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Category: Homebuying (4)

Mar
29

Do I Need to Sell Before I Buy?

Although every situation is unique, it is not uncommon for homebuyers to qualify for a mortgage on a new home while still living in their primary residence.

Perhaps you are outgrowing your current house, or have been forced to relocate due to a job transfer? Regardless of the motivation for keeping one property while purchasing another, let’s address this question with the mortgage approval in mind:

So, Do I Need to Sell Before I Buy?

Yes. No. Maybe. It depends.

Welcome to the wonderful world of mortgage lending. Only in this industry can one simple question elicit four answers…. and all of them may be right for the right situation.

If you are in a financial position where you qualify to afford both your current residence and the proposed payment on your new house, then the simple answer is NO!

Qualifying based on your Debt-to-Income (DTI) Ratio is one thing, but remember to budget for the additional expenses of maintaining multiple properties. Everything from mortgage payments, increased property taxes and hazard insurance to unexpected repairs should be factored into your final decision.

What If I Rent My Current Property?

This situation presents the “maybe” and the “it depends” answers to the question.

If you’re not quite qualified to carry both mortgages and housing expenses, you may have to rent the other property in order to offset the mortgage payment.

In that scenario, the lender will typically only count 75% of the monthly gross rent you are proposing to receive. So if you are going to receive $1000 a month in rent and your current payment is $100, the lender is going to factor in an additional $750 of monthly debt in your overall Debt-to-Income Ratios.

If you would like more information on whether you need to sell before you buy, please contact us today! 

Mar
10

Updates to Conventional Financing

In the world of conventional financing, specifically, Freddie Mac, there are a number of policies changes relating to income requirements. Below are the changes pertaining to loans submitted to underwriting on or after March 6, 2017:

  • Employment Income
    • Pay stubs are no longer required to reflect at least 30 days of earnings. A pay stub documenting all YTD earnings for the most recent calendar year is now acceptable.
  • Commission Income
    • Commission income that is less than 25% of the borrower’s total income will not require 1040s and will not need un-reimbursed expenses to be deducted.
  • Dividend or Interest Income
    • Year-end asset account statements for the most recent two years reflecting the dividends/interest paid out may now be used in lieu of tax returns.
  • Self-Employment Verification
    • If a business is in existence five or more years, one year of tax returns must be provided. If less than five years, the two most recent years of tax returns must be provided – regardless of Streamline or Standard documentation feedback.
    • A Verification of Business (VOB) can now be dated 120 days prior to the Note Date.

If you have any questions regarding your qualifications for a home loan, please contact me today. Balner and Co can provide resources to get your questions answered!

Mar
05

If You Really Love That Home…

DON’T LOSE THE BID

In this housing market, the best deal doesn’t always come with the lowest price.

Price vs Payments – If you’re financing your purchase, you’ll probably never come close to paying the actual price. You’re making a comparatively small down payment and then paying interest on the loan until you refinance or sell. Yes, you will have a higher payment if you pay more for the home, but an extra $10,000 of mortgage money can add less than $50 per month on a low-rate, 30 year loan.

Relative Prices – Our natural tendency to pay as little as possible is not as meaningful for an investment, such as a home, as it is for a consumer product. In this case, what you pay now can affect your sales price later. There may be little difference in total earnings if you pay less or pay more and sell for more.

Influencing Value – For appraisers, the last sale or “comp” in an area sets the value for similar home. Whatever you pay helps establish what your home and comparable properties are considered to be worth.

Setting the Trend – If you pay less for your home than was paid for the last similar home, you may be contributing to a downward price trend, which can be difficult to reverse. Conversely, helping to maintain a trend of price appreciation can end up paying you back many times over.

One Chance – No two homes are ever exactly the same. Even when structure matches, your land, your view, your address and your immediate neighbors will always be different. You truly may have only one chance at the right house. Industry professionals have all seen buyers lose out on what they really wanted. We don”t want that to happen to you. Nor do we want you to pay more tomorrow for something less than what you could have had today as a result of increasing prices and rates.

Reach out, and we’ll be happy to help you weigh your options for the home you really love to own today. 

Home Garden
Feb
23

Still Writing Checks to Landlords?

Home loan payments are now often less than rent payments

If you don’t intend to stay in your home long-term, need extra mobility or are unsure about your employment prospects, renting probably makes good sense for you. But if you’re planning to stick around,  owning may prove to be more financially rewarding.

Here are 5 good reasons to own a home:

  1. Mortgage rates are STILL near historic lows
    With historically low mortgage rates coupled with low inventory, rents have continued to climb with real estate prices. Owning a home have enabled homeowners to keep up with inflation. Even with smaller down payments, homeowners are able to BETTER control their housing expenses.
  2. Buying builds equity.
    On most home loans, you pay down the principal balance with each payment. This typically starts as low as $100 per month for every $100,000 of loan balance and increases each month through the entire life of the loan.
  3. Home values rise over time
    Increases are not guaranteed in the short term; however, as long as there is inflation, the costs of building a home will increase as well. This in turn will always force home values to rise along with inflation.
  4. Home ownership often brings tax benefits
    Deductions from home mortgage interest and property taxes save many homeowners thousands every year. Others still find taking the standard deduction more beneficial. Always consult your tax pro for advice.
  5. It’s more than just the money 
    Families become rooted in a neighborhood, school district and community. Homeowners have the freedom to choose how customize their homes to their desires. Pets are welcomed. Intangibles like these often generate the most valuable returns.

Housing is a precious commodity that we all need every day. It’s your choice to rent or to own, yet buying a home for yourself usually benefits more than buying one for your landlord.

If you’re ready to make that leap to home ownership or to find out more about what it means to own a home, please contact us!