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Pre-Approval Makes All the Difference When Buying a Home

You may have been told that it’s important to get pre-approved at the beginning of the homebuying process, but what does that really mean, and why is it so important? Especially in today’s market, with rising home prices and high buyer competition, it’s crucial to have a clear understanding of your budget so you stand out to sellers as a serious homebuyer.

Being intentional and competitive are musts when buying a home right now. Pre-approval from a lender is the only way to know your true price range and how much money you can borrow for your loan. Just as important, being able to present a pre-approval letter shows sellers you’re a qualified buyer, something that can really help you land your dream home in an ultra-competitive market.

With limited housing inventory, there are many more buyers active in the market than there are sellers, and that’s creating some serious competition. According to the National Association of Realtors (NAR), homes are receiving an average of 5.1 offers for sellers to consider. As a result, bidding wars are more and more common. Pre-approval gives you an advantage if you get into a multiple-offer scenario, and these days, it’s likely you will. When a seller knows you’re qualified to buy the home, you’re in a better position to potentially win the bidding war.

Freddie Mac explains:

“By having pre-approval letter from your lender, you’re telling the seller that you’re a serious buyer, and you’ve been pre-approved for a mortgage by your lender for a specific dollar amount. In a true bidding war, your offer will likely get dropped if you don’t already have one.”

Every step you can take to gain an advantage as a buyer is crucial when today’s market is constantly changing. Interest rates are low, prices are going up, and lending institutions are regularly updating their standards. You’re going to need guidance to navigate these waters, so it’s important to have a team of professionals such as a loan officer and a trusted real estate agent making sure you take the right steps and can show your qualifications as a buyer when you find a home to purchase.

Bottom Line

In a competitive market with low inventory, a pre-approval letter is a game-changing piece of the homebuying process. Not only does being pre-approved bring clarity to your homebuying budget, but it shows sellers how serious you are about purchasing a home.

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Where Do Experts Say the Housing Market Is Heading?

 

As we enter the middle of 2021, many are wondering if we’ll see big changes in the housing market during the second half of this year. Here’s a look at what some experts have to say about key factors that will drive the industry and the economy forward in the months to come.

realtor.com

“. . . homes continue to sell quickly in what’s normally the fastest-moving time of the year. This is in contrast with 2020 when homes sold slower in the spring and fastest in September and October. While we expect fall to be competitive, this year’s seasonal pattern is likely to be more normal, with homes selling fastest from roughly now until mid-summer.”

National Association of Realtors (NAR)

Sellers who have been hesitant to list homes as part of their personal health safety precautions may be more encouraged to list and show their homes with a population mostly vaccinated by the mid-year.”

Danielle Hale, Chief Economist at realtor.com

“Surveys showed that seller confidence continued to rise in April. Extra confidence plus our recent survey finding that more homeowners than normal are planning to list their homes for sale in the next 12 months suggest that while we may not see an end to the sellers’ market, we might see the intensity of the competition diminish as buyers have more options to choose from.”

Freddie Mac

We forecast that mortgage rates will continue to rise through the end of next year. We estimate the 30-year fixed mortgage rate will average 3.4% in the fourth quarter of 2021, rising to 3.8% in the fourth quarter of 2022.”

Bottom Line

Experts are optimistic about the second half of the year. Let’s connect today to talk more about the conditions in our local market.

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Do I Really Need a 20% Down Payment to Buy a Home?

Is the idea of saving for a down payment holding you back from buying a home right now? You may be eager to take advantage of today’s low mortgage rates, but the thought of needing a large down payment might make you want to pump the brakes. Today, there’s still a common myth that you have to come up with 20% of the total sale price for your down payment. This means people who could buy a home may be putting their plans on hold because they don’t have that much saved yet. The reality is, whether you’re looking for your first home or you’ve purchased one before, you most likely don’t need to put 20% down. Here’s why.

According to Freddie Mac:

“The most damaging down payment myth—since it stops the homebuying process before it can start—is the belief that 20% is necessary.”

If saving that much money sounds daunting, potential homebuyers might give up on the dream of homeownership before they even begin – but they don’t have to.

Data in the 2020 Profile of Home Buyers and Sellers from the National Association of Realtors (NAR) indicates that the median down payment actually hasn’t been over 20% since 2005, and even then, that was for repeat buyers, not first-time homebuyers. As the image below shows, today’s median down payment is clearly less than 20%.

What does this mean for potential homebuyers?

As we can see, the median down payment was lowest for first-time buyers with the 2020 percentage coming in at 7%. If you’re a first-time buyer and putting down 7% still seems high, understand that there are programs that allow qualified buyers to purchase a home with a down payment as low as 3.5%. There are even options like VA loans and USDA loans with no down payment requirements for qualified applicants.

It’s important for potential homebuyers (whether they’re repeat or first-time buyers) to know they likely don’t need to put down 20% of the purchase price, but they do need to do their homework to understand the options available. Be sure to work with trusted professionals from the start to learn what you may qualify for in the homebuying process.

Bottom Line

Don’t let down payment myths keep you from hitting your homeownership goals. If you’re hoping to buy a home this year, let’s connect to review your options.

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Your Tax Refund and Stimulus Savings May Help You Achieve Homeownership This Year

Your Tax Refund and Stimulus Savings May Help You Achieve Homeownership This Year | MyKCM

If you’re planning to buy a home this year, saving for a down payment is one of the most important steps in the process. One of the best ways to jumpstart your savings is by starting with the help of your tax refund.

Your Tax Refund and Stimulus Savings May Help You Achieve Homeownership This Year | MyKCM

Using data from the Internal Revenue Service (IRS), it’s estimated that Americans can expect an average refund of $2,925 when filing their taxes this year. The map below shows the average anticipated tax refund by state:Thanks to programs from the Federal Housing Authority, Freddie Mac, and Fannie Mae, many first-time buyers can purchase a home with as little as 3% down. In addition, Veterans Affairs Loans allow many veterans to put 0% down. You may have heard the common myth that you need to put 20% down when you buy a home, but thankfully for most homebuyers, a 20% down payment isn’t actually required. It’s important to work with your real estate professional and your lender to understand all of your options.

How can your tax refund help?

If you’re a first-time buyer, your tax refund may cover more of a down payment than you realize.

Your Tax Refund and Stimulus Savings May Help You Achieve Homeownership This Year | MyKCM

If you take into account the median home sale price by state, the map below shows the percentage of a 3% down payment that’s covered by the average anticipated tax refund:The darker the blue, the closer your tax refund gets you to homeownership when you qualify for one of the low down payment programs. Maybe this is the year to plan ahead and put your tax refund toward the down payment on a home.

Not enough money from your tax return? 

A recent paper from the National Bureau of Economic Research found that, of the households that received a stimulus check last year, “One third report that they primarily saved the stimulus money.” If you had the opportunity to save your Economic Impact Payments, you may consider putting that money toward your down payment or closing costs as well. Your trusted Giver’s Mindset real estate professional can also advise you on the down payment assistance programs available in your area.

Bottom Line

Saving for a down payment can seem like a daunting task, but it doesn’t have to be. This year, your tax refund and your stimulus savings could add up big when it comes to reaching your homeownership goals.

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Are Interest Rates Expected to Rise Over the Next Year?

Are Interest Rates Expected to Rise Over the Next Year? | MyKCM

So far this year, mortgage rates continue to hover around 3%, encouraging many hopeful homebuyers to enter the housing market. However, there’s a good chance rates will increase later this year and going into 2022, ultimately making it more expensive to borrow money for a home loan. Here’s a look at what several experts have to say.

Danielle Hale, Chief Economistrealtor.com:

Our long-term view for mortgage rates in 2021 is higher. As the economic outlook strengthens, thanks to progress against coronavirus and vaccines plus a dose of stimulus from the government, this pushes up expectations for economic growth . . . .”

Lawrence Yun, Chief EconomistNational Association of Realtors (NAR):

In 2021, I think rates will be similar or modestly higher . . . mortgage rates will continue to be historically favorable.”

Freddie Mac:

We forecast that mortgage rates will continue to rise through the end of next year. We estimate the 30-year fixed mortgage rate will average 3.4% in the fourth quarter of 2021, rising to 3.8% in the fourth quarter of 2022.”

Are Interest Rates Expected to Rise Over the Next Year? | MyKCM

Above are the most recent mortgage rate forecasts from four top authorities – Freddie MacFannie Mae, the Mortgage Bankers Association (MBA), and NAR:

Bottom Line

If you’re planning to buy a home, purchasing before mortgage interest rates rise may help you save significantly over the life of your home loan.

The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Our goal is to educate on current market and help you make best decision on your unique situation.

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Reverse Mortgages & The Sandwich Generation

By Alain Valles, CRMP, CSA, MS, MBA

I’m not talking about older peoples’ eating habits but the harsh reality of balancing the financial, physical, and emotional support of three generations.

Two Types of Generational Sandwiches

Young-Middle-Old: The typical generational sandwich is the middle-aged person struggling to financially support their children (often grown adults) AND aging parents.  This is also often called the squeeze generation.  Out of devotion and duty, the 45-60 year old middle-aged person is caring for their parent(s) financially or in the role of an unpaid caregiver.  And, at the same time, stressed trying to give support to their children, often in their 20’s and even 30’s.  Studies show that the person in the middle is at a much higher risk of health, emotional, and financial stress.  And, deferring their own financial planning will continue the cycle on to the next generation.

Though counterintuitive, higher income and net worth families are at an even greater financial risk.  One opinion is because they have not had to say over the years “no, we can’t afford that.” And now that a parent has health issues and an adult child is not living within their means, the person in the middle faces the stark financial reality of what my father-in-law would say – “the waiter will eventually bring the bill.”  Something must proactively be done to keep the family in balance.

Young-Old-Middle:  A growing trend is where aging parents are caring both financially and physically for their grandchildren.  In this case, the older person is in the middle caring for the younger generation.  This may be due to a single parent situation, military duty, work demands or being unemployed, health situations, and sadly addiction or legal challenges.  The older person may still be working which only compounds the emotional and financial stress of keeping everything in equilibrium.  My experience is even though the stock market is roaring it is just plain hard for the typical family to keep it all together.  

Older People Don’t Want to be a Financial Burden

Every study shows that older people do not want to be a financial burden on their adult children.  Older people desire to remain financially independent and will sacrifice their quality of life to achieve this goal.  That might include not being able to pay for needed medical care and medicines, maintaining their homes, or incurring increasing credit card balances to cover bills.  Too many times we hear – “Don’t worry about me, I’ll be ok” and know in our hearts that is not true.

The older person is not alone in these thoughts.  Adult children don’t want to admit to their aging parents that finances are tight.  They will postpone funding their retirements plans to provide for their parents’ needs.  Adult children will incur more debt to fund their children’s education and other needs.   This all can become a viscous cycle. 

It’s Hard Out There – Reverse Mortgage Possible Solution

For fortunate homeowners 62 years old or older, a reverse mortgage may be the optimum solution to minimizing or eliminating the financial squeeze of the generational sandwiches.  When used properly, a reverse mortgage gives the options of receiving immediate tax-free cash, a monthly check for life, and/or a line of credit to be used if ever needed.  Each of these options provides that no monthly mortgage payment is required thereby increasing monthly cash flow.  Of course, real estate taxes and insurance must be paid and abide by other loan guidelines. 

The biggest challenge I find is not the mechanics or math of a reverse mortgage but rather facing the emotional challenge to acknowledge and address that the current financial situation is untenable and can very well destroy the caring and love that every family desire. 

And that is way we are here.  Helping Hands Community Partners is an approved 501(c)(3) self-funded nonprofit company with the mission to educate people about senior housing options and, when appropriate, we can arrange reverse mortgages for qualified individuals.

Get accurate information

A great place to get reverse mortgage information is the free “How to Use Your Home to Stay at Home” 36-page book. This is the official reverse mortgage consumer booklet approved by the U.S. Department of Housing & Urban Development and published by the National Council on Aging.  We’re happy to mail it to you. 

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Renovation Success Story

Helping Hands Community Partners renovated a two family house near Providence College, on River Ave. , Providence, RI. Before, the house was vacant for years and was unlivable. Working with local labor, we replaced the roof, added new heating, new electrical, new appliances, among many more essential components to make this house a home. 

The Helping Hands Community Partners real estate mission’s rule of thumb: sell properties 10% below the appraised value to underserved populations. 

A retired veteran, bought the property for $300,000. Today, the two-family home property is worth around $500,000 and the property values in the neighborhood are now rising. 

From our Giver’s Mindset perspective, our mission is accomplished when we have ecstatic homeowners, grateful neighbors who no longer worried about vacant houses, appreciative local contractors who have gained employment, and satisfied towns or cities. This activity helps actualize our vision of working with likeminded people and organizations to strengthen our communities one family at a time.

This is a true win-win for everyone.

To learn more about Helping Hands Community Partners real estate and mortgage services, call today at (888) 681-2299