Blog

When it comes to buying a home, it can feel a bit intimidating to know how much you need to save and where to find that information. But you should know, you’re not expected to have all the answers yourself. There are many trusted professionals who can help you understand your finances and what you’ll need to budget for throughout the process.

To get you started, here are a few things experts say you should plan for along the way.

1. Down Payment

As you set your savings goal for your purchase, your down payment is likely already top of mind. And, like many other people, you may believe you need to set aside 20% of the home’s purchase price for that down payment – but that’s not always the case. The National Association of Realtors (NAR) says:

“One of the biggest misconceptions among housing consumers is what the typical down payment is and what amount is needed to enter homeownership. Having this knowledge is critical to know what to save . . .”

The good news is, you may be able to put as little as 3.5% (or even 0%) down in some situations. To understand your options, partner with a trusted professional who can go over the various loan types, down payment assistance programs, and what each one requires.

2. Earnest Money Deposit

Another item you may want to plan for is an earnest money deposit. While it isn’t required, it’s common in today’s highly competitive market because it can help your offer stand out in a bidding war.

So, what is it? It’s money you pay as a show of good faith when you make an offer on a house. This deposit works like a credit. You’re using some of the money you already saved for your purchase to show the seller you’re committed and serious about their house. It’s not an added expense, it’s just paying some of that up front. First American explains what it is and how it works:

“The deposit made from the buyer to the seller when submitting an offer. This deposit is typically held in trust by a third party and is intended to show the seller you are serious about purchasing their home. Upon closing the money will generally be applied to your down payment or closing costs.”

In other words, an earnest money deposit could be the very first check you’ll write toward your purchase. The amount varies by state and situation. Realtor.com elaborates:

“The amount you’ll deposit as earnest money will depend on factors such as policies and limitations in your state, the current market, what your real estate agent recommends, and what the seller requires. On average, however, you can expect to hand over 1% to 2% of the total home purchase price.”

Work with a real estate advisor to understand any requirements in your local area and what they’ve recommended for other buyers in your market. They’ll help you determine if it’s something that could be a useful option for you.

3. Closing Costs

The next thing to plan for is your closing costs. The Federal Trade Commission (FTC) defines closing costs as:

“The upfront fees charged in connection with a mortgage loan transaction. …generally including, but not limited to a loan origination fee, title examination and insurance, survey, attorney’s fee, and prepaid items, such as escrow deposits for taxes and insurance.”

Basically, your closing costs cover the fees for various people and services involved in your transaction. NAR has this to say about how much to budget for:

“A home costs more than just the sale price. For example, closing costs—which make up about 2% to 5% of the home’s purchase price—are a major added expense…Lenders provide a Closing Disclosure at least three business days prior to closing on a mortgage. But buyers will need to budget for these added costs ahead of time to avoid sticker shock days before closing.”

The key takeaway is savvy buyers plan ahead for these expenses so they can come into the process prepared. Freddie Mac sums it up like this:

“If you’re in the market to buy a home, your down payment is probably top of mind. And rightly so – it’s likely the biggest cost of homebuying. However, it is not the only cost and it’s critical you understand all your expenses before diving in. The more prepared you are for your down payment, closing and other costs, the smoother your homebuying journey will be.”

Bottom Line

Knowing what to budget for in the homebuying process is essential. To make sure you understand these and any other expenses that may come up, let’s connect so you have reliable expertise on what to expect when you buy a home.

Source: KCM

Since the number of homes for sale is low today, it can feel challenging to find one that checks all your boxes. But if you know which features are absolutely essential in your next home and which ones are just nice bonuses, you can land a home that fits your needs.

Danielle Hale, Chief Economist for realtor.com, explains it like this:

“Focus on the goal you set out for yourself, like your list of must-haves and nice-to-haves and your budget, . . . Stick to that. Be persistent.”

So how do you go about creating your list of desired features? The first step is to get pre-approved for your mortgage. Pre-approval helps you better understand your budget, and that plays an important role in how you’ll craft your list. After all, you don’t want to fall in love with a home that’s too far out of reach.

Once you have a good grasp of your budget, you can begin to list all the features of a home you would like. Here’s a great way to think about them before you begin:

• Must-Haves – If a house doesn’t have these features, it won’t work for you and your lifestyle (examples: distance from work or loved ones, number of bedrooms/bathrooms, etc.).
• Nice-To-Haves – These are features that you’d love to have but can live without. Nice-To-Haves aren’t dealbreakers, but if you find a home that hits all the must-haves and some of the these, it’s a contender (examples: a second home office, garage, etc.).
• Dream State– This is where you can really think big. Again, these aren’t features you’ll need, but if you find a home in your budget that has all the must-haves, most of the nice-to-haves, and any of these, it’s a clear winner (examples: farmhouse sink, multiple walk-in closets, etc.).

Finally, once you’ve created your list and categorized it in a way that works for you, discuss it with your real estate advisor. They’ll be able to help you refine the list further, coach you through the best way to stick to it, and find a home in your area that meets your needs.

Bottom Line

Crafting your home search checklist may seem like a small task, but it can save you time and money. It’s also one of the keys to being successful in today’s competitive market. Let’s connect so we can work together to find a home that fits your wants and needs.

Source: KCM

If you’re a first-time buyer looking to break into the housing market but struggling to find a home to buy, condominiums (or condos) could be a great alternative for you.

Here are a few reasons condos may be something you’ll want to consider.

Exploring Condos Could Add Options That Fit Your Budget

Supply challenges are a reality across the board in today’s housing market. Broadening your home search to include condos could increase your overall pool of options. Just keep in mind, condos generally differ from single-family homes in average space and floorplans.

In a recent article, Bankrate covers some of these differences:

“Condos are generally more affordable because they come with less space — you likely won’t have your own backyard, for example, and the interior tends to be smaller than the square footage of a single-family home.”

But if the size of a condominium meets your needs, they could match your budget as well. Data from the National Association of Realtors (NAR) shows the difference in the median price for both housing types. For single-family homes, the median price is $363,800. And for condominiums, the median price is lower at $305,400.

So, if budget is top of mind for you, a condominium could be a great fit within your target price range.

Not to mention, buying a condo is a great way to break into the market and start building equity that can help power a future move up. The condo you purchase today may not be your forever home, but it can be a great stairstep that can help you buy your dream home later on.

Find Out if Condo Living Is Right for You 

In addition, owning and living in a condo is also a lifestyle choice. While it’s true they may be smaller than single-family homes, the amenities condos provide could be a draw for many buyers. Less space in your home might mean minimal upkeep, lower maintenance, and more time for you to spend doing the things you enjoy.

To understand if condo life is for you, Bankrate recommends asking yourself a few simple questions:

“Hate to mow the lawn and trim the hedges? What about pressure washing your driveway? Are your finances such that having to lay out $5,000 or more for a new roof will be a burden? . . . Condos tend to work best for those comfortable with most of the aspects of apartment living, minus the built-in maintenance.”

Ultimately, talking with an expert real estate advisor is the best first step to determining if condo living might work for you.

Bottom Line

Condominiums are a great option for many buyers, especially those looking to buy their first home. If you’re willing to consider condos in your search, you could find something that’s in line with your target numbers and your needs. To learn more, let’s connect so you have an expert in the condo-buying process on your side.

Source: KCM

Based on the Primary Mortgage Market Survey from Freddie Mac, the average 30-year fixed-rate mortgage has increased by 1.2% (3.22% to 4.42%) since January of this year. The rate jumped by more than a quarter of a point from just a week ago. Here’s a visual to show how mortgage rate movement throughout 2021 was steady compared to the rapid increase in mortgage rates this year:

Just a few months ago, Freddie Mac projected mortgage rates would average 3.6% in 2022. Earlier this month, Fannie Mae forecast mortgage rates would average 3.8% in 2022. As the chart above shows, rates have already surpassed those projections.

Sam Khater, Chief Economist at Freddie Mac, explained in a press release last week:

“This week, the 30-year fixed-rate mortgage increased by more than a quarter of a percent as mortgage rates across all loan types continued to move up. Rising inflation, escalating geopolitical uncertainty and the Federal Reserve’s actions are driving rates higher and weakening consumers’ purchasing power.”

Where Are Mortgage Rates Going from Here?

In a recent article by Bankrate, several industry experts weighed in on where rates might be headed going forward. Here are some of their forecasts:

Greg McBride, Chief Financial Analyst, Bankrate:

“With inflation figures continuing to surprise to the upside, mortgage rates will remain above 4.0% on the 30-year fixed.”

Nadia Evangelou, Senior Economist and Director of Forecasting, National Association of Realtors (NAR):

“While higher short-term interest rates will push up mortgage rates, I expect some of this impact to be mitigated eventually through lower inflation. Thus, I expect the 30-year fixed mortgage rate to continue to rise, although we aren’t likely to see the big jumps that occurred over the past few weeks.”

Len Kiefer, Deputy Chief Economist, Freddie Mac:

“Mortgage rates are likely to continue to move higher throughout the balance of 2022, although the pace of rate increases is likely to moderate.”

In a recent realtor.com article, another expert adds to the conversation:

Danielle Hale, Chief Economist, realtor.com:

“. . . As markets digest the Fed’s updated economic projections, I anticipate a continued increase in mortgage rates over the next several months. . . .”

What Does This Mean for You if You’re Looking To Buy a Home?

With both mortgage rates and home values expected to increase throughout the year, it would be better to buy sooner rather than later if you’re able. That’s because it’ll cost you more the longer you wait. But, there is a possible silver lining to buying a home right now. While you’ll be paying a higher price and a higher mortgage rate than you would have last year, rising prices do have a long-term benefit once you buy.

If you purchase a home today valued at $400,000 and put 10% down, you would be taking out a $360,000 mortgage. According to mortgagecalculator.net, at a 4.42% fixed mortgage rate, your mortgage payment would be $1,807 a month (this does not include insurance, taxes, and other fees because those vary by location).

Now, let’s put that mortgage payment into a new perspective based on the substantial growth in equity that comes with the escalation in home prices. Every quarter, Pulsenomics surveys a panel of over 100 economists, investment strategists, and housing market analysts about their expectations for future home prices in the United States. Last week, Pulsenomics released their latest Home Price Expectation Survey. The survey reveals that the average of the experts’ forecasts calls for a 9% increase in home values in 2022.

Based on those projections, a $400,000 house you buy today could be valued at $436,000 by this time next year. If you break that down, that means the equity in your home would increase by $3,000 a month over that period. That’s greater than the estimated monthly payment above. Granted, the increase in your net worth is tied to the home, but it is one way to put the home price appreciation to use in a way that benefits you.

Bottom Line

Paying a higher price for a home and a higher mortgage rate can be a difficult pill to swallow. However, waiting will just cost you more. If you’re ready, willing, and able to buy a home, now will be a better time than a year, or even six months from now. Let’s connect to begin the process today.

Source: KCM

Are you thinking about selling your house? If so, you may want to make it a priority to start the process soon. According to realtor.com, the sweet spot for sellers is just around the corner. In a recent study, experts analyzed housing market trends by looking at data from the past several years (excluding 2020, since it was an atypical year). When applied to the current market, experts determined the ideal week to list a house this year. The research says:

“Home sellers on the fence waiting for that perfect moment to sell should start preparations, because the best time to list a home in 2022 is approaching quickly. The week of April 10-16 is expected to have the ideal balance of housing market conditions that favor home sellers, more so than any other week in the year.”

If you’ve been putting your move on the back burner waiting for the ideal time to sell, you should know your golden window of opportunity is coming up. If you’re able to get your house ready quickly, here’s what you can expect from that week.

You Should See More Buyer Activity

The article expects higher buyer demand based on what’s happened in previous years. This could result in increased competition among buyers and ultimately a bidding war over your house. And since mortgage rates recently ticked up over 4%, chances are good that analysis is right. When rates rise, experts say buyers often hurry to make their purchase before rates climb higher. As Nadia Evangelou, Senior Economist and Director of Forecasting at the National Association of Realtors (NAR), says:

“. . . Buyers are rushing to lock in lower rates as the outlook is for even higher mortgage rates in the following months.”

Your House Is Expected To Sell Quickly

Additionally, the realtor.com analysis shows houses sell even faster during this week of the year, likely due to the heightened buyer demand. If you work with a trusted real estate professional to price your house right, it should sell quickly. And when homes are already selling in just 18 days according to NAR, that could set you up for a big win.

Your House Will Be in the Spotlight

Since the beginning of the year, the number of homes available for sale has been at or near record lows. According to the realtor.com study, the typical trend for this week of the year is that there will be even fewer sellers on the market. If you list when inventory is low, your house will be the center of attention for eager buyers craving options.

If you’re ready to move fast, you may want to shoot for April 10^th-16^th as your target goal. Just remember, even if you’re not ready to list within the next couple of weeks, rest assured this is still a hot sellers’ market. If you list later in April, you’ll still be in the driver’s seat.

Bottom Line

Ready to get the ball rolling? Let’s connect and schedule a time to go over your next steps. In the meantime, make a checklist of things you need to tackle to get your house ready. When we talk, we can prioritize your to-do list and get you on the road to selling your house.

Source: KCM

The link between financial security and homeownership is especially important today as inflation rises.  But many people may not realize just how much owning a home contributes to your overall net worth. As Leslie Rouda Smith, President of the National Association of Realtors (NAR), says:

“Homeownership is rewarding in so many ways and can serve as a vital component in achieving financial stability.”

Here are just a few reasons why, if you’re looking to increase your financial stability, homeownership is a worthwhile goal.

Owning a Home Is a Building Block for Financial Success

A recent NAR report details several homeownership trends and statistics, including the difference in net worth between homeowners and renters. It finds:

“. . . the net worth of a homeowner was about $300,000 while that of a renter’s was $8,000 in 2021.”

To put that into perspective, the average homeowner’s net worth is roughly 40 times that of a renter (see visual below):

The results from this report show that owning a home is a key piece to the puzzle when building your overall net worth.

Equity Gains Can Substantially Boost a Homeowner’s Net Worth

The net worth gap between owners and renters exists in large part because homeowners build equity. As a homeowner, your equity grows as your home appreciates in value and you make your mortgage payments each month.

In other words, when you own your home, you have the benefit of your mortgage payment acting as a contribution to a forced savings account. And when you sell, any equity you’ve built up comes back to you. As a renter, you’ll never see a return on the money you pay out in rent every month.

To sum it up, NAR says it simply:

“Homeownership has always been an important way to build wealth.”

Bottom Line

The gap between a homeowner’s net worth and a renter’s shows how truly foundational homeownership is to wealth-building. If you’re ready to start on your journey to homeownership, let’s connect today.

Source: KCM

Some Highlights

• With inflation driving up the cost of everyday items, seeking out an energy-efficient home can be a great way to decrease the expenses you can control.
• Energy efficiency can help lower your utility bills and possibly even save you money on your taxes. Options to look for include efficient appliances, windows, and solar panels.
• If you’re planning to buy a home this year, consider energy efficiency in your search. Let’s connect so you can better understand features that can save you money for years to come.

Source: KCM

As the spring housing market kicks off, you likely want to know what you can expect this season when it comes to buying or selling a house. While there are multiple factors causing some uncertainty, including the conflict overseas, rising inflation, and the first rate increase from the Federal Reserve in over three years — the housing market seems to be relatively immune.

Here’s a look at what experts say you can expect this spring.

1. Mortgage Rates Will Climb

Freddie Mac reports the 30-year fixed mortgage rate has increased by more than a full point in the past six months. And despite some mild fluctuation in recent weeks, experts believe rates will continue to edge up over the next 90 days. As Freddie Mac says:

“The Federal Reserve raising short-term rates and signaling further increases means mortgage rates should continue to rise over the course of the year.”

If you’re a first-time buyer or a seller thinking of moving to a home that better fits your needs, realize that waiting will likely mean you’ll pay a higher mortgage rate on your purchase. And that higher rate drives up your monthly payment and can really add up over the life of your loan.

2. Housing Inventory Will Increase

There may be some relief coming for buyers searching for a home to purchase. Realtor.com recently reported that the number of newly listed homes has grown for each of the last two months. Also, the National Association of Realtors (NAR) just announced the months’ supply of inventory increased for the first time in eight months. The inventory of existing homes usually grows every spring, and it seems, based on recent activity, the next 90 days could bring more listings to the market.

If you’re a buyer who has been frustrated with the limited supply of homes available for sale, it looks like you could find some relief this spring. However, be prepared to act quickly if you find the right home.

If you’re a seller, listing now instead of waiting for this additional competition to hit the market makes sense. Your leverage in any negotiation during the sale will be impacted as additional homes come to market.

3. Home Prices Will Rise

Prices are always determined by supply and demand. Though the number of homes entering the market is increasing, buyer demand remains very strong. As realtor.com explains in their most recent Housing Report:

“During the final two weeks of the month, more new sellers entered the market than during the same time last year. . . . However, with 5.8 million new homes missing from the market and millions of millennials at first-time buying ages, housing supply faces a long road to catching up with demand.”

What does that mean for you? With the demand for housing still outpacing supply, home prices will continue to appreciate. Many experts believe the level of appreciation will decelerate from the high double-digit levels we’ve seen over the last two years. That means prices will continue to climb, just at a more moderate pace. Most experts are predicting home prices will not depreciate.

Won’t Increasing Mortgage Rates Cause Home Prices To Fall?

While some people may believe a 1% increase in mortgage rates will impact demand so dramatically that home prices will have to fall, experts say otherwise. Doug Duncan, Senior Vice President and Chief Economist at Fannie Mae, says:

“What I will caution against is making the inference that interest rates have a direct impact on house prices. That is not true.”

Freddie Mac studied the impact that mortgage rates increasing by at least 1% has had on home prices in the past. Here are the results of that study:

As the chart shows, mortgage rates jumped by at least 1% six times in the last thirty years. In each case, home values increased.

So again, if you’re a first-time buyer or a repeat buyer, waiting to buy likely means you’ll pay more for a home later in the year (as compared to its current value).

Bottom Line

There are three things that seem certain going into the spring housing market:

1. Mortgage rates will continue to rise
2. The selection of homes available for sale will modestly improve
3. Home prices will continue to appreciate, just at a slightly slower pace

If you’re thinking of buying, act now before mortgage rates and home prices increase further. If you’re thinking of selling, your best bet may be to sell soon so you can beat the increase in competition that’s about to come to market.

Source: KCM

If you’re ready to move up, you may be trying to decide whether you want to buy a home that’s already on the market or build a new one. And since the supply of homes available for sale today is low, you’re willing to consider either avenue. While home builders are doing everything they can to construct more houses and help narrow the supply shortage, they’re also facing delays due to factors outside of their control.

Here’s the latest on some of the key challenges homebuilders are experiencing today and how they could impact your plans to move up. When you know what’s happening in the industry, you can make an informed decision on whether to look for a newly built or an existing home in your home search.

Supply Chain Issues

The first hurdle builders are dealing with is the lack of supply of various building materials. According to a recent article from HousingWire:

“. . . Nearly everything needed in the homebuilding process is facing some sort of delay and subsequent price increase.”

The supply issue isn’t just with lumber, even though that’s what’s covered most in the news. The article explains many other supplies are impacted too, including roofing materials, windows, garage doors, siding, and gypsum (which is used in drywall).

The difficulty in getting these items is dragging out timelines for new homes as builders wait on what they need to finish construction. And since materials are in short supply, even when they do get the product, the principle of supply and demand is driving prices up for those goods. HousingWire explains it like this:

“When supplies are low, charges inevitably go up, . . . Meanwhile, a lack of availability is causing huge delays, meaning builders are struggling to stay on schedule.”

The National Association of Home Builders (NAHB) agrees:

“Builders are grappling with supply-chain issues that are extending construction times and increasing costs.”

Skilled Labor Shortage

But that’s not the only challenge with new home construction today. Builders are also having a hard time finding skilled labor, which means they’re short-handed, further dragging out their timelines. Odeta Kushi, Deputy Chief Economist at First American, says this is an ongoing challenge for the industry:

“The skilled labor shortage in the construction industry is not new – it’s been an issue for more than a decade now.”

But there is good news. The February jobs report shows employment gains in the construction industry. Kushi puts this encouraging news into perspective in the article mentioned above:

“Overall this was a good report, . . . The supply of workers continues to fall short of demand, but the underlying momentum of the labor market recovery is strong, and falling COVID case counts provide further forward momentum.”

That means, while finding workers continues to be a challenge for builders, there are signs of positive momentum moving forward.

How This Impacts You

HousingWire explains how these things can impact move-up buyers today:

“The residential construction industry is facing a crisis as builders manage the critical shortage of building materials and labor. Explosive supply and labor costs are forcing long delays. . . .” 

So, when you weigh your options and try to decide between building a home or buying an existing one, factor the potential delay in new home construction into your decision. While it doesn’t mean you should cross newly built homes off your list, it does mean you should consider your timeline and if you’re willing to wait while your home is being constructed.

Bottom Line

When planning your next move, understanding the latest market conditions is key to making the best decision possible. To make sure you have all the information you need, let’s connect. Together we can make sure you know what’s happening in our local market so you can confidently decide what’s right for you, your priorities, and your timeline.

Source: KCM

The past two years have taught us the true value of homeownership, especially the stability and the feeling of accomplishment it can provide. But homeownership has so much more to offer. Here’s a look at a few of the non-financial and financial benefits of owning a home. If you’re looking to buy a home today, think about all the ways homeownership can impact your life.

Homeownership Has Impactful Personal and Emotional Benefits

Owning your home gives you a significant sense of pride because it’s a space that is truly yours. And as a homeowner, you can customize your home to your heart’s desire. Having a space you’ve put your stamp on enhances the pride and sense of ownership you may feel.

And that sense of ownership can extend beyond your shelter to help create social, community, and civic benefits as well. That’s because the average homeowner stays in their home for longer than just a few years. That means you’ll naturally feel a stronger connection to the community around you the longer you live there. This can help you experience a greater sense of belonging and a greater stake in your community as a whole. As the National Association of Realtors (NAR) says:

“Living in one place for a longer amount of time creates an obvious sense of community pride, which may lead to more investment in said community.”

Owning a Home Is a Significant Step Toward Financial Stability

In a financial sense, homeowners benefit from home price appreciation, equity gains, and having a shield against some of the effects of inflation. These benefits can have a big impact on your life. As you gain equity through home price appreciation and paying down your mortgage, you build your net worth. And in times of inflation, your 30-year fixed-rate mortgage can help you stabilize one of your largest monthly expenses for the duration of your loan.

Lawrence Yun, Chief Economist for NAR, explains how you can start to see these lasting effects of homeownership as soon as you make your purchase:

“Owning a home continues to be a proven method for building long-term wealth. . . . Home values generally grow over time, so homeowners begin the wealth-building process as soon as they make a down payment and move to pay down their mortgage.”

Knowing you’ve made a good investment soon after your purchase is powerful. And that may give you confidence in your decision to buy a home.

Bottom Line

The benefits of owning a home are foundational. As a homeowner, you can feel proud of the space you call home and know you’ve made a sound financial investment. To learn how homeownership can help you, let’s connect to start the conversation today.

Source: KCM