if anything) you plan to pass on to family members.
  • You want help investing properly FOR and IN retirement. Once someone comes up with a good retirement income plan, then it’s a matter of matching their investment strategy to that plan. A lot of people get tis backwards and start focusing on their investments first, without having a plan in place.
  • You want to have confidence in your financial future. People that seek out financial advisors go because they want to feel more prepared and remove some of the fear from their future.

Financial planners aren’t just for people that have money or people that already have a strong sense of their finances and retirement plan. Financial planners can also be an excellent resource for people that don’t have good sense of their finances and are lacking a plan. They offer unbiased, expert advice and can open your eyes up to tips and strategies you might not have been aware of. As all financial advisors have their own style, do your research to determine which one is the best match for you and your needs. You go to the doctor to ensure you are in optimal health; why not go to a financial advisor to ensure your finances are healthy, too?

Forbes Contributor

Average mortgage rate drops to 5-month low

by Leave a Comment

The average U.S. mortgage rate fell below a key threshold of 4 percent this week, its lowest level in five months.

Mortgage buyer Freddie Mac said Thursday that the average interest rate on 30-year fixed-rate home loans declined to 3.97 percent this week from 4.08 percent last week. Interest rates on mortgages began to rise after President Donald Trump won the November election. But they’ve started falling as the fate of tax reform and other policies has become uncertain.

The 30-year rate stood at 3.59 percent a year ago and averaged 3.65 percent in 2016, the lowest level in records dating to 1971. Lower rates make it easier for home buyers to afford their monthly mortgage payments.

The rate on 15-year mortgages declined to 3.23 percent from 3.34 percent last week.

The recent drop also illustrates the range of factors that affect mortgage rates. The average 30-year rate has declined steadily in recent weeks — it was 4.23 percent a month ago — even as the Federal Reserve has lifted the short-term rate it controls three times in the past 15 months.

And Fed policymakers have signaled more hikes are likely to come this year as long as the economy keeps growing.

Mortgage rates, however, more closely track the yield on the 10-year Treasury note, rather than the Fed’s decisions. That yield rose after the election in anticipation of faster growth and greater inflation under President Trump.

Yet as investors have downgraded their expectations for tax cuts and infrastructure spending, the yield on the 10-year has fallen. That has led mortgage rates lower as well.

  • By THE ASSOCIATED PRESS

WASHINGTON — Apr 20, 2017,

Contact Us

Issaquah real estate

Larry & Kathy Reichle
371 NE Gilman Blvd. #160
Issaquah, WA 98027

Phone: 206-999-1690

Contact Us

Digital Millennium Copyright Act Notice (DMCA)

Eastside Real Estate Blog