2020 Buying A Home Handbook – Part 1
4 Reasons to Buy a Home This Winter
Here are four great reasons to consider buying a home today instead of waiting.
- Prices Will Continue to Rise
CoreLogic’s latest Home Price Insights Report shows that home prices have appreciated by 3.5% over the last 12 months. The same report forecasts prices will continue to increase at a rate of 5.6% over the next year.
Home values will continue to appreciate, so waiting may end up costing you more in the
long run.
- Mortgage Interest Rates Are Forecasted to Remain Low
The Primary Mortgage Market Survey from Freddie Mac indicates that rates for a 30-year mortgage have recently hovered around historically low levels. This is great news for buyers in the market right now because low rates increase your purchasing power, meaning you can get more for your money.
The Mortgage Bankers Association, Fannie Mae, Freddie Mac, and the National Association of Realtors are in unison, projecting rates will remain steady as we progress throughout 2020, making this winter a great time to consider buying a home.
- Either Way, You Are Paying a Mortgage
There are some renters who haven’t purchased a home yet because they’re uncomfortable taking on the obligation of a mortgage. Everyone should realize that unless you’re living rent-free with your parents, you are paying a mortgage – either yours or that of your landlord.
As an owner, your mortgage payment is a form of ‘forced savings’ that allows you to have equity in your home you can tap into later in life. As a renter, you guarantee your landlord is the person with that equity.
Are you ready to put your housing costs to work for you?
- Waiting May Increase Your Long-Term Costs
The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears prices are on the rise, making waiting a potentially more expensive option.
Look at the actual reason you’re buying and decide if it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer, or you just want to have control over custom renovations, maybe now is the time to buy.
What’s the Latest on Mortgage Rates?
Mortgage rates have fallen by over a full percentage point since Q4 of 2018, hovering at near-historic lows. This is big news for buyers looking to get more for their money in the current housing market.
According to Freddie Mac’s Primary Mortgage Market Survey, “We expect rates to remain low, falling to a yearly average of 3.8% in 2020 and 2021.”
Freddie Mac notes that this is great news for homebuyers, stating, “Modest increases in home sales and house prices will boost purchase mortgage originations for the foreseeable future.”
As a potential buyer, the best thing you can do is work with a trusted advisor who can help you keep a close eye on how the market is changing. Relying on current expert advice is more important than ever when it comes to making a confident and informed decision for you and your family.
Even a small increase (or decrease) in mortgage rates can impact your monthly housing costs.
If buying a home is on your short list of goals to achieve, let’s get together to determine your best move.
Where Are Home Prices Heading?
Questions continue to rise around where home prices will head in 2020. Here is a look at the forecast from CoreLogic:
Additionally, ARCH Mortgage Insurance Company in their current Housing and Mortgage
Market Review revealed their latest ARCH Risk Index, which estimates the probability of home prices being lower in two years. Based on the most recent results, 32 of the 50 states (plus D.C.) had a minimal probability of lowering by 2021.
Experts forecast home price appreciation to continue at a moderate rate as we move through 2020 and beyond. With appreciation growing, now is a great time to buy.
The True Cost of Not Owning Your Home
There are great advantages to owning a home, yet many people continue to rent. The financial benefits are just some of the reasons why homeownership has been a part of the long-standing American dream.
Realtor.com reported that:
“Buying remains the more attractive option in the long term – that remains the American dream, and it’s true in many markets where renting has become really the shortsighted option…as people get more savings in their pockets, buying becomes the better option.”
Why is owning a home financially better than renting?
Here are the top five financial benefits of homeownership:
- Homeownership is a form of forced savings.
- Homeownership provides a tax savings.
- Homeownership allows you to lock in your monthly housing cost.
- Buying a home is less expensive than renting.
- No other investment lets you live inside of it.
Studies have shown that a homeowner’s net worth is 44x greater than that of a renter.
A family that purchased a median-priced home at the start of 2019 would build more than
$37,750 in family wealth over the next five years with projected price appreciation alone.
Some argue that renting eliminates the cost of taxes and home repairs, but every potential renter must realize that all the expenses the landlord incurs are already baked into the rent payment – along with a profit margin! Owning a home has many financial benefits that cannot be achieved by renting.
Buying a Home: Do You Know the Lingo?
To confidently point you in the right direction, here is a list of some of the most common terms used in the homebuying process.
- Appraisal – A professional analysis used to estimate the value of the home. A necessary step in validating the home’s worth to you and your lender to secure financing.
- Closing Costs – The fees required to complete the real estate transaction. Paid at closing, they include points, taxes, title insurance, financing costs, and items that must be prepaid or escrowed. Ask your lender for a complete list of closing cost items.
- Credit Score – A number ranging from 300-850 that is based on an analysis of your credit history. Helps lenders determine the likelihood that you’ll repay future debts.
- Down Payment – Down payments are typically 3-20% of the purchase price of the home. Some 0% down programs are also available. Ask your lender for more information.
- Mortgage Rate – The interest rate you pay to borrow money to buy your home. The lower the rate, the better.
- Pre-Approval Letter – A letter from a lender indicating you qualify for a mortgage of a specific amount.
- Real Estate Professional – An individual who provides services in buying and selling homes. Real estate professionals are there to help you through the confusing paperwork, find your dream home, negotiate any of the details that come up, and to help you know exactly what’s going on in the housing market.
The best way to ensure your homebuying process is a confident one is to find a real estate pro who will guide you through every aspect of the transaction with ‘the heart of a teacher’ by putting your family’s needs first.
Why Pre-Approval Should Be Your First Step
In many markets across the country, the number of buyers searching for their dream homes greatly exceeds the number of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. One way to show you’re serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before you start your search. Even if you’re in a market that’s not as competitive, understanding your budget will help you know if your dream home is within your reach.
Freddie Mac lays out the advantages of pre-approval in the ‘My Home’ section of their website.
“It’s highly recommended that you work with your lender to get pre-approved before
you begin house hunting. Pre-approval will tell you how much home you can afford
and can help you move faster, and with greater confidence, in competitive markets.”
One of the advantages of working with a local real estate professional is that many have relationships with lenders who will be able to help you with this process. Once you’ve selected a lender, you’ll need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.”
Freddie Mac describes the ‘4 Cs’ that help determine the amount you’ll be qualified
to borrow:
- Capacity: Your current and future ability to make your payments
- Capital or Cash Reserves: The money, savings, and investments you have that can be sold quickly for cash
- Collateral: The home, or type of home, that you would like to purchase
- Credit: Your history of paying bills and other debts on time
Getting pre-approved is one of many steps that will show home sellers you’re serious
about buying, and it often helps accelerate the process once your offer has been accepted. If you’re ready and willing to buy, getting pre-approved will help you feel more informed, and may even give you the competitive edge you need in today’s homebuying process.
