Tag Archives: home buying/selling process

Down Payment Strategy

Down payment Strategy

The minimum down payment on an FHA loan is 3.5 percent, which makes it a popular choice among those who do not have the funds for a large down payment (also those who do not meet the higher credit score requirements for other types of loans). And that is not even the lowest you can go. Some loans require only three percent down, and if you are a veteran or are buying a home in a rural area, you may be able to buy a home for nothing down. But should you go that low just because you can, or are you better off making a larger down payment? Here is break-down:

The case for a 20 percent down payment – There are several advantages to putting down 20 percent when buying a home, like:

Since the bank will generally consider you a lower risk because of your large down payment, you may be able to get a lower interest rate than you would with other types of loans—as long as you have the credit score to support it.

You will have built-in equity as soon as you move in.
You can avoid paying private mortgage insurance (PMI).
It is that last part that drives many people to strive for that 20 percent down payment since PMI can add several hundred dollars to a new homeowner’s monthly payment, and it can be hard to get rid of it.

But is that a smart move? – The less you put down, the higher the mortgage insurance will be. Yep, there is that pesky PMI again, which, for many first-time buyers, pushes their monthly payment to a level they are not comfortable with. Another issue with PMI: if you need to pay PMI, the loan amount you can get will be slightly smaller, to allow for the bigger payment which will determine the house you can afford.

You may also have trouble qualifying for a loan even if you have a high enough credit score because you would not have enough cash reserves after the down payment. If you are using all your savings for the down payment and the lender questions where the funds for your closing costs, taxes and insurance, and any needed repairs are coming from, you could have a problem.

Even when you add the PMI and a higher interest rate, the equation comes out in favor of the lower down payment. With three percent down and making adjustments for rate and PMI, the rate of return on a low-down-payment loan is still be as high as 106 percent – much higher than if you made a large down payment. The less you put down, then the larger your potential return on investment could be.
The case for somewhere in between – Finding that balance between down payment and savings is a challenge for many homebuyers and the sweet spot will be different for everyone depending on their unique circumstances and financial situation. Most financial experts will say that saving and scrounging to get together 20 percent at the risk of depleted savings and zero emergency funds is a shaky strategy.
If putting 20 percent down means that you would use all of your savings, then do not do it! Especially, when you consider all the added costs you may be facing once you buy: yard work, home repairs and maintenance, renovation costs, property taxes, insurance, association fees, etc. It is important to consider all of the costs and not just compare the monthly mortgage payment to your current rent amount or mortgage payment on your old house.

Another thing to consider when evaluating how much you should put down is what would happen if you had an emergency. It is easy to lose sight of real-life issues that can arise when you are so driven to buy a home and focused on saving the money to get there. v

Is Selling in the Fall a Good Idea?

_FALL-570It is no secret that homes sell throughout the year and in all twelve months. It is also no secret that the largest percentage of homes sell in the Spring. In fact, for many years you could look at a line that went from January through December on a line graph and it would look like the back of a double hump camel.

The first hump would occur in May each year. More homes sell in that month than any other month of the year. Then there would be a bit of a pullback in July as people took vacations and enjoyed the summer. Then the second (smaller) hump would occur in August and September where there would be a bit of a resurgence in sales and then things would tail off into the holidays.

About 7 years ago however, a new trend started to take place in the twin cities and it has not changed over that period of time. Now, what we see is that the early Spring market is even more robust than in past decades. May is still the top month of the year for home sales. However, there is no trough in July or second hump in August and September any longer. Instead, once May sales are complete there is just a slow descent into the holidays over the rest of the year.

Now, please understand that we still sell MANY homes after May. However, it is apparent that the buying habits of consumers, at least here in the twin cities, has caused a “front loading” of sales early in the year. In fact, by the end of June almost 2/3 of all sales for the year have taken place.

So, what does this mean for home sellers in the Fall? There are two variables to pay attention to. The first is the level of inventory that is available. It is widely known that over the last few years the demand for housing has far outpaced the available inventory. This has been especially true in the first tier move up buyer range of $250-400,000. In the Spring when the largest number of buyers are in the marketplace, there are multiple offers competing for the same property. You’ve seen the news stories which are becoming a yearly ritual. Generally speaking the most activity for multiple offers has been in the first time buyer range up to $250,000. And, there are always some neighborhoods that enjoy heavy demand regardless of time of year like Linden Hills, Wayzata, Kenwood, Crocus Hill Highland Park, and Mounds Park to name a few.

The second variable is that in the Fall, the market is still active but, there are fewer buyers, so sellers have to be priced more competitively than in the Spring. You can still make record profits as a seller this time of year. You just have to know how to position your home correctly in the marketplace.

Lastly, the Fall is the best time of year to contact me if you are also thinking of taking advantage of the hot Spring market. The reason is I can give you great advice on what to do over the winter to prepare your home for the coming Spring. You won’t have to rush to get things done and you will be in great shape come Spring when you open your doors to all of the interested buyers who will be looking for that perfect home. Yours.

article contributed by:
Mike Vanderheyden
RE/MAX Specialists
8400 Adair Avenue N 
Brooklyn Park, MN 55443

http://www.mike.remax-northcentral.com/

6 Tips for Buying in a Seller’s Market

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Buying a home in a seller’s market doesn’t necessarily have to mean paying too much, giving in to seller demands, or difficult negotiations. Even when sellers have the advantage, they may still need to work with a buyer to sell their home.

Some homes will often get plenty of attention while other homes may sit because they are priced too high or because of any number of factors that are undesirable to buyers in their market. With this in mind, it’s possible to make buying easier, even when the market favors the seller.

1) Be Firm but Fair in Negotiations

No matter what the seller may be asking for their home, the home still has a fair market value. While the amount the seller may be asking for a home could be a little bit higher in a seller’s market, that doesn’t mean a buyer can’t negotiate the price. Remain firm in negotiating, but also be fair based on the market conditions. A real estate agent can be your best resource to help you determine what your options are when it comes to making an offer.

2) Take a Look at Homes on the Market For a Long Time

Even in a seller’s market, there will be homes that just aren’t as popular as others. These homes will stay on the market longer, and finding out why this is the case, might be the beginnings of a great deal. If a home has a characteristic that isn’t popular with many buyers in the area, but it doesn’t bother you, it may be possible to buy a home in a seller’s market for less than you might expect.

3) Remember, There’s More Than one Location

Location is very important, but there’s generally more than one specific street or area where a buyer might want to live. By looking in several different places you might find the home that’s right for your needs without being completely tied to a location where the sellers may be less willing to negotiate and the prices might be above budget.

4) Find the Motivated Sellers

There will always be some sellers that are more motivated than others. No matter the reason for their motivation, the opportunity exists for buyers to get a good deal on a home they love. It may not always be easy to find sellers that are highly-motivated, but an agent can often help locate sellers who are looking to move their properties faster, and for a lower price.

5) Be Prepared and Ready to Negotiate

One of the ways to get ahead as a buyer in a seller’s market is to make sure your finances are ready. By having a mortgage pre-approval letter and a strong down payment, it’s possible to get ahead of other buyers who may not be as prepared. Sellers want to work with buyers who are serious and have a high probability of completing the transaction without delays.

Not being ready before making offers could mean missing out on a home that would be just right.

6) Don’t Underestimate the Power of Cash

Buyers who pay in cash and don’t need a mortgage to purchase a home often have a better chance being ahead of other buyers in a sellers market. Cash can be very attractive to some buyers, because when it comes to buying a home, it shows a seller that they don’t have to worry as much about a deal falling through because of mortgage finance issues.

When buyers don’t need mortgages, the transaction may be completed a lot faster, too, making it easier for everyone to moving on to the next phase of their lives. Speak to a financial professional to see if this would be a prudent move for your long-term financial health.

While a seller’s market can be a bit tricky to navigate, home buyers should know that with enough preparation and effort, they can find and purchase their dream home without adding additional stress to the process.

By our guest blogger,_KrisLindahl_481224369

Kris Lindahl REALTOR® CRS CLHMS
The Kris Lindahl Team at RE/MAX Results
2407 109th Ave NE Suite 110
Blaine, MN 55449

www.krislindahl.com
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