The RE/MAX Associates Louisville Real Estate Blog

Trump Administrations Reverse Mortgage Change

Donald Trump's of ministration is in the works of raising premiums and putting more restrictive limits on loan programs that allow some seniors to supplement as their income. 

The US Department of Housing and Urban Development plans to reveal changes to the reverse mortgage program. That program lets borrowers take money out on the house they own. The Trump administration believes doing this will put it on a stronger financial foundation, because after all it is is paid by the taxpayers.

Ben Carson says there have been troubling loses in the program over the years, and he believes these changes are the right thing to do by the taxpayers. 

The changes won't affect those with existing mortgages, only those to take out new loans. More than a half 1 million borrow ours, 650,000 have outstanding reverse mortgages which are insured by the Federal Housing Administration. 

The changes to the program will make new borrowers pay higher premiums upfront, but lower ones throughout the life of the loan, which protects taxpayers if the seniors live longer than expected. Borrowers are set to pay 2% up front, and 0.5% throughout the life of the loan. 

Right now borrowers only pay 0.5% upfront and 1.25% annually during the loan. If someone wanted to borrow more than 60% of their homes value in the first year they're already paying 2.5% upfront, so luckily for them their premiums will be going down. 

To balance it all out, most seniors will be able to borrow less money. Right now the average borrower takes out 64% of their homes value, and at current interest rates, they'll only be able to borrow 58%. Keep in mind these numbers are not concrete, they are based on the average borrower. So for the average borrower who can only afford to borrow less, some may be able to borrow more depending on what happens to interest rates. 

The whole point of the reverse mortgage program is to help seniors take out money...

What To Ask Before You Buy A Home

Everyone wants a nice house, and one of the best ways to get that is buying a flipped house. It's an exciting time, because the home is either brand new or gently used. There are risks involved with buying a flipped home though. The repairs and renovations need to be done correctly. So before you buy be sure to ask these questions.

  1. Who's selling it?

Is the seller a person or an LLC? Everyone needs to ask this question. It's happen that a renovator makes himself an LLC and right after the sale, he immediately liquidates the LLC. This is in hopes to get themselves off the hook in case any defects come up shortly after the sale. If the seller is an LLC, take some time to probe into how long the business has been around, and their reputation. 

  1. Whats the scope of the renovation?

This question will get the owner or agent talking. You'll find out if there were any walls removed, major plumbing or electrical work done. How long ago, etc. the smaller renovation jobs are usually bathroom jobs, new paint and floors, mostly cosmetic work. The bigger jobs are much bigger, and the new buyer needs to know what was done. 

  1. Did they get permits?

If there was any major electrical, plumbing, or structural work they need to have permits. Ask for a copy of them. You can also check the city records to see if permits were filed. If there aren't any permits this may mean the work could have been less than professional. 

  1. Who was the last owner?

There's always records of home ownership. If any issues are popping up, it's completely appropriate to ask the previous owner about them. Questions worth asking: when did you put on a new roof? Have there ever been any leaks anywhere? Has there always been this part of the home?

It's important to know every change that was made in the house because flippers get in a hurry sometimes and don't finish...

Cash Buying

Freddie Mac’s latest report showed housing charted lower than they originally thought for Q2, and this is making buyers pursue another route to buy a home. 

In the report the tight supply of homes was highlighted, and how cash deals are more attractive to the sellers. Back in the day, people would basically buy homes with a loan they received. This is still a popular route, but it’s getting increasingly difficult. Now sellers are preferring cash deals, which puts a lot of buyers out of the market. 

Some people aren’t fond of the idea of throwing their cash into real estate because it is illiquid and has extremely high transaction costs. But today, if a buyer walks up to a house they like with cash, they gain the upper hand quickly over their competitors. This way, the seller doesn’t have to worry about the buyer getting a mortgage, or if the appraisal will come in lower than they expected. Having one more cash sale means one less mortgage origination. 

Since Freddie Mac’s prime mortgage interest rates expected to stay under 4% for the rest of 2017, home sales should hit 6.2 million units for the year, which is a whopping 3% jump from 2016. Freddie would say the number is still stifled due to inventory constraints.  

For the year, home price appreciation is expected to be 6.3% due to high demand and incredibly low  supply. 

For the month of June, cash sales were 18% of all home sales. The historical average is 10%, but it was still less than the all-time high of 35%. 

We will have to wait and see what today’s market that sucks down cash has on the mortgage market. If the cash sales can hover around 20% for a while, that would equate to $172 billion less in mortgage originations than if the cash were steady at it’s historical norm.

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How to Make an Offer

After weeks, and maybe months you have finally found the house you want to spend your life in. Now you need to make an offer. But how does one make an offer to ensure they get what they want? Since this is one of the biggest items you may ever buy, you’ll want to know what you’re doing. 

You will have tools and professionals on your side to keep your finances in order, and make your offer stand out, while protecting your money. From down payments to contingencies, escrow accounts to counter offers, here’s how you can sift through each phase and get the dream home. 

  1. Do your homework

In order to find a fair price you’re willing to pay you need to mw the local market and the seller. The best tool here is your real estate agent, hopefully they know what they’re doing. The next thing you can do is go online to real estate sites and search by zip codes. 

You’ll look at comparable home sales and that’ll give you an idea where the market is. Inquire about the history of the property and if any major additions, repairs, or undertakings have taken place, and when. Find out when the previous owner bought it and for how much. 

Then after all this research ask your real estate agent what they think is a fair price. They may have the most accurate price. 

  1. Have a lender in your corner 

Not many of us can pay cash for a house, so we need to get a mortgage and the sellers want proof. You’ll need to get pre approved by a lender. They’ll write out a certain amount you qualify for, and certain terms and conditions. A seller will ALWAYS take an offer from a buyer is who pre approved over one who is not. 

  1. Bring in the pros 

Unless you are a genius, you’ll want some professional help in this process because of house difficult it is. There’s so many moving parts and confusing...

Prices Rise Again in 2nd Quarter

Median homes prices are rising in 87% of markets, and it's setting records along the way. In the second quarter prices edged the record high from 2016, coming off a 6.2% jump even while the weak supply has been inflating prices higher. 

The national median price for a single family home from the second quarter was $255,600, which is up from $240,700 in Q2 of 2016. 23 metros saw double digits increases, and the price for a single family home rose a whopping 87% in markets across the nation.

According to the National Association of Realtors, The economy gained 2.2 million jobs over the past year, and that has really increased the buying trend; even more so with the tight supply. Homes in the market were being sold frequently, lasting only a month. Home prices rose due to the supply not being able to keep pace with the demand. 

If the supply could meet the demand, many more people could enter the markets and enjoy the wealth building opportunities of homeownership. They’re currently being priced out. 

Even though sales are still 1.6% higher than this time last year, the total existing home sales dropped 0.9% to a seasonally adjusted annual rate of 5.57 million for the second quarter. On the flip side, by 2nd quarter end in 2017, 1.96 million homes were on the market which is a 7.1% drop from 2016. The average supply was 4.2 months. 

The people are believing it’s a good time to buy because mortgage rates are down, their incomes are rising, but the supply of homes is still abhorrently low and it’ll pose problems for the second part of the year. 

The five most expensive housing markets in the second quarter were San Jose, San Francisco, Aneheim-Santa Ana, Honolulu, and San Diego. It’s no coincidence 4/5 are in California, and the 5th is even further west. You know what they say, “West Coast Best Coast”. Maybe not in affordability, but most other things yes. 

On the other...

Weddings Can Be Expensive, Even If Your Not in The Wedding

The new American trend of destination parties has become quite popular. Across the country millennial's are flying to different cities and celebrating events with their friends, most common are wedding bachelor(ette) parties. These expensive trips add up fast over the years.

A study by Zillow has concluded that if a person travels to nine or 10 destination parties they will have spent almost $14,000. This is enough for a 35% down payment on a medium priced home.

Owning a home is a call to a lot of millennial's, but a lot of them struggle to save enough for an adequate down payment. 

The average destination bachelor party cost him $1500, while the average bachelorette cost $1100. This is all according to the wedding website, The Knot. If one person goes on a 10 of these destination trips they will have spent more than enough money for a down payment on a modestly priced home. 

And some markets this amount of money will get you as much as 50% down payment by Pittsburgh and Cleveland, while in other markets like LA and San Francisco you will only have 4%or 5%. 

Bachelor and bachelorette parties are not the only wedding expense. Hundreds of dollars are spent on clothes for the wedding, presents for certain party members, and travel costs to the wedding. On average, bridal party members spend an average of $888, and this is just to be in the party. 

Figure out how much you can actually spend on a home based on your income, savings, and your debts. Spend your money wisely and don't buy things you can't afford.

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Millennials and Gen Xers

Millennials aren’t taking everything over as we originally thought. They are not leading the industry in market share as believed prior. The Association of Mortgage Professionals did a recent survey that questions its members monthly collecting data trends. There were groups of all ages in the survey, millennials (< 35), Gen Xers (36-52), Baby Boomers (53-71), and the Greatest Generation (72+). 

It was discovered that Gen Xers make up most of the marketshare, at 36 to 75%. More than a quarter respondents comprised anywhere from 50 to 75%, in opposition to millennials, who were less than 25% in over half of the businesses surveyed. 

One thing that sets millennials apart form Gen Xers, are the willingness to throw down a fat down payment. Millennials were more partial to the 3% and under down payment, while Gen Xers were willing to throw down anywhere from 10%-20%. 

A piece of common ground all the groups could agree on was the need for the mortgage process to be streamlined. They all wished their was less paperwork, except for about 15% of them. They also felt the smaller mortgage companies weren’t in competition among themselves, but the big five banks.

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Why You Should Buy A Fixer-Upper

To buy a fixer-upper home or not to buy a fixer-upper home, that is the question. There are many home buyers out there who want to fix up their home and customize it to their liking. And on the other hand, there are those who would rather buy a home and leave it as is. 

Buying a fixer-upper isn't for everyone, but there are plenty of reasons to undertake the endeavor. Here are a few reasons invade you're on the fence.

  1. Always a deal

Most fixer uppers are usually sold for a great price, which is the biggest attraction for buyers. They usually sell for anywhere from 18% - 25% less than comparable homes in the area. 

Keep in mind fixer uppers will require you spend a lot of money on the renovations. Have a contractor give a thorough estimate of what each job will cost, and be sure to budget an extra 5% for the unexpected expenses, because they will arise. 

  1. Making it your home

Fixer-upper homes up allow the owners to customize the home exactly as they wish. What's also need about these, is they let the new owners live in them before they begin renovations. 

On the flip-side, living in a demolition zone can be less than enjoyable. Maybe you can talk to the contractor and see if it can be completed in corners; this can leave you a section of the home to live in while they build.

  1. Sweat equity

A good portion of fixer-upper homes are often older with a different layout than homes built today. The parts of the home that show age and personality may need to be remolded to fit your taste, so don't be afraid to add your own touch. 

Coloring the home to your taste will make you appreciate it that much more. 

  1. Because you are a DIY'er

For those who are quite handy and have a lot of know how, a fixer-upper house will put their skills to the test.and the payoff will be the bragging rights and compliments you...

What is An Active Contingent'?

If you're searching for a home and you've found one you like, but the official status is "active contingent" is it still possible to get this home? 

What does it mean?

If a home's status reads "active contingent" all that means is the buyer has given their offer, but with contingencies. A contingency is an issue that needs to be resolved before the sale can be final. The contingencies that appear fairly often are a homes inspection, buyer getting approved for a loan, and the buyer being able to sell their home. Once all the contingencies are met, the sale process can proceed. 

What's the difference between active contingent and sale pending?

The active contingent means several issues are currently being resolved, while sale pending simply means there were no contingencies, or they have all been met. 

So does this mean you shouldn't put an offer in for an active contingent?

The odds aren't likely, but it still doesn't mean you shouldn't cast your line. Who knows, your offer may be more reasonable as attractive, and they decide to call a meeting. The only time you shouldn't is when the seller's agent says they are no longer accepting bids. 

So if you're going to submit an offer just to see what happens, you better make it one hell of an attractive offer. Stranger things have happened than seller's jumping ship to the backup offer. 

Offer a fair price, ideally zero contingencies, as is, and a local lender is about perfect.

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College Tuition

Why do colleges keep raising the tuition rates for students, who are already taking out massive loans to pay for their education. These universities aren’t full of dummies, they know how economics work, yet they still raise their prices despite burdening their customers and hurting the economy. One of the most major ways it’s hurting the economy is preventing young graduates from buying a home. 

The Federal Reserve Bank of New York published their research and it’s the first to quantify the impact of recent rate hikes in colleges. Since 2009, we have seen student debt Double to more than $1.4 trillion; and homeownership is declining from young Americans 28-30.  The news about this will impact the economy because paychecks aren’t large enough to cover the expenses. When people buy a home, it’s almost guaranteed they will continue to spend, and spend big on things like furniture, tools, appliances, etc. It’s not hard to see that the drop in home buying is affecting the economy in other ways. 

35% of the drop in homeownership by young Americans from 2007 to 2015 is largely due to higher student loan debt. The study surveyed the entire sample size of 28-30 year-olds despite if they forfeited a college education, and suggested that the drop in home buying from this demographic is likely even greater. 

hey study also suggests that if tuition rates had stayed where they were in 2001, more than 360,000 young people would be homeowners in 2015. That would've made the total roughly 2.9 million 28-30 year-olds owning a home. Keep in mind this does not take count for other millennial's who are outside the age range also crippled by student debt. 

More than likely the total number of millennial's opting out of buying a home has grown since the period the economist studied. What's really fascinating is that since the constant yearly increase of raising tuition student debt has prison 13% every year, and the graduating...

Fannie Mae and Freddie Mac

So far in 2017 Fannie Mae has lowered the benchmark interest rate for standard mortgage modifications, and now is about to do it again. 

Usually, Fannie and Freddie increase or decrease the benchmark interest rate together, but apparently not this time.

Last Wednesday they said they would be lowering the benchmark rate from 4.125% to 4%, but Freddie didn't make a statement about it. Housing wire has reached out to the government run entity, but they have yet to give a response. 

This January Freddie increased the benchmark from 3.87%to 4.25% which is the highest point it had been since July of 2015. But just this May, they both cut it back down to 4.125% together. 

Yet again Fannie is cutting the benchmark back down again. This number is influenced by prevailing market rates, so the GSE's change the benchmark intermittently to stay current w the market rates. 

January was the second treatment of an increase, since Fannie and Freddie did decreased the benchmark throughout 2016, even below 4%.

The GSE's dipped the standard mortgage modification benchmark interest rate to its lowest level ever at 3.5% in August 2016, and shortly after they started rising again. It made another spike in December, and even the month after in January.

We don't know if Freddie will be doing the same but for right now it's benchmark is 4.125%.

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The True Cost of Home Ownership

Zillow has just come out with some new data: the average U.S. homeowner spends an extra $9,080 on their home each year, and sometimes up to $16,000 in certain cities. Homes cost way more than just their listing price, so this is a major point to consider when debating if you can actually afford a house. 

Some buyers only look at homes listing price, or monthly mortgage when they are determining if they c an afford it. The hidden costs are what they should be thinking about that will determine if they actually can or not. 

Zillow concluded there are “unavoidable costs” like taxes, utilities, insurance, etc. and homeowners pay an average of $6,060 for these. These costs are highest in cities like Seattle, New York, and San Francisco, and lowest in cities like Indianapolis where the average is $4,700. 

Then there are maintenance and repair costs. These include repairs to your HVAC system, yard maintenance, plumbing, carpet cleaning etc. These run the average homeowner to a total of $3,020 per year. Seattle also takes the cake for the highest maintenance cost here too. San Antonio was awarded with the lowest. 

What is important for potential homeowners is to figure out how much the home will ultimately cost you, and what you truly can afford. Know where you stand when it comes to finances and know what you can reasonably spend each month. While the house with the luxurious deck catches your eye, keeping it in pristine condition may cost you more than you are ready to shell out. 

For the record San Francisco has the highest cost of living for homeowners at $16,290. Boston was next at $14,377. To finish the top five San Diego placed third at $13,488, Seattle at $12,924, and Los Angeles at $12,556. 

According to Zillow, a third of all buyers exceed their budget when buying a home. To make sure this doesn’t happen to you, find a budget calculator to help you better organize your monthly expenses. These will include...

How to Buy A Home the Smart Way

If you’re about to take the plunge into buying a home, you’ll want to be ready for what’s about to come. It can be a breeze of a process, or a long, drawn-out, painful one if you don’t do it right. It’s best to buy a home quick and smart. Usually, it can take anywhere from two to three months, sometimes longer, and sometimes shorter depending on what type of market you are in. Check out how we advise to buy a home quickly and wisely. 

  1. Let Uncle Sam help

Saving for a downpayment is one of the toughest parts of buying a home. Luckily, the government offers more than 2,200 down payment assistance programs. These are programs offering grants, tax credits, and low-interest loans. A ton of buyers don’t even know these are available to them, or think they are next to impossible to get. Good news for you, they’re not that difficult to get. 

You’ll need to meet specific eligibility requirements regarding income, occupation, or credit, but buyers who use these tools save an average of $17,766 between upfront costs and lower monthly mortgage payments over the life of a loan. 

  1. Be watchful for new listings

Check the real estate websites every day to see if any new homes pop up in your area. Another tool is asking your real estate agent to set up an automated email service that alerts you to new homes that hit the market. 

Watching new listings will give you the advantage over your competition because you’ll be ready to make an offer before your completion even pulls in the driveway. 

  1. Consider a foreclosure

Many potential buyers pass right over foreclosures or bank owned properties because they are weary of the homes condition. Yes, a valid reason, but this is where the real deals are made.Despite the fact that banks won’t fix any problems found during inspections, there are still huge advantages. These usually sell...