3 Crucial Reasons You Should Buy a Home Before 2017 Ends

Buying a house in 2017 will feel kind of like you’ve jumped onto the subway just as the doors were closing. Your heart’s pounding and you’re winded from the race, but you made it—just in time.

OK, so maybe that’s a little exaggerated. But here’s the thing: Interest rates have begun to rise and will likely climb higher. Inventory is low and could shrink more. And home prices? Well, home prices are increasing—and they’re not predicted to fall any time soon.

If you don’t jump aboard the real estate train now, you might be too late.

“It’s tough to buy a home today in most places in the country because there are so few homes for sale,” says Jonathan Smoke, chief economist for realtor.com®. “But if you wait to buy, then you’re gambling that the market will be better for you to purchase in the future.”

And that’s not a smart gamble, our real estate experts say. If you’ve been toying with the idea of buying, or you anticipate a life change that might force you to move—such as a new baby or a job transfer—you should be “buying as urgently and as soon as possible,” Smoke says.

So finish reading this, then start looking for a house. Here’s why.

1. Rates are rising

In 1981, when mortgage rates hit 18% and seemed to rise every day, single-digit rates seemed like an impossible dream.

Last August, however, rates on 30-year mortgages bottomed out at 3.55%. Now that the Federal Reserve finally decided to raise its key interest rate, mortgage rates have been climbing slowly. Today, the average rate is just above 4%; by 2019 or 2020, rates could easily climb to 6%.

“All signs point to this trend continuing,” says Richard DeNapoli, managing director for Coral Gables Trust and a former Florida real estate commissioner.

Before you freak out, take heart: Rising rates aren’t necessarily a deal breaker for buyers. The National Association of Realtors® (NAR) calculated that a rise from 4.2% to 5% would increase average monthly mortgage payments by $90—not nothing, but not a catastrophe, either. And if you take the long view, those higher rates are still historically low.

“For buyers there still is opportunity,” says Danielle Hale, managing director of housing research for the NAR. “For those who are still able to get into the market, these low rates continue to be helpful.”

Another upside: When rates go up, competition and prices often go down.

“I’d tell buyers not to panic, because higher mortgage rates eventually cause sellers to be more flexible on pricing,” DeNapoli says.

2. Inventory is shrinking

In November 2016, there were only 1.85 million homes for sale. That’s a nearly 10% drop from the year before. And it continues a trend of steady decline since just before the housing crash, when inventory peaked.

Real estate experts predict that inventory will continue to shrink, at least for the foreseeable future. That means that in most areas of the country, buyers have more homes to choose from today than they will next year.

Or even next month. If you get moving now (during the winter, which is largely considered to be real estate’s off-season), you’ll have less competition for those homes than you will in the peak spring and summer months.

Bottom line: Every day you wait to start looking for a new home, you face stiffer competition for fewer homes.

“If you think it’s bad right now, wait until April to August,” Smoke says.

3. Home prices are still rising

The bad news for buyers is that home prices now stand higher than before the 2007 crash, increasing 5% from 2015 to 2016. And housing experts expect an additional 2% to 3% jump in 2017, DeNapoli says.

“Prices continue to go up; we have yet to see that ceiling,” says Trevor Levin, a real estate agent with Nourmand & Associates in Los Angeles. “I think they have room to grow.”

How high prices will rise and how long they’ll remain high is anyone’s guess. Rising mortgage rates and the new Trump administration have introduced “uncertainty” into the real estate market, Levin says.

“And uncertainty is never ideal,” he says.

The good news? If you jump into the market pronto, you just might make it before those doors close.

Lisa Kaplan Gordon - Realtor.com

4 Signs Now’s the Right Time to Sell Your Home

Not sure when to sell your house? If you’ve been on the fence, we’ve got good news: It’s a great market for sellers! Limited inventory continues to drive home prices up, and the latest data from the National Association of Realtors shows that half of recently sold properties were on the market for just 39 days.

Of course, the decision of when to sell your home isn’t solely based on market conditions. You have to take your personal situation into account—and that’s where expert advice comes in handy.

We asked Linda Domis, a Los Angeles-area real estate Endorsed Local Provider (ELP) with 38 years of experience, to share her advice.

“Now is a great time to sell,” she says. “Longer days during daylight saving time mean more hours for buyers to look at property. With less stress, buyers can think about a move more comfortably.”

Here are a few other things to keep in mind before planting a For Sale sign in your yard.

You’re Out of Debt With Cash in the Bank

If you didn’t have all your financial ducks in a row your first time around the home-buying block, you probably learned a few things the hard way. Like the fact that Murphy can smell broke from miles away. If it can go wrong, it will! Put those lessons to good use and be a money-smart home buyer the next go-round!

Start by taking a hard look at your finances. If you’ve paid off all your nonmortgage debt and have three to six months of expenses in your emergency fund, that’s a good sign you’re financially mature enough to purchase a home again.

You’ve Got Equity on Your Side

When the housing bubble burst, home values plummeted, sending many mortgages underwater. Thankfully, the tide has turned: According to CoreLogic, only 8% of homes with a mortgage had negative equity at the beginning of 2016. If you’re not sure where your equity stands, ask an experienced real estate agent to run a free comparative market analysis (CMA) to determine an approximate value for your home.

Linda says it’s worth the sale “if your home has recovered enough value to provide at least 20% equity for your next purchase.” Why is 20% the magic number? Because putting 20% or more down on a home keeps private mortgage insurance (PMI) at bay. That could save you hundreds of dollars each year!

Your Home No Longer Fits Your Lifestyle

Another factor to consider is how well your home meets your everyday needs. Perhaps you could use another bedroom (or even two) to accommodate your growing family. Or maybe your kids have all moved out and you’re ready to downsize.

“Empty nesters can really benefit from selling now while rates are low,” Linda says. “It’s very freeing to sell a large home, pay cash for a smaller one, and invest the rest in your retirement.”

Whether you’re sizing up or down, make sure your mortgage fits your budget. Dave recommends keeping your monthly payment to 25% or less of your take-home pay on a 15-year fixed-rate mortgage.

You Can Actually Afford the Move

Don’t get so carried away by the excitement of your next home that you forget to account for the cost of leaving your current one. Hiring professional movers? Save up cash to cover the cost of packing up and hauling your stuff away.

You should also invest a little to get your current place ready for prime time. Linda recommends focusing your home-improvement dollars on these areas:

Paint: “Paint is the number-one investment when upgrading,” she says. “Buyers love the look—and smell—of fresh paint.” Curb appeal: You only get one chance to make a first impression. Linda suggests a three-pronged approach:
“Plant flowers, trim shrubs, and paint the trim.” Kitchen and bath: “You don’t need expensive appliances or countertops, but new faucets and fixtures go a long way,” she says. Want a bonus tip that doesn’t cost a dime? Clear out the clutter. “Neat closets and tidy shelves make your home look larger!” Linda adds.

Make the Right Choice for You

There’s no single formula for determining when to sell your house. Partner with a pro you can trust to provide honest advice so you can do what’s best for you and your budget. A good agent puts service before sales—but knows how to get things done when it’s time to sell.

Original Article - DaveRamsey.com

How to Avoid Private Mortgage Insurance (PMI)

Lenders require private mortgage insurance (PMI) on conventional loan programs to protect themselves against potential loss if you stop making payments. You may be thinking that there must be a way to avoid being responsible for paying insurance premiums on something, hopefully, your lender will never need.

The simplest way to avoid paying PMI is to make a down payment that is large enough to cancel out the need for insurance in the first place.

Easier said than done, right? So, what else can you do to avoid paying for private mortgage insurance?

FIND A LOW OR NO DOWN PAYMENT OPTION
Specifically, find one that does not require private mortgage insurance as a condition of getting the low or no down payment. Look for loans that are guaranteed or backed by a government agency such as the VA, USDA or FHA. In lieu of requiring private mortgage insurance, there may be guarantee fees, funding fees, or other mortgage insurance required to protect the agency backing the loan.

REQUEST A CANCELLATION
It’s important that you keep a close eye on your loan’s principal balance because it will be an indicator of when you might be able to request that your lender remove the private mortgage insurance from your loan.

Once your balance drops below 80% of your home’s value or below 80% of your home’s current market value, you can submit a request in writing asking if you can have your PMI cancelled.

Depending on the type of loan you have and what conditions are in your private mortgage insurance policy, you may be required to make a certain number of payments before PMI can be cancelled. You may also be required to have a payment history free of late payments for a specific number of months. For example, no 30 days or more late payments in a 12-month period and no 60 days or more late payments in a 24 month period.

Every year, you’ll receive a notice that shows where you are with your loan balance and potential for PMI cancellation. Lenders have to monitor this closely themselves because they’re required to terminate PMI per the Homeowners Protection Act of 1998 once your balance reaches 78% of the purchase price or appraised value at the time of purchase, whichever is lesser. As soon as the lender confirms you’re eligible to have your PMI cancelled, they’ll send you a letter. It may also come from a subservicers on their behalf.

If you’re not close to the 80% loan-to-value target and you’ve made improvements on the home, you may want to get an appraisal. If your remaining loan balance multiplied by the factor 1.25 is less than the appraised value, you can request consideration for PMI cancellation.

ASK ABOUT LENDER PAID MORTGAGE INSURANCE (LPMI)
In exchange for a small increase in your mortgage interest rate, lenders may be able to take care of the private mortgage insurance. Unlike regular private mortgage insurance that you pay for, lender-paid private mortgage insurance cannot be cancelled per your request. Before selecting this option, you’ll want to do some math to determine what’s best for you and your budget long-term.

It may be appealing to not have a monthly PMI premium; however, the increased interest rate may result in you paying more in interest over the life of your loan.

On the flip side, interest is a tax write-off, whereas MI isn’t always a write-off if you exceed a certain income bracket.

Let’s look at a hypothetical example:
John and Jane both get a $225,000, 30-year, fixed-rate mortgage. Both are required to have mortgage insurance. John opts for the traditional monthly-paid private mortgage insurance that’s included in his mortgage payment. Jane negotiates a higher interest rate in order to have her lender pay the private mortgage insurance as a single premium to the private mortgage insurance company.

As seen in the table below, John has a lower principal and interest payment than Jane. However, he pays $84 a month in PMI, which raises his overall mortgage payment.

Once John’s loan meets the requirements to drop PMI, his payment is reduced by $84 per month. Jane’s loan is not eligible for PMI removal. After the loan reaches maturity with all 360 payments being made, John pays $417,509 for his $225,000 loan. Because of the higher interest rate, Jane pays a bit more for the same loan.

REFINANCE
If your home value has increased but you don’t meet the requirements to cancel the PMI, you may be able to refinance into a new loan that doesn’t require PMI.

Talk to [a loan officer] about the cost-savings, because there will be fees to do the refinance and you’ll want to make sure it’s worth it in the long run.

If paying for private mortgage insurance is making you hesitant to get a mortgage loan, please talk to a mortgage banker about ways to save for the down payment, down payment assistance programs, loans that don’t require PMI and how long you may need to pay PMI before you can cancel.

By: Beverly Darnell - Content Writer for Atlantic Bay Mortgage Group

Top 5 Reasons You Should Not For Sale By Owner

In today’s market, with home prices rising and a lack of inventory, some homeowners may consider trying to sell their home on their own, known in the industry as a For Sale by Owner (FSBO). There are several reasons why this might not be a good idea for the vast majority of sellers.

Here are the top five reasons:

1. Exposure to Prospective Buyers - Recent studies have shown that 94% of buyers search online for a home. That is in comparison to only 17% looking at print newspaper ads. Most real estate agents have an internet strategy to promote the sale of your home. Do you?
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2. Results Come from the Internet - Where did buyers find the home they actually purchased?
   The days of selling your house by just putting up a sign and putting it in the paper are long gone. Having a strong internet strategy is crucial.
   
• 51% on the internet
• 34% from a Real Estate Agent
• 9% from a yard sign
• 1% from newspapers
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3. There Are Too Many People to Negotiate With - Here is a list of some of the people with whom you must be prepared to negotiate if you decide to For Sale By Owner:
• The buyer who wants the best deal possible
• The buyer’s agent who solely represents the best interest of the buyer
• The buyer’s attorney (in some parts of the country)
• The home inspection companies, which work for the buyer and will almost always find some problems with the house
• The appraiser if there is a question of value
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4. FSBOing Has Become More And More Difficult - The paperwork involved in selling and buying a home has increased dramatically as industry disclosures and regulations have become mandatory. This is one of the reasons that the percentage of people FSBOing has dropped from 19% to 8% over the last 20+ years.
   
   The 8% share represents the lowest recorded figure since NAR began collecting data in 1981.
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5. You Net More Money When Using an Agent - Many homeowners believe that they will 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 the commission.

Studies have shown that the typical house sold by the homeowner sells for $185,000, while the typical house sold by an agent sells for $245,000. This doesn’t mean that an agent can get $60,000 more for your home, as studies have shown that people are more likely to FSBO in markets with lower price points. However, it does show that selling on your own might not make sense.

Bottom Line
Before you decide to take on the challenges of selling your house on your own, sit with a real estate professional in your marketplace and see what they have to offer.

The KCM Crew - For Sellers, FSBO's