Have you ever wondered whether you can afford to buy a house? If so, you are not alone. Here are 5 Rules to remember and 5 Questions to ask yourself.
So, you are home shopping, have found ‘The One,’ and you’re ready to make an offer. Are you sure you know what you’re doing? I mean, of course you know that you plan to make an offer, but do you know what comes with the house that you think you are ready to buy? The odds are good that you have not considered everything, and that you may be in for an unwelcome surprise. This is especially true if you are a first time home buyer.
At Benchmark, we want you to be confident in your decisions. It is part of our mission and dedication to helping our clients fulfill their piece of the American Dream of homeownership. Protect yourself by evaluating factors in these 4 categories before placing your offer.
You should already be pre-approved for a maximum loan amount. Make sure the asking price is fair, and make sure your offer fits well within your tolerances for your pre-approval amount. It’s also a good idea to check the expenses for the house, like utility bills, property tax, insurance, and HOA dues, if applicable. Make sure the monthly financial obligation fits within your range of affordability. Lastly, make sure you have easy/quick access to your funds for a down payment and earnest money. If your offer is accepted, be ready to pounce!
Be really sure you are as aware as you can be of what you’re buying. Take another walkthrough, and bring a bright flashlight, a level, a tape measure, or anything else you think you may need in order to go into a 30 year obligation with eyes wide open. Take a look at the seller’s disclosure, so you are in the loop about any upgrades or repairs that may have been done to the top candidate for your future home. This can help give you an idea of any work that you can avoid doing, or that you may need to get done after you’ve become the new fearless owner of the abode.
Get to know the neighborhood and the general location of the home you have your sights set on. Find the assigned school, its rank, distance from the home, and wether you think it’s a good fit for your family’s values. Check the distance and availability of business you rely on, like gas stations, grocery stores, as well as proximity and availability of entertainment, cafes, and restaurants. How far is it from your place of work? What would your new commute look like? It is important to weigh all of this considerations to prevent a future case of buyer’s remorse.
It can also be a good idea to visit the house at different times of the day, and on different days of the week. This can help give you a feel for the overall culture of the neighborhood, as well as what kinds of noises and activity to expect. Doing this may also give you a better idea of traffic congestion spots. You may also want to consider checking crime in the area, and registered sex offenders who may live nearby. Also be aware of neighborhood amenities provided by the HOA, or community cooperation. Last but not least, meet the neighbors! The best way to get a feel for the neighborhood is to talk to someone who has lived there for awhile already.
Now, Go Make Your Offer!
You have checked the financials, decided that you are prepared, and are aware of the total cost to live in the home you want to buy. You are going in with eyes wide open, fully aware of the school situation, access to resources, and the compatibility of your desired neighborhood. Most importantly, you are aware of any issues present in the house itself, and the work that was recently done.
If you are looking for a house right now, and are preparing ahead of time, great job! Researching the next step before you are there is a display of wisdom. Are you pre-approved? Without being pre-approved, any offer you make is unlikely to be accepted without an approved loan amount, unless you plan to buy in cash. (if so, why are you reading this on a mortgage site? You should be writing your own finance blog!)
If you are looking to get pre-approved, we make it easy. More than that, our expert loan officers will match your goals with the perfect loan for your unique situation. We often refer to ourselves as “The Benchmark Family”, and when you choose to work with us, you become part of it, too. Ready to get started?
Find your Benchmark branch and contact them today for a hassle-free experience.Give us a call or contact us today. At Benchmark, we’ve got your back.Give me a call, send me an email, or request a call today. My team and I will take good care of you.
Welcome. Benchmark Brings You Home
[VIDEO] Hurricane Michael devastated much of Florida, and destroyed many homes that were in its path. Benchmark went above and beyond to make sure that Dustin and his family were taken care of.
The fee amount depends on the type of veteran, whether you choose to put a down payment, and whether you have used the VA loan benefit before. Some people are exempt from having to pay the fee, and the VA has the last word on who is exempt.
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Does renting make you feel a little too transient? Is community important to you? It may make sense to become a homeowner. Almost nothing can help you put down roots, be involved in your community, or serve as an automatic catchment for memories quite like owning your own home.
With student debt making headlines on a regular basis, and the rates of homeownership being lower, is there a connection? Maybe.
In the first issue of Consumer & Community Context, a publication from the Federal Reserve, an article by Alvaro Mezza, Daniel Ringo, and Kamila Sommer, Federal Reserve Board Division of Research & Statistics entitled, “Can Student Loan Debt Explain Low Homeownership Rates for Young Adults?”, Mezza et al write,
While many factors have influenced the downward slide in the rate of homeownership, some believe that the historic levels of student loan debt have been particular impediments. Indeed, outstanding student loan balances have more than doubled in real terms (to about $1.5 trillion) in the last decade, with average real student loan debt per capita for individuals ages 24 to 32 rising from about $5,000 in 2005 to $10,000 in 2014. In surveys, young adults commonly report that their student loan debts are preventing them from buying a home.
We found that a $1,000 increase in student loan debt . . . causes a 1 to 2 percentage point drop in the homeownership rate for student loan borrowers during their late 20s and early 30s.
In a study by the Federal Reserve in 2017, they found that every $1k in student loan debt postpones homeownership by about two and a half months. However, “postponed” is not the same as “canceled”! By time time higher education graduates reach their thirties, student loan debt has a reduced affect on rates of homeownership.
We have written before about the wealth-building power of paying a mortgage over paying rent, and student loan debt is similarly and investment into one’s career. The boosted earning potential of a generation of more college graduates is bound to catch up to the burden of the debt that helped fuel it.
Is it better to pay down debt, or to save for a down payment?
There is no one-size-fits-all answer to this question. No matter whether you have prioritized paying your student loan debt or saving for a down payment, if you would like to take a closer look at what makes the most sense for you, contact us. Our job is to work with you to find the right solution for your financial goals.
Find your Benchmark branch and contact them today for more information.Give us a call or contact us today. At Benchmark, we’ve got your back.Give me a call, send me an email, or request a call today. My team and I got your back.
Maybe you want to remodel the kitchen, paint the walls, or re-tile the shower, but you either don't have permission, or you know it would be throwing money away. Here are a few more reasons why home owners enjoy more privacy and more security than renters.
If you are thinking about refinancing, you probably have a good reason. Maybe you are curious if you could save money by locking in a lower interest rate. Maybe you wonder if you could use some of the equity you have established in your home. Whatever your reason, here are 5 things to know before deciding if refinancing makes sense for you.
1. There are Good Reasons To Refinance
Not sure if Refinancing is a good idea? While refinancing may not be the best choice for everyone, there are a few good reasons to refinance.
A. A Shorter Mortgage Term
Maybe you are motivated to pay off your home sooner. If so, by refinancing to a shorter term mortgage (for example, a 15 year mortgage from a 30 year mortgage), you could set yourself up to be paid off in nearly half the time, depending on the maturity date of your existing mortgage.
Shorter term mortgages often come with smaller interest rates than their longer term counterparts. This can make the increased mortgage payment easily justifiable with the potential decrease of interest payments overall.
B. A Lower Interest Rate
Maybe you bought when interest rates were higher. While timing the market is a risky practice, at best, if the current average interest rates are significantly lower than the rate on your current mortgage, refinancing may look like an attractive option.
C. A Lower Monthly Payment
If your current mortgage is a few years old, refinancing into a new mortgage with the same term could reduce your monthly payment obligation. While this will likely increase the total interest you will have paid over time, the lower payment could free up cash for other expenses or goals.
D. Trade an Adjustable Rate for a Fixed Rate
If you opted for an adjustable rate mortgage due to a lower starting interest rate, you have likely noticed the periodic shifts, up or down, that your interest rate may have taken since originating your mortgage. If you are seeking a little more financial consistency, refinancing with a new fixed rate mortgage may be an appealing option.
E. Access The Equity In Your Home
Has your home increased in market value since you bought it? Do you think your equity could be used better than being tied up in your home? A Cash Out Refinance may be for you. Mind the risk!
F. Consolidate Debt
Do you have other debt with higher interest rates? Do you think it would be a good idea to roll that debt into your mortgage instead? A Cash Out Refinance may be an appropriate option for you. Just like above, we strongly recommend that you mind the risk!
G. Drop Private Mortgage Insurance (PMI)
Low down payment mortgages are a great way to take advantage of the right opportunity, but it comes with Private Mortgage Insurance. In order to get a new loan without PMI, you will have to have at least 20% equity in your home. If you have that, dropping the added monthly expense for the PMI could help pay your home off sooner (with a shorter term mortgage), or result in more available cashflow on a monthly basis.
2. Pay Attention To The Term
The Amortization date (or the time until the death of the loan) is an important aspect to consider if you think you may want to refinance your home. A longer term (like the common 30 year mortgage) will have lower monthly payments, but means you will be paying more interest overall, and paying for more years. A shorter term, like a 15 year mortgage, benefits from less overall interest cost due to fewer interest payments. Shorter terms also often come with lower interest rates than their 30 year counterparts, helping you save even more over the long run. However, a shorter term also means higher monthly payments, as the principle is spread over a shorter period of time.
Deciding which term is right for you will depend on your monthly cash flow, and your personal goals. Your loan officer can help you to determine the right loan for you.
3. Crunch The Numbers
The costs associated with Refinancing can be complicated, when all is taken into consideration. If your goal is simply to save money, it may or may not make financial sense to refinance. Your loan officer can help you consider all facets that may effect the overall cost or benefit of a refinance.
If you are refinancing for a different reason, do the math to be clear on where you stand. A mortgage is a big commitment, and it’s a good idea to thoroughly understand the new agreement before jumping in.
4. Know The Break-Even Point
Total Closing Costs / Monthly Savings = Break-Even Point
The “Break-Even Point” is calculated by a simple formula, dividing the total closing costs by the monthly savings. The calculator linked below can help give you an idea about what your break-even point might be. This is the point in the life of the new loan where the new mortgage effectively pays for its own closing costs.
Why is this useful? If your goal is to save money, you may want to stay in your current mortgage if you plan to sell your home before the break-even point. Selling before you’ve reached the break-even point will end up costing you more overall.
5. Know The Risk
As mentioned earlier, a mortgage is a big commitment. There is always risk present when taking out a loan, especially when defaulting means losing your home. This is especially important to consider before taking a Cash Out Refinance to consolidate debt, especially debt that is not secured.
If you miss payments on a credit card, or student loan, you will have collectors giving you a hard time. If you the same debt is rolled into a mortgage, it becomes guaranteed by your home. Defaulting on a mortgage could result in losing your home. While consolidating high-interest debt into a low-interest mortgage can be a good long-term strategy, it may not be for everyone.
Be Smart: Talk To Your Benchmark Loan Officer Today
At Benchmark, we do more than sell a low interest rate. We look closely to help you determine the right loan for you. Even if you don’t feel ready, talking to us now can help you set a course for success.
Find your Benchmark branch, and contact them today for more information.Give us a call or contact us today. At Benchmark, we’ve got your back.Give me a call, send me an email, or request a call today. Along with my Benchmark community of mortgage pro’s, I’ve got your back.
Thinking about buying? If you are serious about owning your very own piece of the American Dream, it makes sense to take inventory of your current finances. By taking a closer look, you will have a better idea of whether you are ready to grab your dream of homeownership by the horns or whether you want to make some adjustments first.
If you haven’t read last week’s post, we recommend you do so. It will help give you a clear idea of what it takes to buy.
Read it now: How To Buy A House In 2019 — 5 Tips
Now, read on. Here are a few considerations before you decide to buy.
Emergency Fund Integrity
Many financial experts recommend that you have 3-6 months worth of expenses saved up in an Emergency Fund. An emergency could be a car repair, appliance replacement, or sudden unemployment. Rainy days happen, and a substantial rainy day fund can help protect you from the financial blow.
While it is true that a bigger down payment will equate to a smaller monthly mortgage payment, it probably isn’t the best idea to tank your emergency fund. You might even consider opening a separate savings account for your down payment, as we mentioned last week: How To Buy A House In 2019 – 5 Tips
Debt-To-Income Ratio (D.T.I.)
You can think of this as a ratio of current monthly income and payment obligations. Your DTI is communicated as a percentage, where lower is better. A low deb-to-income ratio implies that you have a high cashflow relative to your income, and gives the impression that you are responsible with your finances. It also means that you are at a lower risk for defaulting on a payment, which lenders like.
Is your monthly debt obligation higher than you would like it to be? Here are a couple of ways to cut it down without significantly altering your lifestyle.
Do you have any credit card debt? Your minimum monthly credit card payment total is factored into your D.T.I. If you have a card with a low enough balance that you could pay it off sooner, you could effectively reduce your debt factor. Doing this repeatedly is commonly known as the “debt snowball,” an emotion guided strategy for paying down debt.
Are you working on paying off a car purchase? If you make payments on a car loan that is relatively close to being paid off, paying it off will reduce your debt score by the monthly required payment on the loan.
Is your credit history accurate? Do you have a copy of your credit report? It is a good idea to get a copy of your credit report to check for any errors.
You can contact the credit bureaus if you find an error, and work with them to correct it on your credit report. While a ding on your credit history may not be enough to deny your loan application, it may end up costing you big in the form of a higher interest rate.
You have the right to request 1 free credit report each year. Many credit card companies offer this as a service, as do many identity protection services. You can request your credit report and current credit score from Experian, TransUnion, or Equifax.
Need A Second Opinion?
We know that crunching the numbers isn’t for everyone. Even if you are the best candidate for management of your own finances, not everyone feels motivated to sift through their own numbers. At Benchmark, we advocate for the best financial outcome for our clients.
I am willing to help you order your finances so you can make the most informed decision possible. Call me today, or contact me now.
We work with our clients to help you make the most informed decision possible. Find your branch, and contact them today.
Benchmark brings you home.
If you want to buy a home this year, here are five tips on how to buy a house in 2019. At Benchmark, we make the effort to make it easy to claim your piece of the American Dream.
Watch this video, then read last week’s article linked below.
1) Know Your Target Home Value and Down Payment
To be able to know if you can realistically afford to be a homeowner, you should first explore your local housing market to find out how much you should expect your new home to cost.
You can use the “How Much House Can I Afford?” tool to get a realistic estimate. We also have a variety of Calculators right here at Benchmark.us to help calculate a number of factors, comparisons, and scenarios.
To get an idea whether the house you have your eye on is priced fairly, you should also ask your real estate agent for a Comparative Market Analysis. (see also: Find A Great Real Estate Agent The Easy Way)
When you have an idea of the cost of your future house, you can roughly calculate how much you will need for your down payment. Think you need 20% down?
Think again. See last week’s post, “This New Year, Reach Your Dream of Homeownership” if you haven’t already.
2) Know Your Cash Flow
Saving can be challenging, especially if you are not used to tracking your expenses. To improve your chances of saving success, you should know where every dollar that you earn is going every month. Check with your bank or credit union, as many banks and credit unions include tools for this. You can also use third party tools like Mint, YNAB, everydollar or even a simple spreadsheet. The more organized your plan towards achieving the goal, the more successfully you will be able to save.
If you read our previous post This New Year, Reach Your Dream of Homeownership, you will recognize the link between consistent savings and your down payment. A budget can help you do that.
If it will take you several months or years to save for your down payment, you could even consider opening a high yield savings account to get your savings earning as well.
3) Know How Much House You Need
For many, the first home you buy is not the first home you want. If the home you want is beyond your financial reach, it could still make sense to settle on a less expensive buy, if your budget and standards allow.
It could cost you far more money in the long run to wait until you can afford the house you want, when a house you could be happy with is within reach now. You can always “trade up” when the time is right. You will have to make this decision for yourself, but it is something to think about.
In an earlier article entitled Millionaire Tells Millennials To Buy A Home, we mention that David Bach, author of “The Automatic Millionaire” is quoted as saying,
“The fact is, you aren’t really in the game of building wealth until you own some real estate.”
Mr. Bach also said,
“Oftentimes, buying your first home means you’re not buying your dream home. You’re just getting into the market.”
If that isn’t enough, you can read “Homeowner Average Net Worth 3,600% Higher Than Renter” for more reasons to consider getting started sooner rather than later.
4) Know The Steps For Buying A Home
I have a convenient interactive tool right here on my website to help walk you through the steps to take when buying a home.
We built a tool for our Loan Officer websites that asks a series of questions to give you an personalized step-by-step plan for buying your next home. Need a plan for refinancing? It does that too.
To use this tool for yourself, you will need to find a loan officer in your area Find Your Loan Officer, then click on “The Way Home” in the navigation menu.
To use this tool, you will need to find your Loan Officer and go to their website by clicking the link that looks like this:
Once on your loan officer’s website, look for the “The Way Home” navigation link (below), and click.
5) Keep Your Cool
Do you feel overwhelmed by what appears to be a monumental achievement? We understand. Do you wish it could seem easy? This is what we do every day.
At Benchmark, we have such a great team, that we have been able to make mortgages happen for borrowers who had already been turned down by another lender.
Not sure where to start? No problem. We are honored to help guide to towards your dream of owning your own home with a mortgage that aligns with your personal financial outlook.
Even if you are concerned with debt, your credit history, or even your down payment, let’s chat! If you want to make your dreams a reality, we are here to help make that possible.
Find your branch, and contact them today. If you are ready, you can click to Apply Now. We look forward to helping you reach your goals!Call or email us, or Contact Us today. If you are ready, you can Apply Now. We look forward to helping you reach your goals!Call me, Email Me, or Contact Me today. If you are ready, you can Apply Now. I look forward to helping you reach your goals!