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Things to Consider

Woman working on finances with a calculator and laptop

Planning for the Extra Expenses of Homeownership

When deciding how much of a home you can afford, don't forget to factor in the extra expenses of homeownership that extend beyond your monthly mortgage payment, taxes, insurance and utilities.

Home maintenance

Home maintenance helps your home run efficiently and keeps your house in good condition. There are a few popular rules of thumb used to estimate how much homeowners will spend annually on home maintenance.

  • The 1% Rule: Budget 1% of the purchase price of your home each year to go towards home maintenance.
  • The Square Foot Rule: Budget $1 per square foot of your house per year for maintenance and home repairs.

Keep in mind that these general rules for home maintenance and repair budgets DO NOT take into consideration many factors like the age of your home, the location, the weather of the area where you live and the condition of your house. All these factors can affect your yearly maintenance and repair expenses.

Household items for your new home

There are many items that first-time homebuyers may need to purchase for their new home. See below for a list of some of the popular items new homeowners buy within the first few weeks of moving in.

  • Calculator with images indicating home, groceries, car and vacationNew locks and keys
  • Garden hose
  • Lawn mower (if applicable)
  • Snow shovel (if applicable)
  • Rake
  • Garden tools
  • Curtains or blinds for the windows
  • Light bulbs
  • Tool kit
  • Fire Extinguisher
  • Grill

Making sure things like maintenance, repairs, and additional household items are included in your budgeting will help you decide how much home you can comfortably afford. It pays to speak with local experts early in the home buying process so you can focus on the right price range and buy your dream home.


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Things to Consider

Foreclosure sign in front of a house

How to find REO properties

No matter where you are along you're homeownership journey, you've likely come across many new or unusual terms and phrases. One of them is typically expressed as an abbreviation: REO.

If you're looking to buy a home for sale at an affordable price - which can be said for most people in the real estate market - it can really pay off to know more about what REO properties are and where you can find them.

What's an REO property?

Short for real estate owned, REO properties are essentially foreclosed homes. When homeowners are unable to make their mortgage payments on time for a few months or longer, they receive a notice of default and, if payments continue to go unpaid, their houses go into foreclosure.

This means that the financial institution that provided the original loan assumes ownership. Much like homeownership itself, foreclosure is a process that can take several months to finish. REO is a shorthand way of indicating the transferral in ownership is complete.

During the financial crisis and the recession that followed, REO properties were fairly common in the U.S., with foreclosure starts topping 2 million nationwide back in 2009, according to ATTOM Data Solutions. They're nowhere near as prevalent today, thanks in large measure to the economy being in better shape and more rigorous mortgage approval standards.

Fewer than 500,000 homeowners were foreclosed upon last year, based on the most recent annual available from ATTOM. They continue to fall on a year-over-year basis, with nearly 55,000 default notices, scheduled auctions and bank repossessions recorded in February. That's the eighth consecutive month in which foreclosure filings fell on an annual basis.

The fact that REO listings are less common is an encouraging development, mainly because it's an indication that more Americans are in sound financial shape and paying off their monthly mortgage bills on schedule. Going into foreclosure can wreak havoc on one's credit score, making it more difficult for them to borrow money at an affordable rate of interest.

Why should you buy a REO or foreclosed property?

The one positive aspect about REOs, particularly for those who are in the market for the first time, is that once they go to public auction, they typically sell at price points well below market value.

Lenders do this in order to make bank-owned properties more appealing to buy and because foreclosures may not be "move-in ready," perhaps in need of some refurbishing to get them back in tip-top shape.

Thus, a single-family residence that originally sold for $250,000 may be listed for $200,000 as a foreclosure. Sometimes the price is more, perhaps even less. As with most aspects of residential real estate, what you spend is largely contingent on the circumstances of the moment and the local marketplace.

How do you buy a REO or foreclosed property?

Going about finding foreclosure listings is fairly similar to the process for the typical housing hunt.

Mobile apps, real estate listing websites and other online search tools will often categorize foreclosures as their own separate entity so shoppers can identify them more expeditiously by checking off the appropriate boxes.

Alternatively, many real estate agents specialize in foreclosed homes. Getting in touch with them can provide you with leads about new units in public auction and what you should be mindful of should you decide to purchase the property.

Much like existing, recently renovated or brand new houses, you never know when the next REO property will become available, but you can be sure they will. They're more common in certain portions of the country than others.

For instance, New Jersey currently has the highest foreclosure rate, accounting for 1 in every 1,006 housing units in February, according to separate analysis from ATTOM Data Solutions. Second to the Garden State was Delaware at one in every 1,008, followed by Maryland (one in 1,193), Florida (one in 1,365) and Illinois (one in 1,465).

As with any home purchase, buying an REO property should not be taken lightly. Although they usually sell for less, it quite possibly could be the most money you'll ever spend on a single purchase, so it's important to enter the process fully informed.

Here are a few things to keep in mind:

Understand your mortgage options

Generally speaking, you should be able to finance an REO, assuming you have the appropriate qualifications and are creditworthy. However, if the property you're interested in is not in livable condition - usually due to poor upkeep by the previous tenants - traditional financing may not be an option. This means that you may only be able to buy it with cash. It's another reason why your best move is to go through a real estate agent; they can fill you in on all the details that you may miss by going it alone.

Know what you're up against

Because demand currently outstrips supply, you may be in competition with others for the real estate owned property. Some of these individuals may be investors, who buy the listing with cash and then resell it after making various strategic renovations. This shouldn't dissuade you from making an offer, but it's always good to enter the process knowing what you're up against.

Have house inspected

Home inspection is standard operating procedure before buying a house, but it's especially important prior to finalizing a deal on a foreclosure. There may be structural issues that need to be addressed before you sign on the dotted line.

Talk with a trusted real estate agent or lender to learn more about REO properties - they just may be the pricing opportunity that you've been waiting for.


Things to Consider

house sitting on top of a piggy bank

Should you consider refinancing your mortgage?

If you've been a homeowner for a little while now, you may be asking yourself the all-important question, "Should I refinance my mortgage?"

People refinance their mortgages every day. Back when rates hovered between 3.5 percent and 4 percent, refinancing constituted a majority of the home loan application volume that took place each week, according to archived data maintained by the Mortgage Bankers Association. Lately, however, the refinancing portion of application activity has slid considerably, dipping below 40 percent.

You probably know the reason why: Rates have risen. Based on Freddie Mac data, 30-year fixed-rate mortgages averaged approximately 4.8 percent toward the end of 2018. That's up nearly a full percentage point from the final month of 2017.

Given this, you may be under the impression that refinancing your home loan doesn't make sense. However, even a fraction of a difference in your current interest rate can help you save potentially hundreds - if not thousands - off your mortgage over time.

Generally speaking, experts say refinancing is worthwhile when you can lower your rate by half a percentage point. As an example, perhaps your mortgage currently has an interest rate of 5 percent or thereabouts. By shopping around and running the numbers via a refinance calculator, a 4.5 percent rate can take off around $50 to $100 off what you spend each month in interest. The exact amount, of course, depends upon the terms of the loan. That kind of money really adds up over time so you can keep more of what you earn.

Having said all that, a lower interest rate isn't the only reason why it may make sense to refinance. Here are two other worthwhile justifications:

1) Your house is worth more

Homeownership is a smart investment, especially these days, as more homes are appreciating in value. According to recent quarterly figures from ATTOM Data Solutions, approximately 14.5 million properties are in positive equity. That accounts for roughly 1 in 4 homeowners who still have outstanding mortgage balances. Determining the value of your house is a bit more involved than positive equity data, but this gives you an idea.

As noted by Credit Karma, refinancing your mortgage with more equity available can provide added funds to pay off other expenses. This is made possible through cash-out refinance services, which work much like a home equity loan. You can then use the extra cash however you'd prefer.

2) You have a better credit score

Do you check your credit score? More specifically, do you check it often? Many people don't, unfortunately. You should get in the habit because the higher your score is, the better terms you get from lenders. You're entitled to a free credit report every year - one from all three credit bureaus. Once you get the information, reach out to your mortgage loan officer and run the numbers. You'll see what you may be able to save assuming your score is in better shape now.

Sure, rates may be slightly higher today compared to last year - but they're still quite low by historical standards. Your next step here is a simple one: Talk to your lender soon to determine if refinancing is ideal for you.

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Things to Consider

sun shining on a house

Will the sun shine on the housing market come spring?

With Groundhog Day fast approaching, America's favorite pint-sized meteorologist - Punxsutawney Phil - will soon emerge from his burrow to give the country his prediction: Will it be an early spring?

Don't get your hopes up too high. If history is any guide, it'll likely be another six weeks of winter. More often than not, Phil does see his shadow: 103 times since 1887, in fact, USA Today reported using National Oceanic and Atmospheric Association data.

That being said, there's still plenty to look forward to. In addition to the flowers blooming in spring, the housing market is expected to flourish as well - at least relatively speaking. Well, at least that's what the early signs suggest.

Home sales are down — for now

By most indications, such as those from the National Association of Realtors, buying activity decidedly cooled off down the stretch in 2018, with existing-home sales rising on a year-over-year basis just twice since the early summer.

With fewer people looking to move up or buy a house for the first time, builders have added time to develop residential properties. According to the National Association of Home Builders, a newly constructed single-family residence is move-in ready in approximately seven months.

Inventory is in slightly better shape

Housing supply remains below the ideal, with the number of unsold properties amounting to around 3.9 months, based on NAR's calculations. The optimal amount is approximately six months. However, conditions are better now than they were a year ago when total housing inventory in November equaled 1.74 million — up from 1.67 million at the same time a year earlier. 

With more dwellings to choose from, home value increases should stay relatively nominal, although the housing market does have a certain degree of uncertainty due to the effects of local dynamics. Still, NAR Chief Economist Lawrence Yun doesn't foresee any major price or sales swings, speaking at the REALTORS Conference & Expo in Boston this past November.

"The forecast for home sales will be very boring - meaning stable," Yun noted at the time.

Mortgage rates should remain historically low

Something else to be encouraged about is mortgage rates. Due to the Federal Reserve raising short-term interest rates four times in 2018, many suspected mortgage rates would rise sharply. That's not expected in spring, or throughout the year for that matter, explained Sam Khater, vice president and chief economist of housing research at Freddie Mac.

"Generally, the monthly mortgage payment remains affordable for most buyers and that's good news," Khater said. "First-time buyers account for over 45 percent of purchases and their share hardly has been impacted by the run-up in mortgage rates in 2018, which I think illustrates that they are a stabilizing force to the market because their willingness to purchase is high."

Although 30-year fixed rate mortgages did, on average, rise in 2018, the uptick wasn't major. But even if rates were to increase, they remain quite low by historical standards.

Much like Punxsutawney Phil, the housing market is unpredictable. But one thing is for sure: Residential real estate is healthy overall and poised to improve further along with the economy.


Things to Consider

Modern craftsman-style home

5 architectural styles to consider in your homebuying journey

What does your ideal home look like? Is it in a rural setting, or perhaps someplace more urban? Does it have a white picket fence or an underground one so your pets can roam free?

There's no right or wrong answer. But one thing you may not have considered regarding your next home is its architectural style. What kind of house do you envision buying for you and yours?

The building styles of residential properties nationwide run the gamut. Here are five of the more common ones today’s homebuyers typically purchase and what makes each so desired.

1. Craftsman

It's safe to say you've seen craftsman-style houses before, given that they're the most popular kind among Americans, favored by 43 percent of respondents in a recent Trulia survey. Craftsman properties trace back to the 19th century and were a product of the industrial revolution and the arts and crafts movement.

As noted by Marika Snider of the American Institute of Architects, these properties are epitomized by several common structural characteristics, such as stone and wood. In other words, they usually make use of natural elements as opposed to artificial siding, for example. This style is ideal if you like the rustic look, such as exposed beams in the interior or fireplaces.

2. Colonial

When you think of the picture-perfect home straight out of "Anne of Green Gables," colonial probably springs to mind. As the name implies, colonial-style homes came about in the 17th and 18th centuries, as settlers in the colonies adopted what they were used to in England and other parts of Europe.

Although there are several subcategories of colonial - such as Federal and Revival - they're known for architectural symmetry and proportionality. Shuttered windows are a common accompaniment as well, according to DIY Network.

3. Ranch

Unlike colonial, the ranch-style got its start in the United States, mainly in the West and Southwest, becoming particularly commonplace in the 1940s. As noted by Home Stratosphere, ranches are typically one-story and lengthier than they are tall. They're ideal if you prefer not to deal with stairs.

According to House Beautiful, ranch architectures also usually have low rooflines and U-shaped floor plans.

4. Cape Cod

Located in the easternmost section of Massachusetts, Cape Cod is one of the most popular vacation destinations in America, but it also is the birthplace of the eponymous architectural style.

Home Stratosphere noted that the early settlers adapted the style from Colonial Revival, mainly for protective purposes, as the dimensions were effective in minimizing the effects of stormy weather. Cape Cod style houses are generally thought of when describing New England charm.

5. Modern

Modern-style houses are the counter to the architectural styles of the early days. Instead of gable-style roofs, for example, modern home roofs are typically flat or have a slight slope to them, Snider told the Huffington Post. They're usually found in fairly upscale neighborhoods and the interiors feature clean lines and high-quality craftsmanship, such as hardwood flooring, marble or granite countertops and brick fireplaces.

These are just a handful of the house styles out there. Your real estate agent can help you decide what shape fits you and your family best and your loan officer can help you determine what you can afford.


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