by Hal M. Bundrick courtesy of Yahoo Homes : July 21st, 2014
A combination of market factors may make you think you're getting priced out of the home market. But one observer believes first-time homebuyers might want to consider making a move.
"I know it's hard to face rising interest rates and rising home prices at the same time," says Ilyce Glink, real estate expert and managing editor of the Equifax finance blog. "The good news is there's still plenty of runway if you want to buy a house this year."
Glink believes first-time homebuyers should consider these five good reasons to buy a house before the end of the year:
Home prices are still off their highs
Yes, home prices are rising from the lows seen during the housing crash of 2008, but they're still nearly 20% off their mid-2006 peak. According to the S&P/Case-Shiller Home Price Index, average U.S. home prices are currently at summer 2004 levels. In markets that are still recovering, first-time homebuyers could see significant appreciation over the next few years, if they buy now.
Interest rates are expected to keep rising
Interest rates are slowly climbing, and as the Federal Reserve concludes its economic stimulus plan, rates are expected to continue to rise. Some experts believe mortgage interest rates could hit 5% by the end of 2014 or the first quarter of 2015, according to Glink. And even a small bump in interest rates can mean a significant jump in your monthly note.
"If you're offered a 4.2% interest rate on a $400,000 mortgage, for example, your monthly payment will be $1,961, and you'll pay more than $300,000 in interest over the loan's 30-year term," Glink says. "If your interest rate were 4.9%, your monthly payment would jump to $2,115, and the total interest paid over the life of the loan would exceed $360,000."
Rental rates are rising
There is always an argument to be made regarding whether to buy or rent. It's all a matter of your particular situation – as well as the status of your local housing market. If you need to be mobile -- prepared for job transfers or out-of-state promotions -- or are continuing to search for "the perfect place," renting is probably right for you.
However, if you would like to put down some roots, and rents are high in your hometown – it might be cheaper to buy.
"Divide the list price of the home you're interested in by the annual rental rate of a comparable property to determine the price-rent ratio," Glink advises. "If it's below 20, chances are it's a good time to buy."
Of course, buying a home means more than a mortgage. Remember to consider the other built-in expenses: maintenance, insurance, taxes and utilities.
Consider your buying power
Americans have been steadily reducing their debt load. Maybe you have, too. The lower your debt, the higher your buying power. Creditors will consider your debt-to-income ratio – how much debt you have, compared to your gross (before-tax) income.
"Experts generally agree that you can spend between 28% and 36% of your gross income in total debt service -- that's your housing expenses plus your other debt payments," says Glink.
With lower debt comes a higher score
As you pay off student loans, credit cards and consumer debt, your credit scorewill improve. And that's one of the biggest factors mortgage lenders consider when determining the interest rate and terms of your loan.
"You should definitely consider buying this year, because it's unlikely the housing market will look much rosier next year, when interest rates and home prices could be even higher," Glink says.
A new breed of insurance company is promising discounts on a type of policy many home buyers don't even realize they need: title insurance.
Almost everyone who buys a house also purchases title insurance. Mortgage lenders generally require that borrowers buy a so-called lender's policy. Owners can buy a separate policy for themselves. The insurers determine if there is clear ownership of the property and offer protection if someone later claims an ownership interest in it.
Brian DeYoung
Title insurance can cost hundreds of dollars for modest houses and thousands for multimillion-dollar properties. Yet many home buyers don't focus on the product, or the price, until they sit down at the closing. There often is little incentive to shop around, as established insurers typically charge similar premiums and some states set or cap prices. Consumers tend to rely on a mortgage broker, real-estate agent or lawyer to connect them with a title insurer.
Now upstart insurers and agencies are challenging the status quo.
Insurance agencies also are being more aggressive in competing for title-insurance business.
Redfin, a real-estate agency based in Seattle that has pioneered the use of technology in real-estate sales, started a title-insurance agency, Title Forward, in early 2013. It is based in Philadelphia and sells policies in Maryland, Virginia, Pennsylvania, Georgia and the District of Columbia.
Title Forward is telling customers it can save them money by helping them figure out which type of title-insurance policy they need—and whether they can do without the more-expensive "enhanced" policies many agents sell. These policies can cover home buyers if the seller doesn't pay a contractor who did work on the house just before the sale and later claims he is owed money, according to Adam Wiener, a Redfin executive.
Enhanced policies cost as much as 17% more in the states where Title Forward works, he says. Title Forward's policies are issued by industry giant First American Financial.
Sue-Ann Greenfield, an entertainment-industry business manager from Manhattan, was buying a second home in exclusive Sag Harbor, N.Y., last fall when she went onto the Internet to research closing costs.
"I decided I was going to be proactive," she says. "Why am I spending all this money on title insurance, and I don't even know what it is?"
Still, greater competition will benefit consumers, says Birny Birnbaum, executive director of the Center for Economic Justice, a nonprofit consumer-advocacy organization based in Texas.
Mr. Birnbaum notes that state insurance departments have "requirements in place to make sure a company can pay its claims."
In 2007, the U.S. Government Accountability Office, Congress's investigative arm, concluded that the title-insurance industry's reliance on agents who sell to real-estate and mortgage professionals and lawyers, rather than to consumers, presents potential conflicts of interest and raises questions about the "reasonableness of prices" paid by consumers. [The Wall Street Journal]
Read the entire Wall Street Journal article by Leslie Scism (email at leslie.scism@wsj.com) and Alan Zibel (email at alan.zibel@wsj.com) on their web site here
We will be beginning Part 4 discussing one of the most important of the sections on page 1 of the Good Faith Estimate (GFE): the SUMMARY OF YOUR LOAN. We will discuss this sections and how they relate to a purchase and a refinance transaction.
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We will be beginning Part 3 discussing some of the sections on page 1 of the Good Faith Estimate (GFE): PURPOSE, SHOPPING FOR YOUR LOAN, and IMPORTANT DATES. We will discuss these sections and how they relate to a purchase and a refinance transaction.
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In this article, we will be discussing what a Good Faith Estimate is (GFE), who provides it and what it means. The average person does not know what a GFE is and too often think that they are “mandatory” charges by the bank. If you look at a GFE, you will see there are also Title Insurance charges on it. These charges, unlike popular belief, are not mandatory charges. In fact, nearly almost every charge on your GFE are all estimates, hence the name Good Faith Estimate.
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Shopping for title insurance may seem like a tricky and complicated subject. It is not all that hard though. In fact, Title insurance shopping can be compared to grocery shopping. You want to find the best product for the lowest amount. Now just because a place like Costco, Sam’s club or even BJ’s might have a cheaper product does not mean the quality of the product has been compromised. In fact, the product has all the same packaging, information, writing and even the same quality product inside; the only difference is the price and quality of how the customer is treated.
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