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2 Myths Holding Back Home Buyers

2 Myths Holding Back Home Buyers

In a recent article, First American shared how millennials are not really any different from previous generations when it comes to the goal of homeownership; it is still a huge part of their American Dream. The piece, however, also reveals,

 “Saving for a down payment is one of the biggest obstacles faced by first-time home buyers. Dispelling the 20 percent down payment myth could open the path to homeownership for many more.”

 Myth #1: “I Need a 20% Down Payment”

Buyers often overestimate how much they need to qualify for a home loan. According to the same article:

“Americans still overestimate the qualifications needed to get a mortgage, resulting in qualified potential buyers not even considering homeownership. Indeed, the Urban Institute report revealed that 16 percent of consumers believed that the minimum down payment required by lenders is 20 percent or more, and another 40 percent didn’t know at all.”

While many potential buyers still think they need to put at least 20% down for the home of their dreams, they often don’t realize how many assistance programs are available with as little as 3% down. With a little research, many renters may actually be able to enter the housing market sooner than they ever imagined.

Myth #2: “I Need a 780 FICO® Score or Higher”

In addition to down payments, buyers are also often confused about the FICO® score it takes to qualify for a mortgage, believing a ‘good’ credit score is 780 or higher.

To debunk this myth, let’s take a look at Ellie Mae’s latest Origination Insight Report, which focuses on recently closed (approved) loans.2 Myths Holding Back Home Buyers | Simplifying The MarketAs indicated in the chart above, 50.23% of approved mortgages had a credit score of 500-749.

Bottom Line

Whether buying your first home or moving up to your dream home, knowing your options will make the mortgage process easier. Believe it or not – your dream home may already be within your reach.

The #1 Reason to Sell Your House in the Winter

The #1 Reason to Sell Your House in the Winter

Many sellers believe spring is the best time to put their homes on the market because buyer demand traditionally increases at that time of year. What they don’t realize is if every homeowner believes the same thing, then that’s when they’ll have the most competition.

So, what’s the #1 reason to sell your house in the winter? Less competition.

Housing supply traditionally shrinks at this time of year, so the choices buyers have will be limited. The chart below was created using the months supply of listings from the National Association of Realtors.The #1 Reason to List Your House in the Winter | Simplifying The MarketAs you can see, the ‘sweet spot’ to list your house for the most exposure naturally occurs in the late fall and winter months (November – January). 

Temperatures aren’t the only thing that heats up in the spring – so do listings!The #1 Reason to List Your House in the Winter | Simplifying The MarketIn 2018, the number of homes on the market increased from December to May. Don’t wait for these listings and the competition that comes with them to come to the market before you decide to sell your house.

Added Bonus: Serious Buyers Are Out in the Winter

At this time of year, purchasers who are serious about buying a home will be in the marketplace. You and your family will not be bothered and inconvenienced by mere ‘lookers.’ The lookers are at the mall or online doing their holiday shopping.

 Bottom Line

If you’ve been debating whether or not to sell your house and are curious about market conditions in your area, let’s get together to determine the best time to place your house on the market.

4 Keys to Buying a Home in Today’s Market

4 Keys to Buying a Home in Today’s Market

After a few months of thinking it over, you’ve finally made the decision to purchase your first home.

You picture the process to be fairly simple: find a realtor, tour a few homes until you find your dream home, obtain a mortgage, and then you have your new home,right?

Not exactly.

You meet with your realtor and view a few homes, but the houses you see don’t match up to what you imagined your forever home for your family would be. 

Because you’re ready to buy your first home, you feel annoyed and frustrated at the process. Then, it happens. Your realtor shows you a house for sale that meets all your requirements, but it has several competing offers. 

Your realtor says you need to be ready to make an offer to the seller soon so you don’t lose the property, and to have the best chance you should not ask for a seller assist.

Reality sets in, and you quickly realize you are nowhere near as ready to purchase a home as you initially thought, especially from a financial standpoint. 

It’s not uncommon for first-time home buyers to reconsider once they realize they may have to compete for a home and don’t fully understand what financial considerations are taken into account at that point in the home buying process. 

Fortunately for you, Erica Rawls Real Estate Advisors know buying a home can be complicated, and our job is to make it as simple as possible for you. 

To help first-time home buyers and others who are looking for a new home, we’ve shared four key things you need to know before buying a new home in today’s market. 

1. Save As Much Money As You Can Toward The Total Purchase Price

That’s right. The most important thing to do you can do when buying a home is saving money.

You may be afraid of not knowing exactly how much money it will cost to buy your new home, but if you have enough saved toward it, when the time comes, you will have a better chance at getting your home.

Here’s Our Tip: Have at least 7 % of the total purchase price saved. This amount includes the down payment, closing costs, and may not may not include money for future repairs and furniture.

Now, you may be thinking how much money is that? Let’s break it down with this example.

Let’s say the home you want costs $100,000, and you have to put a 5% down payment toward the cost, which would be $5,000.

You also need to plan for closing fees, which you can expect to pay, on average, 3% of your home’s purchase price, so that would be $3,000. Then, you know you want to have $3,500 saved for future repairs and furniture.

In this case, you’d ideally want to have $11,500 saved at a minimum ($5,000 + $3,000 + $3,500) to include the down payment, closing costs and repairs/furniture. 

You would only need about $7,000-$8,000 if you want to save 7% without factoring in future repairs or furniture.

If you’re in a competing offer for a home you don’t want to be in a position to ask for seller assistance, which can risk your chance of getting the house. 

Here’s a real-life scenario where having enough money saved benefited the potential buyer in a competing offer.

Our team worked with a millennial who saved $20,000 toward their dream home,which was between $130,000 – $150,000. When the millennial found out there was a competing offer, they told the seller they could make a $10,000 earnest money non-refundable deposit with no seller assistance — the millennial won the offer!

The amount of money you save is going to make or break you in today’s market, so save as much as you possibly can.

You may be thinking, I already have so many other bills and obligations, how can I begin to save for a home?

Don’t get discouraged.  Here are a few tips to help you with saving for your dream home 

  • Tip 1: Don’t make any large purchases, including furniture, until AFTER closing! Keep your focus on the down payment and closing costs.
  • Tip 2: Save a portion of money from your tax return! The beginning of the year is a great time to start a new savings plan. Jump-start your savings using your refund.
  • Tip 3: Find a program that will help you pay for your closing costs. There are even some programs will pay up to 100% of the costs!

2 . Understand Your Credit Score And/Or Work Toward Improving It

Aside from saving money toward the down payment and closing costs, your credit score is another important factor that you need to consider when purchasing a home in today’s market. 

If you know the importance of having a good credit score to buy a car, then you understand how imperative a good credit score will be for buying a new home. 

The higher your credit score is, the less risky you will appear to the lender. You will also have a lower interest rate on your mortgage over the life of the loan, which saves you money long-term. 

You may be wondering, “What credit score do I need to buy a home?”

Here’s Our Tip: Reach for a minimum of a 740 middle credit score across all three credit bureaus so you will have the most favorable terms available to you.

It’s possible to purchase a home with a credit score lower than 740, such as a 640 or 680, but you will pay at least one percentage point higher in interest, which is a significant amount of money over the life of a loan. 

There are some programs that may allow you to purchase a home with a score of 580 — we do not recommend going this route!

We want you to be financially successful when it comes to purchasing a home so you become a successful homeowner. 

If you’re credit score is not where you’d like it to be, work on ways to improve your score before you enter the home buying process. 

“What if I can make a big down payment? Does my credit score matter then?”

Your credit score doesn’t matter if you pay in cash. Otherwise, yes, it’s still a factor, even with a large down payment. 

If you make a larger down payment it will not fix a poor credit score. The down payment will only reduce the amount of the loan you will need. 

For example, the house you want is $250,000 and you qualify for a $150,000 mortgage. You can still get the home if you have $100,000 in cash to pay it off. 

3. Have and Maintain a Steady Job For At Least 2 Years

One thing lenders review when considering whether to grant you a mortgage is whether or not you have a steady income. 

Lenders like to see at least two years of employment when they’re considering you for a mortgage. They will review at least two years of your tax returns — whether you receive a W-2 from an employer or work as an independent contractor. 

Here’s Our Tip: If you’re considering leaving a job, wait until AFTER closing.

Lenders understand if you’re working in a position where you’re going from one job to another in the same field that would be considered a promotion, but it still makes the closing process more difficult with additional paperwork to file. 

4. Assess Your Finances – Can You Really Afford the Monthly Mortgage Payment?

The last thing to consider when buying a home in today’s market is how much you can actually afford to pay for your mortgage each month. 

Once you’ve saved the money for your closing costs, boosted your credit score to the ideal range and established you have a steady income, you need to determine how much you can afford for your monthly mortgage payment.

Just because you qualify for a certain mortage doesn’t mean you have to take it. If you qualify for a $250,000 mortgage but know you can’t afford more than $1200/month for a mortgage payment, you may consider taking a $150,000 mortgage instead.

Here’s our tip: Create a list to determine all of your monthly bills and expenses. This can give you an idea for how much you can afford each month for your mortgage.

You know your monthly financial obligations and personal desires better than anyone else. In your list factor things such as how much you shop, spend on bills, potential vacations, children’s expenses (if applicable), etc. 

Contact Erica Rawls Real Estate Advisors Team Today!

If you’re ready to take the next steps to purchase your new home, complete our online form or give us a call at 717.409.6500 to contact the team at Erica Rawls Real Estate Advisors today!

5 Reasons to Sell This Fall

5 Reasons to Sell This Fall

Below are 5 compelling reasons listing your home for sale this fall makes sense.

1. Demand Is Strong

The latest Buyer Traffic Report from the National Association of Realtors (NAR) shows that buyer demand remains strong throughout the vast majority of the country. These buyers are ready, willing, and able to purchase…and are in the market right now. More often than not, in many areas of the country, multiple buyers are competing with each other to buy the same home.

Take advantage of the buyer activity currently in the market.

2. There Is Less Competition Now

Housing inventory is still under the 6-month supply that is needed for a normal market. This means that in the majority of the country, there are not enough homes for sale to satisfy the number of buyers.

Historically, a homeowner would stay an average of six years in his or her home. Since 2011, that number has hovered between nine and ten years. There is a pent-up desire for many homeowners to move as they were unable to sell over the last few years due to a negative equity situation. As home values continue to appreciate, more and more homeowners will be given the freedom to move.

Many homeowners were reluctant to list their homes over the last couple years, for fear that they would not find a home to move to. That is all changing now as more homes come to market at the higher end. The choices buyers have will continue to increase. Don’t wait until additional inventory comes to market before you decide to sell.

3. The Process Will Be Quicker

Today’s competitive environment has forced buyers to do all they can to stand out from the crowd, including getting pre-approved for their mortgage financing. This makes the entire selling process much faster and simpler, as buyers know exactly what they can afford before shopping for a home. According to Ellie Mae’s latest Origination Insights Report, the time needed to close a loan is 43 days.

4. There Will Never Be a Better Time to Move Up

If your next move will be into a premium or luxury home, now is the time to move up. There is currently ample inventory for sale at higher price ranges. This means if you’re planning on selling a starter or trade-up home and moving into your dream home, you’ll be able to do that in the luxury or premium market.

According to CoreLogic, prices are projected to appreciate by 5.2% over the next year. If you’re moving to a higher-priced home, it will wind up costing you more in raw dollars (both in down payment and mortgage) if you wait.

5. It’s Time to Move on with Your Life

Look at the reason you decided to sell in the first place and determine whether it is worth waiting. Is money more important than being with family? Is money more important than having the freedom to go on with your life the way you think you should?

Only you know the answers to these questions. You have the power to take control of the situation by putting your home on the market. Perhaps the time has come for you and your family to move on and start living the life you desire.

That is what is truly important.

Homeownership Will Always Be a Part of the American Dream

Homeownership Will Always Be a Part of the American Dream

On Labor Day we celebrate the hard work that helps us achieve the American Dream.

Growing up, many of us thought about our future lives with great ambition. We drew pictures of what jobs we wanted to have and where we would live as a representation of a secure life for ourselves and our families. Today we celebrate the workers that make this country a place where those dreams can become a reality.

According to Wikipedia,

Labor Day honors the American labor movement and the contributions that workers have made to the development, growth, endurance, strength, security, prosperity, productivity, laws, sustainability, persistence, structure, and well-being of the country.”

The hard work that happens every day across this country allows so many to achieve the American Dream. The 2019 Aspiring Home Buyers Profile by the National Association of Realtors (NAR) says,

“Approximately 75% of non-homeowners believe homeownership is part of their American Dream, while 9 in 10 current homeowners said the same.”

Looking at the number of non-owners, you may wonder, ‘If they believe in homeownership, why haven’t they bought a home yet?’. Well, increasing home prices and low inventory can be part of the reason why some haven’t jumped in, but that does not mean there is a lack of interest. The same report shows the increase in the desire to buy in the last year (as shown in the graph below):Homeownership Will Always Be a Part of the American Dream | Simplifying The MarketAs we can see, there are more and more people each quarter who want to buy a home. The good news is, as more inventory comes to the market, more non-homeowners will be able to fulfill their dreams. Finally, they’ll be able to move into that home they drew when they were little kids!

Bottom Line

If you’re a homeowner considering selling, this fall might be the right time, as there are buyers in the market ready to buy. Let’s get together to determine how you can benefit from the pent-up housing demand.

5 Real Estate Reality TV Myths Explained

5 Real Estate Reality TV Myths Explained

Have you ever been flipping through the channels, only to find yourself glued to the couch in an HGTV binge session? We’ve all been there, watching entire seasons of shows like “Property Brothers,”Fixer Upper,” and “Love It or List It,” all in one sitting.

When you’re in the middle of your real estate-themed TV show marathon, you might start to think everything you see on the screen must be how it works in real life. However, you may need a reality check.

Reality TV Show Myths vs. Real Life:

Myth #1: Buyers look at 3 homes and decide to purchase one of them.
Truth: There may be buyers who fall in love and buy the first home they see, but according to the National Association of Realtors, the average homebuyer tours 10 homes as a part of their search.  

Myth #2: The houses the buyers are touring are still for sale.
Truth: Everything is staged for TV. Many of the homes shown are already sold and are off the market. 

Myth #3: The buyers haven’t made a purchase decision yet.
Truth: Since there is no way to show the entire buying process in a 30-minute show, TV producers often choose buyers who are further along in the process and have already chosen a home to buy. 

Myth #4: If you list your home for sale, it will ALWAYS sell at the open house.
Truth: Of course, this would be great! Open houses are important to guarantee the most exposure to buyers in your area, but they are only one piece of the overall marketing of your home. Keep in mind, many homes are sold during regular showing appointments as well. 

Myth #5: Homeowners decide to sell their homes after a 5-minute conversation.
Truth: Similar to the buyers portrayed on the shows, many of the sellers have already spent hours deliberating the decision to list their homes and move on with their lives and goals.

Bottom Line

Having an experienced professional on your side while navigating the real estate market is the best way to guarantee you can make the home of your dreams a true reality.

The Benefits of Growing Equity in Your Home

The Benefits of Growing Equity in Your Home

Over the last couple of years, we’ve heard quite a bit about rising home prices. Today, expert projections still forecast continued growth, just at a slower pace. One of the often-overlooked benefits of rising home prices is the positive impact they have on home equity. Let’s break down three ways this is a win for homeowners.

1. Move-Up Opportunity

With the rise in prices, homeowners naturally experience an increase in home equity. According to the Homeowner Equity Insights from CoreLogic,

“In the first quarter of 2019, the average homeowner gained approximately $6,400 in equity during the past year.”

This increase in profit means if homeowners decide to sell, they’ll be able to put their equity to work for them as they make plans to move up into their next home.

2. Gain in Seller’s Profit

ATTOM Data Solutions recently released their Q2 2019 Home Sales Report, indicating the seller’s profit jumped at one of the fastest rates since 2015. They said:

“A look at the national numbers showed that U.S. homeowners who sold in the second quarter of 2019 realized an average home price gain since the original purchase of $67,500…the average home seller gain of $67,500 in Q2 2019 represented an average 33.9 percent return as a percentage of the original purchase price.”

Looking at the amount paid when they bought their homes, and then the amount they received after selling, we can see that some homeowners were able to walk away with a significant gain.

3. Out of a Negative Equity Situation

Negative equity occurs when there is a decline in home value, an increase in mortgage debt, or both. Many families experienced these challenges over the last decade. According to the same report from CoreLogic,

“U.S. homeowners with mortgages (roughly 63% of all properties) have seen their equity increase by a total of nearly $485.7 billion since the first quarter 2018, an increase of 5.6%, year over year.

In the first quarter of 2019, the total number of mortgaged residential properties with negative equity decreased…to 2.2 million homes, or 4.1% of all mortgaged properties.”

The good news is, many families have moved beyond a negative equity situation, and no longer owe more on their mortgage than the value of their home.

Bottom Line

If you’re a current homeowner, you may have more equity than you realize. Your equity can open the door to future opportunities, such as moving up to your dream home. Let’s get together to discuss your options and start to put your equity to work for you.

How Much Do You Know About Down Payments?

How Much Do You Know About Down Payments?

Whether you’ve owned a home before, or you’re ready to jump into homeownership for the first time, there are always a lot of questions swirling around about what is truly required for a down payment, and how to best source down payment assistance. Let’s tackle these two today.

1. How much do you really need for a down payment?

There is a long-standing misconception about down payment requirements. A survey from Fannie Mae shows only 17% of consumers know the minimum options are actually between 1 – 5% of the purchase price and 40% don’t know how much they need at all.How Much Do You Know About Down Payments? | Simplifying The MarketThere are many mortgage loans available that require as little as 3% down for first-time buyers, and some ask for only 3.5% down from repeat buyers. There are even loans available for Veterans that provide 0% down payment options too.

We’ve mentioned recently that you don’t need to come up with a 20% down payment to buy, and we’ve also shared how quickly you can save for a 3% or 10% down payment, depending on where you live. If you’re planning to put down just 3%, the research shows it may be possible in most states to have enough saved for a down payment in less than a year. That puts homeownership in a much closer reach for many potential buyers, maybe even you!

2. How can I get help with my down payment?

Regardless of the loans available, many buyers still need assistance with a down payment. The great news is, there are a lot of ways to tap into down payment assistance options. Here are just a couple of them:

Assistance from Family Members

The National Association of Realtors (NAR) said, “a third of recent first-time buyers received down payment assistance from family members.” They also mentioned, “the average net worth of those aged 75 and over stands at $264,800…They just might offer the boost the next generation needs to become homeowners.

That means one of the ways to find help with a down payment is to accept a gift from a family member. If this is an option for you, make sure you talk to your loan officer before you accept the money, to ensure you document the process the way it is required by your loan. This way, it will be received properly and you can still potentially qualify.

Down Payment Assistance Programs

The reality is, not everyone has a loved one or a family member who can provide help with a down payment. There are, however, more than 2,500 down payment assistance programs available (by local areas like city, county, or neighborhood), and some of them are even specifically for first-time buyers.

The gap, as mentioned in the same survey, is “only 23% of consumers are familiar with low down payment programs.”

That’s why it is so important to get familiar with these options by doing your homework before you plan to buy a home. Determine what is available in the area where you ultimately want to live, so you have all the details you need to take advantage of the down payment assistance option that is best for your family.

Bottom Line

If buying a home is one of your long-term goals, you may be able to get there sooner than you think by tapping into one of the many down payment assistance programs available.

Should I Refinance My Home?

Should I Refinance My Home?

With the recent lower interest rates, many homeowners are wondering if they should refinance.

To decide if refinancing is the best option for your family, start by asking yourself these questions:

Why do you want to refinance?

There are many reasons to refinance, but here are three of the most common ones:

  1. Lower your interest rate and payment – This is the most popular reason. If you have a 5% interest rate or higher, it might be worth seeing if you can take advantage of the current lower interest rates, hovering below 4%, to reduce your monthly payment and overall cost of the loan.
  2. Shorten the term of your loan – If you have a 30-year loan, it may be advantageous to change it to a 15 or 20-year loan to pay off your mortgage sooner.
  3. Cash-out refinance – With home prices increasing, you might have enough equity to cash out and invest in something else, like your children’s education, a vacation home, or a new business.

Once you know why you might want to refinance, ask yourself the next question:

How much is it going to cost?

There are fees and closing costs involved in refinancing, and Lenders Network explains:

“If you were to refinance that loan into a new loan, total closing costs will run between 2%-4% of the loan amount.”

They also explain that there are options for no-cost refinance loans, but be on the lookout:

“A no-cost refinance loan is when the lender pays the closing costs for the borrower. However, you should be aware that the lender makes up this money from other aspects of the mortgage. Usually pay charging a slightly higher interest rate so they can make the money back.”

If you’re comfortable with the costs of refinancing, then ask yourself one more question:

Is it worth it?

To answer this one, we’ll use an example. Let’s assume you have a $200,000 home loan. A 4% refinance cost will be $10,000. If you want to lower your interest rate from 6% to 4%,  then refinancing is going to save you $244 per month. To break even ($10,000/$244), you need to continue owning your home for over 40 months.

Now that you know how the math shakes out, think about how much longer you’d like to own your current home. If you plan to stay for more than 3 years, then maybe it is advantageous for you to refinance.

If, however, your current home does not fulfill your present needs, you might want to consider using your potential refinance costs for a down payment on a new move-up home. You will still get a lower interest rate than the one you have on your current house, and with the equity you’ve already built, you can finally purchase the home of your dreams.

Bottom Line

There are many opportunities for growth in the current real estate market. To find out what’s right for your family, let’s get together to help you understand your options and guide you toward the best decision.