Should You Rent, Or Buy?: The 3 C's

Many people are confronted, by the need, to make a decision, whether they should, buy, a home of their own, or, rather, rent a place, to live. We often state, owning a home, is the American Dream, but, unless/ until, we make our decisions, wisely, we might risk, the dream, becoming, more of a nightmare, than dream! Therefore, this article will briefly discuss, examine, and review, the so - called, 3 C's, of making the best personal decision, in this manner. 

1. Cash reserves: Before one buys, he must put together, significant cash reserves, so as to do so, wisely, and with far less stress! Not only is this essential, in terms of putting down a down - payment, and qualifying for a mortgage, but also, preparing for the potential necessary repairs, maintenance, renovation, and/ or any other obstacle, thrust in the face, of a homeowner. On the other hand, renters have a far more predictable, scenario, and potentially, less stress! Examine your personal situation, needs, wants, and priorities, and make the best decision, for you, and your needs, and goals!

2. Credit Rating: In order to obtain the best possible mortgage, if/ when you buy a home, you must pay keen attention, to creating, and maintaining the finest possible, credit rating. Before beginning your home hunting quest, obtain a copy of your credit report, and pay keen attention, to improving it. Avoid making costly mistakes, and if you decide to purchase, avoid taking out, any new credit, or borrowing, in the 6 months, or so, prior to seeking the mortgage. Become credit savvy!

3. Comfort zone: Each individual is different, and different things/ factors make some far more comfortable owning, while others are more comfortable, renting! Know your comfort zone, and act wisely, so you balance, comfort, with your needs, goals, and family situation!

Use the 3 C's, to help you determine, if renting, or buying, is best, for you! A wise, prepared person, acts wisest, in this regard!

4 Needed Reserves, For Less Stressful Home Ownership

The better prepared, and ready, a homeowner, the less stressful, and more satisfying, the experience of home ownership, becomes. In order to prepare, one must recognize, and consider, and examine, 4 needed financial reserves, in order, to avoid unnecessary stresses, etc. While these aren't the only challenges, they are the most common, and, thus, creating these reserves, and committing to all the necessities, and discipline, the happier, and easier the overall experience. Here are a few of the approaches, and possibilities.

1. Monthly costs/ predictable: The predictable costs of home ownership, are those, you are fully aware of, from the onset! The wise homeowner, creates a reserve, of from 4 to 8 months, so, as to be prepared, for any negative contingencies, etc. These costs include the mortgage principal, and interest, escrow for real estate taxes, insurance, etc. Remember, while the principal and interest, might remain the same, real estate taxes often increase, annually, as do insurance premiums, etc. In addition, there is often, insufficient funding of the escrow, and it is recalculated, after the first year, or so.

2. Repairs/ unexpected and unanticipated: Along with owning a house, comes those unexpected, but necessary repairs! While some of these might be minor, the ever - increasing costs of hiring a plumber, electrician, roofer, etc, makes being prepared, a wise move. Funding this reserve, with an additional 6 months, or so, of reserves, is a wise approach, although requires commitment and discipline!

3. Maintenance - regular: Performing regularly scheduled maintenance, often, minimizes, further exposure, caused by being inattentive, or unprepared! Consider the possibilities, which includes seasonal maintenance, fixing minor issues (before they become major, etc), is a smart approach, but how one pays for these, is a necessary consideration!

4. Renovations - future needs, updating/ upgrading: When we first, purchase a home, of our own, our needs, may be somewhat different than they become, in the future! While, unlike the first three scenarios, can and should not, be delayed or put off, we can delay renovations, but, to enjoy, fully, where we live, we often need, to renovate and update/ upgrade. Only by planning, and disciplining ourselves, to have reserves, etc, will this be achieved, without undue stress!

The better prepared one is, the happier the home ownership, experience! Will you discipline yourself, so you are your own, best friend?

Mortgage Options & Alternatives: The More You Know!

For most people, their house, represents their single - biggest, financial asset, so wouldn't it make sense, for them, to proceed, with their eyes - wide - open, and act, in the best possible manner? In addition, the vast number of individuals, take advantage of some sort of loan, and/ or mortgage, and, therefore, often, consider, their monthly costs, rather than, merely the price of the house. Therefore, this article will attempt to briefly examine, consider, review, and discuss, some of the prevailing options and alternatives, regarding the best option, for an individual.

1. Fixed mortgage: Some loans come with, so - called, points, yet, it, seems, very few, understand, what this means. One point equals 1% of the mortgage, paid, up - front, so, for example, a $300,000 mortgage, with one point, means paying $3,000, in advance. This is sometimes, related to credit, while at other times, based on the specific type of loans, and/ or paying - down the rate. The length, or term of the mortgage, generally includes: 15 years; 20 years; 25, 30 and 40 years; and while, the longer, the rate, the lower, the monthly costs, but it also represents, more total payments. It's often a balancing act, between what one can afford, and the best way to proceed. The other advantage of a fixed mortgage, is, having an accurate picture, of one's monthly costs!

2. Adjustable/ variable mortgage: These also come with the possibilities of points, as mentioned above! Other considerations should include an understanding on what rates/ index, determine, the changes, in rates, at specific periods, and what those intervals might be! In addition, one should consider, whether there is a cap, on how much the rate can change, at each period, and overall, during the life, of the loan.

3. When one type, versus other: Many factors might determine, which way to proceed. Sometimes, one may only qualify, initially, because of the proportions and ratios, used, for a Variable mortgage, because, often, these have lower initial rates. Whether the rates are relatively high, at the onset, or low, often, is a major contributing factor, in terns of which is best! One should focus on what makes him comfortable, and paying attention, to both, the immediate, as well, as long - term, monthly rates. It's important to also consider, how long, you intend, to live somewhere, as well as what makes you most comfortable. In addition, don't ignore the fact, qualified homeowners, are capable of refinancing, if that makes sense, in the future!

The more one knows and understands, the better, prepared, he might be, for owning and enjoying, his home! Will you become an educated homeowner/ consumer?

Mortgage Options And Alternatives: The More, You Know!

Since, for most of us, our house, represents our single - largest, individual, financial asset, and most people, use some sort of financing, usually mortgages, to be capable of buying a home, doesn't it make sense, for people, to understand, recognize, and know, the different possibilities, when it comes to mortgages, and some of the options, and alternatives? The more one knows about this, the better, he will become, to make the smartest decision, for his personal situation. With that in mind, this article will attempt to consider, review, and evaluate, some of the options, and the advantages and disadvantages, of each of these.

1. Fixed Mortgage: Using a fixed mortgage, provides one, with the ability, to prepare, each monthly, because he knows, fairly well, what his monthly mortgage expense, might be! In addition, sometimes, these have points, which represent, a pre - payment (1 point = 1% of the mortgage principal), and, these are sometimes, necessary, to pay - down, the loan, in order to qualify, while, at other times, these are used, to lower the monthly interest rate. In addition, loans come in a variety of terms, and lengths, and, usually, the shorter the term, the lower the rate. However, shorter terms translate, also, to higher monthly payments. Terms are most often, either 15, 20, 25, 30, or 40 years, and each individual should recognize the difference, in terms of his monthly expenses. Many take longer - terms, so they can pre - pay, and pay - down, when affordable, while maintaining a lower requirement minimum!

2. Adjustable/ variable: An adjustable or variable loan, generally has a lower up - front interest rate, for a specific term, and changes, at specific points, in time. These may also have points, or none! Consider the specific index being used, to determine future rates, as well as any potential cap, both, each period, as well as an overall cap. Also consider, how often the rate might be adjusted.

3. Which one's for you?: Know your personal financial needs, and abilities, and act wisely! Consider several factors, including your personal comfort zone, existing rates (low, or high), probability of rates rising or falling, and what you might be able to afford!

The more one knows, about mortgages, the better the possibilities of making the best decisions! Will you learn, so you might protect, your best interests?

What You Need To Know About Mortgages?

The vast majority of houses sold in the United States require the buyer to secure a mortgage for a large portion of the home's price. Very few home buyers are either willing or able to purchase a house without getting a mortgage. One would think, therefore, that since so many people either presently pay a mortgage, have previously paid a mortgage, or require a mortgage to purchase a house, that there would be more knowledge and understanding by the public about the subject of mortgages, how they work, what the options are, etc.

During the "housing bubble," many lenders were often indiscriminately approving people for mortgages. These lenders were granting mortgages at some times for even more than the value of the home. They were also rather lenient about credit, and very liberal in terms of valuations. Probably in large part due to the housing crisis in the last few years, lenders have taken a far more conservative approach.

Most lenders today require excellent credit to be approved for a mortgage. The lowest mortgage rates are generally approved only for individuals with credit scores approaching 750, and, in most cases, lenders will not even consider an individual with a credit score lower than 650. Obviously, this has tightened the mortgage market, and has indirectly been another factor in bringing down home prices.

Years ago, many lenders would require far lower down payments than they presently do. Many buyers were then even able to purchase houses with no out of pocket expenditure, and some lending institutions even loaned over 100% of the houses selling price. Today, the vast majority of lenders expect home buyers to pay approximately 20% of the price of the house, and will only loan up to about 80% of the price that the lender values the house at.

Many home buyers are confused by what they will be paying for the loan. There are many factors involved, and the rates fluctuate. Some institutions will, however, lock in a loan rate for a certain short time period (generally ranging from 30 to 90 days). In addition, some loan rates are quoted with no points, and some require points. Home buyers should understand what a "point" represents. In the mortgage industry, a "point" represents a percentage. Therefore, if a loan is quoted with one point, it means that the home buyer must prepay to the lending institution one percent of the amount of the loan. Therefore, for example, if the amount of the mortgage is $500,000, one point means that the buyer must prepay $5,000 to the lending institution.

A mortgage may be either a fixed rate or an adjustable rate loan. A fixed rate means that the buyer will be paying the same interest rate during the term of the loan. An adjustable rate, or variable rate loan, will lock in a rate for only a specified time, and then will change. Variable rate loans are generally "pegged" to some official index, such as the Treasury Bill, Treasury Note, or Treasury Bond index, or some other index that the lending institution specifies. Lending institutions have often offered low introductory rates for a short period, and then those rates rose when the term for readjustment arrived. Adjustable rate loans may lock in the initial rate for any specified term, but is generally anywhere from six months to five years. Therefore, if an individual plans on only living in the house purchased for a relatively short period, and, for example, a five-year adjustable mortgage had a significantly lower interest rate, it might make sense for the buyer to opt for that type of loan. I strongly recommend that buyers carefully discuss their options with a trusted financial professional, such as a Certified Public Account, or Certified Financial Professional.

Both buyers and sellers must agree to a realistic price based on comparative market values, or the lending institution will not "comp" the house, and the buyer will have to come up with significantly more personal funds to purchase a house. Other areas that need to be considered are securing a professionally examined and prepared Home Inspection, prior to agreeing to purchase any house.

These items are only a brief and cursory view of the many factors impacting mortgages. Home buyers should study and fully understand mortgages, their ramifications and their options, prior to purchase. A home buyer should always ask himself, "Do I feel comfortable with a monthly payment, which includes mortgage (interest, principal, escrow), taxes, utilities and maintenance (including a reserve for contingencies). Unfortunately, many buyers purchase emotionally rather than logically!

What's Up With The Real Estate Market?

People come up to me all the time and ask, “How’s the real estate market doing?” Although I would really enjoy giving a simple answer to this question, the real answer is far more complex. In certain parts of the country, the housing market has been stronger than in many other areas, although, prices are lower than they were at the peak of the market. However, many homeowners who list their homes have listed them at unrealistically high prices, and then been inflexible in terms of reducing their price. I have observed homeowners list their houses at prices higher than homes sold for at the peak of the market, and then becoming disappointed when their homes don't sell. Some homeowners explain their asking price by explaining how much money they have put into their homes, or how beautiful and exceptional their house is. Often, these same homeowners have owned their houses for many years, and they seem to conveniently forget how little they originally paid for their houses. Yet, the reality is that the price one receives for one's house is not related directly to how much one may have paid, or how much one may have put into the property. In the end, houses generally sell based on what buyers are willing to spend for the house, and that is generally related to the real estate market at that time.

These homeowners are generally hurting their own chances of selling their homes by listing their homes at unrealistically high prices. Houses that are “priced right to sell” from the start have a far better chance of selling than those priced too high. Today’s buyers study the internet, and many realize what comparable houses are realistically selling for. A basic reality of real estate is that in most cases, the best offer a homeowner will receive for his house is received in the first few weeks after it goes on the market. New listings are “hot” to potential buyers, while houses that remain unsold often elicit questions from buyers as to what was wrong with the property - - why it hasn’t sold?

Many owners interested in selling their homes interview several real estate agents and brokers, and ask for recommendations as to pricing, as well as many other questions. Many owners want to believe the agent that tells them their house is worth the highest amount, as if saying it will automatically bring forth a higher price. Instead, owners should demand a professionally prepared Comparative Market Analysis, including pricing and a marketing plan from their realtor. In most cases, a homeowner will do best going with an agent that acts professionally, markets professionally, and justifies both the pricing, and how the marketing plan will work.

In addition, even if a "stranger from another planet" decided to pay an unrealistically high price for a house, most buyers need to get a mortgage to finalize the funding for the purchase. Lending institutions, for a number of reasons including some unwise lending decisions during the height of the real estate "bubble," are doing far more complete and conservative comparative market analysis of their own, and if this comparison (known as "Comps") do not justify the price being offered, the lending institution will deny that amount of funding because it does not "comp out."

Since for most individuals, their home is their most valuable asset, doesn’t it make sense to objectively ask the same questions as an owner that potential buyers will ask? The main question should be, “How does this house compare with comparable homes in comparable areas in comparable condition? Owners should also ask, "If I were buying a home, would I pay that much for this house?"

30 Yr Mortgage Rates hit all-time low & other housing info

30 Yr Mortgage Rates hit all-time low & other housing info

Freddie Mac stated today that the 30-year fixed-rate mortgage average hit a new low. The 30-year average declined to 4.71% (with an average 0.7 point) for the week ending Dec. 3 from 4.78% last week. This new 30-year average is the lowest since Freddie Mac began its weekly survey in 1971. Last year, the average was 5.53%. Remember that this is the average 30- year rate, which means that many lending institutions are offering even low rates. Frank Nothaft, Freddie Mac's chief economist stated, "Low mortgage rates and the cumulative decline in house prices have contributed to an extremely affordable housing market and helped spur home sales this year . . . For instance, total new and existing home sales in October were 36% higher than their January low on a seasonally adjusted, annualized rate, according to the U.S. Census Bureau and the National Association of Realtors."
So, there is improving news in the housing/ real estate markets. The combination of the Federal housing tax credit, low mortgage rates, lower home prices, and some improvement in consumer belief that the worst of the recession is over, has created this improvement. As we enter the Holiday season, real estate "shopping" historically cools off until after the holiday season. However, this kind of news is hopefully a fore-teller of a better 2010 housing market.
Another promising indication is that the President is finally convening a Jobs-related summit for tomorrow, and hopefully, that will addressed the major weakness in both the housing market as well as the overall economy. Let's hope that our political leaders have finally understood that joblessness is what's keeping our economy from really growing, and they will address some real solutions to that situation. Amongst my suggestions: (1) Incentives for hiring in "progressive" industries, such as alternative energy, technology, etc-- that will NOT ONLY put people back to work, but also support industries will be necessary for the US to reach the next level. As an Ecobroker, I believe that incentives in "green-related" building and renovations will boost the economy, help the joblessness situation, and make houses more sustainable for now and the future; (2) Make the joblessness challenge the #1 Economic Priority; (3) Create incentives so that progressive industries benefit by hiring people, than by the cost-savings side-effects of layoffs. Let's put America back to work again!

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Interesting News in Housing Market

Today, FNMA appeared to be prepared to alter its established policy regarding foreclosures on properties they control. It appears that they have made the decision to rent out these distressed properties instead of foreclosing and selling them. If this policy is maintained, it would go a long way toward stabilizing housing because it would somewhat reduce the "supply side" of homes by removing these distressed properties from the marketplace. The net effect of that should eventually be shoring up home prices, as well as reducing the amount of average days on market for houses listed for sale. It would also reduce "bottom-feeding" tendencies, and create a more realistically priced housing market.
In addition, the Fed's decision this week to maintain low interest rates for the foreseeable future, should help keep mortgage interest rates close to the low levels they currently are at. In addition, news about the Fed and certain large public companies working together to share the risk on distressed properties/ loans, should eventually loosen the mortgage lending market to some degree.
The recent election results have also indicated that people have become "fed up" with the high taxes they are paying. If this then translates into finally addressing the high real estate taxes paid in certain areas of the country, this will also help the housing market.
There also seems to finally be some awareness that we must control our energy costs, and if that rhetoric translates into some action, it would be another positive for the housing market and real estate industry.
Finally, if our politicians now get the message that the joblessness issue has to be addressed, and Americans begin to see some job creation and consumer confidence, then there will be a rebound in the housing market.
The consensus is that the housing market has or nearly has bottomed out. Therefore, 2010 should be a much better year.

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