Taking Fear Out Of The Mortgage Process

A considerable number of potential buyers shy away from jumping into the real estate market due to their uncertainties about the buying process. A specific cause for concern tends to be mortgage qualification.

For many, the mortgage process can be scary, but it doesn’t have to be!

In order to qualify in today’s market, you’ll need a down payment (the average down payment on all loans last year was 5%, with many buyers putting down 3% or less), a stable income, and good credit history.

Throughout the entire home buying process, you will interact with many different professionals who will all perform necessary roles. These professionals are also valuable resources for you.

Once you’re ready to apply, here are 5 easy steps that Freddie Mac suggests to follow:

1. Find out your current credit history & score – even if you don’t have perfect credit, you may already qualify for a loan. The average FICO Score® of all closed loans in September was 731, according to Ellie Mae.
2. Start gathering all of your documentation – income verification (such as W-2 forms or tax returns), credit history, and assets (such as bank statements to verify your savings).
3. Contact a professional – your real estate agent will be able to recommend a loan officer who can help you develop a spending plan, as well as help you determine how much home you can afford.
4. Consult with your lender – he or she will review your income, expenses, and financial goals in order to determine the type and amount of mortgage you qualify for.
5. Talk to your lender about pre-approval – a pre-approval letter provides an estimate of what you might be able to borrow (provided your financial status doesn’t change) and demonstrates to home sellers that you are serious about buying!

Bottom Line

Do your research, reach out to professionals, stick to your budget, and be sure that you are ready to take on the financial responsibilities of becoming a homeowner.

Source: Keeping Current Matters

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The Sarasota Native Group® is made up of full-time agents; this is not our retirement career nor is this a second job while also waiting tables. Collectively we have been full-time real estate agents going on 15 years. Being born and raised in Sarasota we know the area and the market very well.

On average The Sarasota Native Group® has helped customers save 3% off the list price (or $3,000 for every $100,000) using our years of negotiating experience and knowledge of the local real estate market. (This does not include helping buyers save money by recommending trusted service providers in the area. Our contacts become your contacts.) 

Are you not seeing your dream home on the market? Contact us to discuss the possibility of having our team target off-market homes that have high selling potential that match your specific criteria. We only provide this service to committed customers because of the time and effort we put into finding the home of their dreams.

The Sarasota Native Group® will negotiate to get you the best deal possible and we would be delighted to work with you and anyone you know who is currently looking to purchase a home.

Contact Us today!

  

The Sarasota Native Group® | www.TheSarasotaNativeGroup.com

2000 Webber St. Sarasota, FL 34239 | 941-822-1519

Still Think You Need 15-20% Down To Buy A Home? Think Again!

According to a new study from Urban Institute, there are over 19 million millennials in 31 cities who are not only ready and willing to become homeowners, but are able to as well!

Now that the largest generation since baby boomers has aged into prime homebuying age, there will no doubt be an uptick in the national homeownership rate. The study from Urban Institute revealed that nearly a quarter of this generation has the credit and income needed to purchase a home.

Surprisingly, the largest share of mortgage-ready millennials lives in expensive coastal cities. These cities often attract highly skilled workers who demand higher salaries for their expertise.

So, what’s holding these mortgage-ready millennials back from buying?

Myths About Down Payment Requirements! 

Most of the millennials surveyed for the study believe that they need at least a 15% down payment in order to buy a home when, in reality, the median down payment in the US in 2017 was just 5%, and many programs are available for even lower down payments!

The study goes on to point out that:

“Despite limited awareness, every state has programs that provide grants and loans to make homeownership more attainable, with average assistance in various states ranging from $2,436 to $21,171.”

Bottom Line

With so many young families now able to buy a home in today’s market, the demand for housing will continue for years to come. If you are one of the many millennials who have questions about their ability to buy in today’s market, sit with a local real estate professional who can assist you along your journey!

Source: Keeping Current Matters

How Much Purchasing Power Do You Have?

Are you considering investing in the American Dream? Great idea! You may even have your eye on a certain home that is currently on the market for sale. Let me reassure you that buying a home is a great move for many reasons. But before you get too far you need to make sure you qualify for a mortgage, unless you are going to be paying cash! But how much can you qualify for? Before making an offer on a home you will want to know how much purchasing power you bring to the table.

In this write-up I will show you how lenders will determine your potential purchasing power by using a set of debt-to-income (DTI) ratios that will tell them your pre-approved max loan amount. The DTI lender guidelines were put into place by financial institutions for most common types of mortgages and are geared toward protecting the lender’s overall risk. (You will also need a credit score of at least a 580 to qualify for most mortgage programs. Max DTI’s are for those with better credit & assets.)

The benefits of homeownership are abundant, from stability and wealth growth to responsibility and pride of ownership. Knowing how much you can afford will help you decide if buying in today’s market makes financial sense for you today or if you should wait.

There are two (2) types of DTI ratios that lenders will use to determine your max loan amount. Both DTI ratios use your monthly gross income amount. These two (2) types of DTI’s are called back-end and front-end DTI ratios.

The back-end DTI ratio tells the lender what your max amount of debt payments can be each month. (Typical monthly debt payments might include: car payments, credit card payments, student debt payments, and your new home payment combined.) The front-end DTI ratio tells the lender how much your max home loan payment can be each month. (Your current monthly debt payments will lower your possible monthly payment for a home, which in turn lowers your max loan amount. Paying off debt will increase your max loan amount.)

Now that we know what DTI ratios are, and how important they are in determining your max loan amount, let’s go over the numbers the lender will use to determine your purchasing power.

The first thing that needs to be done is to take your gross yearly income and divide that number by 12. That is your gross monthly income amount. Based on FHA type financing guidelines your back-end DTI can be no more than 43%-56% of your gross monthly income, depending on certain contributing factors. If you use Conventional type financing, you may be able to use up to 45%-50% of your gross monthly income. (Should you use FHA or Conventional financing? The answer will depend on many factors that we can discuss at another time if you’d like.)

After figuring your back-end DTI ratio the lender will make sure your monthly mortgage payment is not exceeding the front-end DTI ratio guidelines. Some lenders want to see your front-end DTI ratio up to 31%, but many will allow you to go up as much as 43%+ for FHA and Conventional type financing.

OK, so let’s say the home you have your eye on is listed for $275,000 and you make $75,000 a year. (If you are buying with a spouse or significant other, you can add their gross annual wages to yours. You will also need to add their monthly debt payments.) When dividing $75K by 12 that gives you a gross monthly income amount of $6,250.00.

Using that gross monthly income amount, and say you use FHA type financing (3.5% minimum down payment required), you can have a back-end DTI amount between $2,687.50 - $3,500 (43%-56% max debt payments per month), and a front-end DTI amount between $1,937.50 -$2,687.50 (31%-43% max home payment per month).

If you have current monthly debt payment’s you would now subtract those from the back-end DTI amount above… or you can wait to see what your estimated monthly payment will be and add the payments to that. For the purpose of this example let’s assume there are no other monthly debt payment’s to worry about.

Now that we know what your max front-end and back-end DTI’s can be, we can go to www.BankRate.com and use their Mortgage Calculator. We then plug in a purchase price of $275,000, plug in the down payment amount of 3.5% or $9,625 for FHA type financing, use the default interest rate (4.88% today) and then hit calculate. That gave us an estimated monthly payment, for your principal and interest, of $1,405.19. Now you still need to add your monthly homeowners insurance amount, your monthly real estate tax amount, and because we are using FHA you will have to add in your monthly mortgage insurance amount to get your final monthly home payment.

For the sake of argument let’s say the taxes are $2500 a year, your insurance is $1,500 a year and your PMI is $188 a month. That adds an additional $520 to your monthly principal and interest payment, for a grand total of $1,925.19 per month.

Great news! You WOULD qualify for a purchase price of $275,000 based on your DTI ratios if you made $75,000 a year.

Ok, so now you know what debt-to-income ratios are, and how they affect how big of a mortgage you can qualify for.

Are you ready to get pre-approved? It will cost you absolutely nothing to confirm your purchasing power. The lender will also need to verify your income and confirm your credit score is over 580. I’d say it is pretty much smooth sailing after that, but I must be honest. Buying a home may be one of the most stressful life events you will encounter. If you have a good Realtor® they will help reduce the stress level by looking out for your best interests.

If you are considering buying a home let’s talk about how much purchasing power you have. Call Alex to discuss further at 941-822-1519.

8 Things Home Sellers Risk When Selling Without a Real Estate Agent

Selling a home without a real estate agent is like handling your own legal matter. You may only know enough to be dangerous, and worse yet, you don’t know what you don’t know.

In that situation, one risks costing themselves time, money and, most importantly, an advantageous outcome. The same goes when sellers sell their home without an agent.

Here are eight things sellers risk when they forego representation:

1. Knowledge
What you don’t know can absolutely hurt you, and it can come back to bite you even worse. A real estate agent’s knowledge is priceless.

Agents know what the internet doesn’t tell consumers, and they can provide insight that consumers can’t get online. Agents also know how to make sense of the data and the entire selling process so that sellers and their home are fully prepared before hitting the market.

2. Time
Everyone’s time is valuable, but do sellers truly have time to attempt to play the real estate agent role?

Are sellers available to show their home in a safe manner, and is it accessible on a moment’s notice?

How will sellers handle showings when they are on vacation for a week and there are cash buyers in town? Can you say lost opportunity?

Do sellers have the time to devote to scheduling and managing showing appointments? What about feedback? Do sellers know what questions to ask and the best way to reach agents to elicit a response?

Are they able to aptly respond to agent and buyer questions, concerns and objections in a manner that will help overcome the hesitation to move forward?

Are sellers able to offer solutions to buyer-perceived obstacles with the property? Can they furnish expert resources such as architects, contractors, designers, engineers or other experts?

3. Presentation
Image is everything when it comes to real estate. You never get a second chance to make a first impression, and the same goes for putting a property up for sale.
Do sellers know how to properly prepare their home for sale, and do they know what it needs or doesn’t need?

Are they able to stage it or bring in someone who can? What about professional photography, drone, video and 3-D? Are they able to orchestrate photo and video shoots with ease and know who to contact? What about photostyling and having an eye for how a space will translate on camera?

4. Marketing
How are sellers going to market their property? Do they know who the buyer demographic is for their home and/or neighborhood? How do sellers reach buyers?

Do sellers have access to predictive analytics or know how to strategically promote the listing to other agents in the community and on social media?

What kind of print media is appropriate for the property, and how will sellers have that created and printed? What agents are most likely to have buyers for the home?

Are they local or regional, or must sellers reach out nationally or internationally?

5. Negotiation experience
So the sellers received an offer. Now what? How do they respond? What do they look for in that purchase agreement?

What terms and conditions could be disadvantageous to the sellers? What costs should or shouldn’t they incur? Do they know how to negotiate to keep the buyer in the game versus walking away?

How do they strike a delicate balance between protecting their interests as a seller and working with the buyer toward the goal of putting an agreement together?
Here’s where what sellers don’t know can hurt them the most.

6. Inspection and repair know-how
This is one of the most difficult parts of a real estate transaction, even for real estate professionals. Do sellers know what inspections they should expect?

How should they handle items that are flagged as needing repair or replacement by an inspector? What kinds of repairs are usually done by a seller?

Do they have a roster of repair people at the ready who can come out on a moment’s notice?

Hint: It’s typically not who you find in the Yellow Pages or by doing a Google search.

If sellers don’t know better, they could find themselves making an improvement, not a repair on their home for a new buyer.

7. Transaction management
So the home is under contract with a buyer. What do sellers do next? Do they know who they need to be in contact with?

Who is going to be handling the closing? What items should they be following up on? How will they handle challenges like the property not appraising for the contract sales price or the deal potentially derailing due to home inspection issues?

What happens if the buyer’s financing is shaky?

8. Closing finesse
Do sellers know what the closing protocol is in their market and what the expectations are? When do sellers have to be completely moved out of the house?
In some markets, that means by the day of closing, and in others, the seller has possession for a few days after closing.

What condition are sellers expected to leave the home in? How do they handle unexpected, last-minute issues that may arise: the movers damage the home when moving belongings out, the air conditioner is on the fritz, or worse yet, the moving crew doesn’t show up when they are supposed to.

Selling a home without an agent is like throwing caution to the wind along with the commission.

The perceived savings can come back to bite sellers in terms of uninformed decisions and costly mistakes that — in the long run — end up costing sellers more money than if they would have used an agent to protect their interests and help them justify their home’s value in the first place.

Are Home Prices Softening Or Are They Falling?

We are beginning to see reports that more housing inventory is coming to the market and that buyer demand may not be increasing at the same pace it did earlier this year. The result will be many headlines written to address the impact that these two situations will have on home values.

Many of these headline writers will confuse “softening home prices” with “falling home prices,” but there is a major difference between the two.

The data will begin to show that home values are not appreciating at the same levels as they had over the last several years (softening prices). This does NOT mean that prices are depreciating (falling prices).

Here is an example: Over the last several years, national home values increased by more than 6% annually. If you had a home worth $300,000 at the beginning of the year, it would be worth $318,000 by year’s end. If the appreciation rate “falls” to 4%, that $300,000 house would be worth $312,000 at the end of next year – a $6,000 difference.

The price of the home did not fall. It just didn’t increase at the level it had the previous year.

Appreciation rates are projected to end this year at approximately 5%, and then drop to somewhere between 4-5% next year. This drop in appreciation rate will cause home price increases to soften.

Again, this does not mean that home prices will depreciate, but instead that they will appreciate more slowly.

Bottom Line

Be careful when reading headlines that discuss home values. Some headline writers will be legitimately confused and will use the word falling in place of softening. Others will realize that the headline “Home Prices are Falling!” will get more clicks than “Home Prices are Softening” and will intentionally write the more compelling headline. Read the article. If the word depreciation is not mentioned, home values are not falling.

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The Sarasota Native Group® is made up of full-time agents; this is not our retirement career nor is this a second job while also waiting tables. Collectively we have been full-time real estate agents going on 15 years. Being born and raised in Sarasota we know the area and the market very well.

On average The Sarasota Native Group® has helped customers save 3% off the list price (or $3,000 for every $100,000) using our years of negotiating experience and knowledge of the local real estate market. (This does not include helping buyers save money by recommending trusted service providers in the area. Our contacts become your contacts.) 

Are you not seeing your dream home on the market? Contact us to discuss the possibility of having our team target off-market homes that have high selling potential that match your specific criteria. We only provide this service to committed customers because of the time and effort we put into finding the home of their dreams.

The Sarasota Native Group® will negotiate to get you the best deal possible and we would be delighted to work with you and anyone you know who is currently looking to purchase a home.

Contact us today!

  

The Sarasota Native Group® | www.TheSarasotaNativeGroup.com | 2000 Webber St. Sarasota, FL 34239 | 941-822-1519