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Things to Consider

What home buyers would have done differently 

Homeownership can be a rollercoaster ride of emotions. And they can occur at all phases. Some are somewhat skeptical about their purchase initially but grow to absolutely love it. For others, it's the reverse - they adore their place in the beginning, but after a few months or years, aren't as wild about it as they were back then. 

It raises an interesting question: If first-time buyers had to do it all over again, or were given the opportunity to do so, what would they change? Here are a few of the most common mistakes first-time homebuyers make. Being cognizant of them —whether you're on the cusp of buying a house or are in the market a second or third time — can help you avoid making decisions that you may come to regret: 

1. Not factoring in the hidden costs  

When you see the price of a house you like and it's within your budget, it's a great thing. However, there are several added expenses that the price doesn't include, such as mortgage insurance, property taxes and repairs. According to a 2018 poll from, in the average year, a homeowner pays roughly $2,000 just to maintain their place's upkeep. 

Rely on your real estate agent to give you the whole picture. If you are a debut or repeat buyer, run the numbers and evaluate all the costs that come with buying a house. You may not be able to get a precise figure, but the more people you talk to, the better off you'll be in determining what a house will cost you over the long term.  

2. Thinking with your heart rather than your head 

When it comes to buying a house, love at first sight really does exist. When you see a potential home that looks great from the listings —and visiting the place confirms your initial reaction — it's a wonderful feeling. The problem is the rush of emotion can lead to impulsivity, buying the house without doing your research into the property's history. It may also result in a bidding war, where you are keen on purchasing the home so long as it is within the range that was pre-approved by your lender. 

Instead, it's best to adjust your expectations and not let emotions guide your decisions. No house is perfect, so try to be as objective as possible and not rush into anything until you're certain you've covered all your bases before you make a formal commitment. 

3. Foregoing or paying a minimal down payment 

Perhaps the biggest misunderstanding people often have upon entering the home buying process is the down payment. Some think they're required to come up with a 20% down payment when in reality they can pay much less. Some mortgages don't require any down payment whatsoever. 

If you have the ability, consider putting as much toward the down payment as possible. In addition to the fact that this helps you build equity faster, a down payment helps you reduce how much you spend on monthly mortgage payments and will help you pay off your loan faster, potentially years quicker. 

It's important to note that you should only pay as much toward your down payment as you can reasonably afford. In other words, if it requires draining your savings dry, then it's probably too much. 

4. Not taking advantage of a land survey 

There are several reasons why buying a house is typically the biggest decision a person makes in their life. It's not only a significant investment, but it can result in opportunities as well.  

The extent of those opportunities may be available through a land survey. While getting one isn't required, it can be very helpful and give you more room to improve or use your land how you want. As noted by HGTV, a professional survey may determine that you have much more square footage of land area than the seller led you to believe. This means you have the legal right to use the extra space as you would like.  

5. Failing to refinance 

Interest rates have been low for quite some time now, but they're particularly low today, averaging 2.87% among 30-year fixed-rate mortgages, according to the most recent statistics available as of this writing from Freddie Mac.  

The general consensus is refinancing makes sense if you can lower your interest rate by even half a percent. Some may opt not to refinance because of the paperwork involved or feel like such a small percentage difference won't amount to much. In reality, it can save you thousands of dollars over the life of a loan. 

Your awareness of these pitfalls can help you make the most of your home buying experience so you never come to regret it.

Things to Consider

Why this time of year is a good time for home renovations 

Be it beautiful fall foliage to tasty pumpkin-flavored treats, fall is chock full of sweet surprises, with lots of exciting things to do and accomplish. But here's a task that you may not necessarily associate with autumn: home renovation. No matter what room of the house is due for a do-over, now is the time to take those measures - and measurements. 

In reality, there really is no one single bad time to begin or complete a home renovation. Even during the height of the coronavirus pandemic, more than half of respondents in a Houzz poll were able to finish their projects despite the uncertainty and tumult that the shutdown created. This was particularly true of homeowners living in the South, as nearly two-thirds successfully continued on with the renovation amid the crisis.  

When it comes down to it, though, the fall months just may be the best of them all for remodeling, pairing a seasonal change with those of your home's. Here are a few reasons why, especially in 2020: 

The weather is delightful 

Ask anyone who enjoys autumn, one of their top reasons for the admiration will be the weather. Not too hot and not too cold, fall is the Goldilocks of seasons - it's just right. Not having to worry about the hazards and mess of heavy wet snow, nor the discomfort and productivity losses from hot humid temperatures, make fall a great several weeks of outdoor conditions that are ideal for projects large and small.  

Building materials usually cost less 

As most people know, spring as well as a good portion of the summer, are the busy seasons not only for home buying, but home building.  

Take June as an example. According to the National Association of Home Builders and the Department of Housing and Urban Development, a rate of nearly 1.2 million houses began construction on a seasonally adjusted annual basis this past June, a more than 17% increase compared to the previous month. The surge in demand led to an uptick in prices for lumber.  

However, since building activity usually trails off as the months draw to a close, so too do the costs of building materials. These savings get passed on to you from whichever contractor is performing the renovation. 

Projects are frequently completed faster 

Many factors play into when a renovation is 100%, as there are always issues that can come up that no one was anticipating, such as COVID-19. Generally speaking, though, since construction crews' workload tends to level off as the temperatures get cooler, they have more time available to prioritize whatever rooms you're rehabbing. Additionally, since the holiday season is just around the corner, rebuilders have an added incentive to finish everything before December and January arrive, which is when the snow starts falling in many areas - or at least is more likely to in comparison to October and early November.   

Cooldown period from summer commotion 

Summer may undoubtedly be the season for vacations, but that doesn't mean it's a time when you're less busy. Whether it's travel or having kids at home from college, June through August can be activity- and people-filled. 

Much like the temperatures, things tend to cool off in fall, as students return to their classrooms, dorms and apartments. Work schedules resume. In short, life gets back to normal. Take advantage of this quieter period by scheduling your renovation just as the days get noticeably shorter and leaves change color.  

The season for hosting 

Speaking of holidays, this is typically the period when family, friends, co-workers and extended relatives come to visit to celebrate the annual festivities. What better way to welcome friends and family memebers than with a new-and-improved kitchen, living room, dining room or guest bathroom when things go back to normal? 

You may want to consider installing an island as a gathering place. According to a survey done earlier this year by Houzz, roughly 66% of respondents who had their kitchens redone had an island either put in or upgraded.  

Again, since it's so close to Thanksgiving, Christmas, Hanukkah and New Year's, builders will aim to complete the job by a certain date so they too can enjoy the time with their loved ones.   

Deep discounts are common at home improvement stores 

Retailers know that a great way to increase customer traffic is by offering doorbuster sales events and discounts. And that's just what many of them do during the off-season, which is fall. If you haven't seen them already, take a look at the websites, circulars and signage of your nearest home improvement stores. You're almost guaranteed to see price cuts on a variety of products. You can take advantage of them or relay the info to your builder and designer.  

Close out 2020 with a bang, only the kind you hear from swinging hammers and clapboards. Residential Mortgage Services has renovation loans that are customized to fit your needs. Contact us today.  

Things to Consider

3 Reasons Why Homebuyers Prefer Fixed Rate Mortgages

You have lots and lots of decisions to make as a current or prospective homeowner. Will you live in the city or somewhere more rural? Is a single-family home the best style for you and your family's budget and needs, or do you prefer the accoutrements that come with condo life? Are you interested in something that is move-in ready, or perhaps you're considering a fixer-upper?

And that's just the tip of the iceberg. However, when it comes to interest rates, there is one choice that is overwhelming in terms of popularity: fixed-rate mortgages. More often than not, when asked which they'd prefer, people select it over variable. Indeed, based on the most recent statistics available from government-sponsored enterprise Freddie Mac, 90% of homebuyers pick a fixed-rate loan.

It raises an interesting question, though: Why? What is it about FRMs that makes them the odds-on favorite to be selected over variable?

Here are three reasons industry experts believe fixed-rate mortgages are so consistently well-received:

1. Rates stay the same

It's said that the only constant in life is change; in short, it's the one thing that is guaranteed. But a rare exception to that truism are FRMs. No matter what, the interest rate you pick is locked in for the life of the loan term, which is usually 30 years.

There is great security and comfort in this fact. When the mortgage payment becomes due each month, you know exactly how much you'll spend on principal and interest. This predictability can help you with planning and budgeting for the week, month, or year.

2. Affordable

The interest rate environment is subject to change, primarily due to market dynamics of the moment, the state of the U.S. economy and actions by the Federal Reserve. But for several years now, interest rates have remained solidly in affordable territory.

The numbers prove as much. Based on archived data maintained by Freddie Mac, 30-year FRMs never edged above 5% in the entirety of 2019. In fact, they stayed well below that figure for all 12 months, topping out at 4.51% the very first week of the year. They remained in the 4% territory or lower throughout 2018 and 2017 as well.

The same has been true in 2020. While everyone can attest to this being an unusual year with lots of changes, FRMs are in record-low territory, now hovering around 3% for the week ending June 4.

In short, people like to pay less, and generally speaking, FRMs are highly affordable given the fact rates have been low for so long.

3. Flexible

This one just may be the main reason as to why FRMs are the overwhelming favorite in comparison to variable. People like the freedom of options, which may explain why homeownership is as popular as ever. In fact, according to a recent survey from the National Association of Realtors, which was conducted in May, nearly 60% of respondents considered buying real estate an "essential" service.

They not only expect to have the freedom to purchase a house at a time that is right for them, but appreciate the ability to pay down their mortgage in a manner that makes sense to them. FRMs offer this kind of flexibility, noted Sean Becketti, former vice president chief economist at Freddie Mac.

"Thirty-year fixed-rate loans are generally prepayable at any time without penalty," Becketti explained. " If the homeowner chooses to pay off the loan before maturity to refinance or sell the home, the homeowner can do so without paying an early prepayment fee."

He went on to note that this option is fairly exclusive to the U.S., as in other parts of the world, it's not unusual to be docked for paying off a loan ahead of schedule.

Another way in which FRMs increase flexibility is this structure can be used in many different loan types. As The Balance noted, they can be leveraged for conventional loans - which are not backed by the government - and also those guaranteed by the Federal Housing Authority or Department of Veterans Affairs for VA loans.

Additionally, while 30-year FRMs are the most common length homebuyers choose, 15 years if also available to them if they so choose. While monthly payments tend to run higher, you wind up spending less on interest overall because the term is significantly shorter. The rate itself is often lower than it is with the long-term option as well.

None of this is to say that variable rates aren't good. They have several positives to them as well. Nor is it to say that fixed rates don't have certain disadvantages.  But these are some of the main reasons why FRMs are a smart choice and why so many pick them when given the choice.

For more information on FRMs or other aspects of homeownership, please contact RMS today.

Things to Consider

Improve The Environment – Starting in Your Home

Earth Day is an annual event celebrated around the world on April 22 to demonstrate support for environmental protection. The theme of Earth Day 2020 is climate action. There are many steps that you can take in your own home that will help the environment in your community and the world.

Reducing the amount of water that you are using in your household can make a big environmental impact.

  • Install low-flow faucets to save water.
  • Turn the water off as you brush your teeth.
  • If you have a dish washer, use it. Dishwashers use less water than washing by hand.
  • Make sure your garden and landscaping plants are native so no extra watering is required. Native plants only need the rainfall that happens naturally, so you don’t need to turn on your sprinklers or fill up your watering cans to keep them looking healthy.

Swap out your harsh household cleaners. You do not need to buy expensive, “green” cleaners to avoid harsh chemicals. Instead try using some basic household products to make your own.

  • All-purpose cleaner: Combine 1 part water, one part white vinegar, and lemon rinds to make a solution to replace your current all-purpose cleaner. Let the mixture infuse for a week before using. Do not use this mixture on granite, acidic cleaners can damage stone. (These are not replacements for disinfectants)
  • Baking soda is a powerhouse when it comes to cleaning the kitchen.
    • Make a paste with baking soda and water to clean your kitchen appliances and give them a great shine.
    • Put baking soda in your fridge to neutralize odors.
    • Unclog your drain and deodorize your sink by pouring baking soda down the drain followed by white vinegar. Let the mixture sit for 10-15 minutes and then flush the sink with boiling hot water.
    • You can even make shampoo out of baking soda and water.

Find ways to save energy in your home, it is good for the environment and it can save you money!

  • Wash your clothes in cold water.
  • Take advantage of warmer days by hanging your laundry out to dry.
  • Turn on your fan so it runs counter-clockwise while using the air conditioner so you can raise your thermostat 4 degrees without any difference in comfort.
  • Install a programmable thermostat to use less heat or air conditioning during the hours you are not home.
  • Clean and replace your air conditioning system’s filters. Dirty filters can slow air flow and cause your system to use more energy.
  • When running your dishwasher skip the heat and let them air dry.

Avoid single-use products whenever possible.

  • Use reusable bags when you shop. If you need to use plastic bags reuse them as liners for your bathroom trashcans.
  • Use reusable travel cups and water bottles when you are out.
  • Bring a mug to your office instead of using disposable paper cups for coffee.
  • Use reusable containers instead of sandwich bags and disposable containers to carry your lunch.

There are many simple steps that you can take to help the environment from the comfort of your own home. Being conscious of the decisions you are making as a consumer and a homeowner can make a big impact on your carbon footprint.

Things to Consider

How financial literacy can affect your kids' homeownership decisions

Many parents are now homeschooling their children for the foreseeable future, and it's virtually impossible to overstate the importance of literacy. The ability to read and write serves as the building blocks to ongoing education, and the earlier parents help their children learn their ABC's, the better off they're likely to be as they grow older.

Similarly as crucial is financial literacy. In many ways, it's the foundation to personal economic prosperity and can provide young people with the intellectual ammunition to make smart, well-informed money-related decisions in their teenage years and into adulthood, including choices that relate to homeownership.

However, based on the infrequency with which financial literacy is taught in many of the country's schools, many students lack the solid grounding they need to succeed. Take this homeschooling opportunity to teach your children basics of personal finance, from looking over a budget, to writing a check and balancing a checkbook.

In the United States at large, only public high schools in just five states - Missouri, Tennessee, Utah, Virginia and Alabama - require students to take personal finance courses, according to statistics compiled by Visual Capitalist. That's the equivalent of only 16% of students overall who must successfully complete personal finance-related curriculum to graduate, a rate that drops to a mere 8.6% when excluding the aforementioned states.

What does financial literacy mean?

As the National Financial Educators Council defines it, financial literacy is the ability to comprehend how money works, both in the macro sense - the world economy, for example - as well as the micro, such as being able to maintain a budget, write a check or understand how interest works.

But financial literacy goes well beyond these basic fundamentals. It also applies to saving. For example, while most Americans anticipate retiring at some point in their lives, their ability to actually do that is almost entirely dependent on building the economic resources they need to draw from to finance the costs of day-to-day living. According to polling conducted by Gallup, more than half of Americans in the workforce at the time of the poll believed they would be able to retire comfortably. Of these individuals, roughly 1 in 3 said they would rely on Social Security as a major source of income.

However, with the worker to beneficiary ratio at 2.8 to 1 - meaning around three people are paying into Social Security for every person drawing from it - most financial experts agree that retirees will not be able to live comfortably off of Social Security income alone.

Of course, well before determining when to retire are decisions about homeownership. For most people, buying a home is the biggest purchase they make in their lives, as the current median in the country overall stands at approximately $274,500, according to recent statistics available from the National Association of Realtors. Aside from the creature comforts that derive from buying a house, homeownership comes with a variety of short-term and long-term advantages. Chief among them is equity, meaning the valuation of a property. According to ATTOM Data Solutions, more than 14 million homeowners in the third quarter of 2019 in the U.S. were considered equity-rich. Being in a state of positive equity typically enables homeowners to sell their house for a higher selling price than they purchased it for and to apply for certain types of loan products, like home equity loans or home equity lines of credit (HELOC).

While most polls illustrate that young people want to become homeowners and take advantage of these perks, some of their financial decisions are preventing that from happening. For example, as a survey from Zillow showed, approximately 50% of Americans who currently rent are unable to purchase a home because of student loan debt. The same goes for 39% of buyers, meaning that unpaid tuition is delaying them from moving on from a starter home.

Of course, serious debt - which can come in many forms - isn't necessarily a function of poor financial literacy. Things happen over the course of a lifetime that can't be avoided, like medical emergencies and sudden job loss. Yet at the same time, a firm grounding in the fundamentals of money management can make overcoming life's adversities easier.

Financial literacy can also help individuals decide between whether they should rent an apartment or buy a home. According to estimates from Zillow, in the last decade, tenants spent a combined $4.5 trillion in monthly rent. To give this figure some context, that's a larger amount than the gross domestic product of Germany and the market value of Alphabet - which owns Google - Apple, Microsoft and Amazon - combined!

Because there are no down payments or ongoing maintenance costs that come with renting, it can seem like it makes the most sense from a cost perspective. More often than not, though, buying a home is the better bargain. Indeed, as ATTOM Data Solutions found, it's cheaper to purchase a three-bedroom house than a three-bedroom unit in more than half of the country, or in 455 of the 855 counties that were analyzed.

Todd Teta, chief product officer at ATTOM Data Solutions, said that even though sticker prices are higher these days, homeownership beats renting in the lion's share of the U.S.

"Owning a home can still be the more affordable option, even as prices keep rising," Teta explained.

Given the importance of financial literacy, you may be wondering what you as a parent or guardian can do to improve your children's understanding of money and how they manage it. Here are a few suggestions, as recommended by the Financial Industry Regulatory Authority:

Consult with your child's school

Depending on their age, your kids spent much of their day within the four walls of a classroom, learning about math, science, history and the like. But what, specifically, are they learning about as it pertains to finances? You may want to ask about that the next time you connect with their teacher(s). If the school isn't adopting some of the lessons you'd like them to, consider reaching out to the school board or PTA to see what can be done to include more financial literacy-related material in the curriculum.

Talk to your kids about money

How you interact with your children in terms of their ongoing education will play a key role in their interests as they grow and develop. Depending on their age, you should talk to them about the value of a dollar and introduce concepts that they'll be able to understand. For instance, if they're in junior high, you may want to discuss the principles of saving, investing, or how interest works for financial products like credit cards or savings accounts. If they're in high school, you may want to introduce slightly more complicated concepts like what a mortgage is or how credit works.

Show them a credit report

Credit, in many ways, is the financial equivalent of your reputation. And a credit report allows lenders to see how effective you are with money management. Your kids may not know how credit works or how to interpret a credit report, so consider showing them one. Again, how in depth you go will largely depend on their age, but it never hurts to provide them with some of the basics, like how credit scores are determined. FICO® has some helpful resources, blogs, charts and short videos available at its website.

Much like a well-built house, your children's ability to learn and grow depends on a solid foundation. You can lay down the necessary groundwork by making their financial literacy a priority.

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