Buyers

What You Should Know About Closing Costs

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Before you buy a home, it’s important to plan ahead. While most buyers consider how much they need to save for a down payment, many are surprised by the closing costs they have to pay. To ensure you aren’t caught off guard when it’s time to close on your home, you need to understand what closing costs are and how much you should budget for.

What Are Closing Costs?

People are sometimes surprised by closing costs because they don’t know what they are. According to Bankrate:

“Closing costs are the fees and expenses you must pay before becoming the legal owner of a house, condo or townhome . . . Closing costs vary depending on the purchase price of the home and how it’s being financed . . .”

In other words, your closing costs are a collection of fees and payments involved with your transaction. According to Freddie Mac, while they can vary by location and situation, closing costs typically include:

  • Government recording costs
  • Appraisal fees
  • Credit report fees
  • Lender origination fees
  • Title services
  • Tax service fees
  • Survey fees
  • Attorney fees
  • Underwriting Fees

How Much Will You Need To Budget for Closing Costs?

Understanding what closing costs include is important, but knowing what you’ll need to budget to cover them is critical, too. According to the Freddie Mac article mentioned above, the costs to close are typically between 2% and 5% of the total purchase price of your home. With that in mind, here’s how you can get an idea of what you’ll need to cover your closing costs.

Let’s say you find a home you want to purchase for the median price of $366,900. Based on the 2-5% Freddie Macestimate, your closing fees could be between roughly $7,500 and $18,500.

Keep in mind, if you’re in the market for a home above or below this price range, your closing costs will be higher or lower.

What’s the Best Way To Make Sure You’re Prepared at Closing Time?

Freddie Mac provides great advice for homebuyers, saying:

“As you start your homebuying journey, take the time to get a sense of all costs involved – from your down payment to closing costs.”

Work with a team of trusted real estate professionals to understand exactly how much you’ll need to budget for closing costs. An agent can help connect you with a lender, and together your expert team can answer any questions you might have.

Bottom Line

It’s important to plan for the fees and payments you’ll be responsible for at closing. Let’s connect so I can help you feel confident throughout the process.

Bottom Line

It’s important to plan for the fees and payments you’ll be responsible for at closing. Let’s connect so I can help you feel confident throughout the process.

Avoid the Rental Trap in 2023

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Avoid the Rental Trap in 2023

If you’re a renter, you likely face an important decision every year: renew your current lease, start a new one, or buy a home. This year is no different. But before you dive too deeply into your options, it helps to understand the true costs of renting moving forward.

In the past year, both current renters and new renters have seen their rent go up based on information from realtor.com:

“Three out of four renters (74.2%) who have moved in the past 12 months reported seeing their rent increase. The strain from recent rent hikes isn’t exclusive to renters who have recently moved. Nearly two-thirds of renters (63.2%) who have lived in their current rental between 12 and 24 months, and likely renewed their lease, have also reported increases in their rent.”

And if you look back at historical data, that shouldn’t come as surprise. That’s because, according to the Census, rents have been rising fairly consistently since 1988 (see graph below):

Avoid the Rental Trap in 2023

So, if you’re considering renting as an option in 2023, it’s worth weighing whether this trend is likely to continue. The 2023 Housing Forecast from realtor.com expects rents will keep climbing (see graph below):

Avoid the Rental Trap in 2023

That forecast projects rents will increase by 6.3% in the year ahead (shown in green). When compared to the blue bars in the graph, it’s clear that the 2023 projection doesn’t call for an increase as drastic as the ones renters have seen over the past two years, but it’s still above the historical average for rent hikes between 2013-2019.

That means, if you’re planning to rent again this year and you’ve not yet renewed your lease, you may pay more when you do.

Homeownership Provides an Alternative to Rising Rents

These rising costs may make you reconsider what other alternatives you have. If you’re looking for more stability, it could be time to prioritize homeownership. One of the many benefits of owning your own home is it provides a stable monthly cost that you can lock in for the duration of your loan. As Freddie Mac says:

“Monthly rent payments may increase over time, but a fixed-rate mortgage will ensure that you’re paying the same amount each month. With a fixed-rate mortgage, your interest rate is locked in for the life of loan. Steady payments allow you to budget wisely and make plans for the future.”

If you’re planning to make a move this year, locking in your monthly housing costs for the duration of your loan can be a major benefit. You’ll avoid wondering if you’ll need to adjust your budget to account for annual increases like you would if you left your housing payment up to your landlord and their renewal cycle.

Homeowners also enjoy the added benefit of home equity, which has grown substantially. In fact, the latest Homeowner Equity Insight report from CoreLogic shows the average homeowner gained $34,300 in equity over the last 12 months. As a renter, your rent payment only covers the cost of your dwelling. When you pay your mortgage on a house, you grow your wealth through the forced savings that is your home equity.

Bottom Line

If you’re thinking of renting this year, it’s important to keep in mind the true costs you’ll face. Let’s chat to see how you can begin your journey to homeownership today.

* This post first appeared here.

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The Pros and Cons of Buying an ‘As Is’ Property: What You Need to Know Before Making a Purchase

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Have you ever come across the term “as is” in a real estate listing and wondered what it means? Essentially, an “as is” sale means that the seller is selling the property in its current condition and will not be making any repairs or improvements before the sale. This can be because the seller doesn’t have the funds or desire to fix any issues with the property, or because the property has been through foreclosure or inherited by an estate agent who doesn’t know its condition.

While this may sound like a red flag to some buyers, others, such as real estate investors, may see it as an opportunity. These properties often have lower list prices, and the sellers may be open to negotiating even lower offers. However, it’s important to keep in mind that an “as is” sale can also be risky. You could be getting a bargain, but you could also be throwing your money into a black hole if the property has serious issues that are not immediately apparent.

So, should you consider buying an “as is” property? It’s definitely worth considering, especially if you’re able to negotiate a lower price. However, it’s essential to take one precaution before making a purchase: a home inspection. This will give you a better understanding of any issues that the property may have, both current and potential. A home inspection typically costs around $300 to $800 and is paid for by the buyer (not the seller), as this ensures that the inspector is not working for the seller’s interests.

But the home inspection is just the first step in the process of buying an “as is” property. It’s also important to be aware of your legal rights as a buyer. Even if a property is being sold “as is,” the seller is still required to disclose any known issues. And as a buyer, you can still negotiate an offer that is contingent upon a home inspection.

So, while an “as is” sale can potentially be a good deal, it’s important to be cautious and do your due diligence. Don’t let the promise of a low price cloud your judgment – make sure to thoroughly inspect the property and understand any potential issues before committing to a purchase. It may take a little extra time and effort, but it will be worth it in the long run to ensure that you’re making a wise investment.

Mortgage Rates Are Dropping. What Does That Mean for You?

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Mortgage Rates Are Dropping. What Does That Mean for You?

Mortgage rates have been a hot topic in the housing market over the past 12 months. Compared to the beginning of 2022, rates have risen dramatically. Now they’re dropping, and that has to do with everything happening in the economy.

Nadia Evangelou, Senior Economist and Director of Forecasting at the National Association of Realtors (NAR), explains it well by saying:

“Mortgage rates dropped even further this week as two main factors affecting today’s mortgage market became more favorable. Inflation continued to ease while the Federal Reserve switched to a smaller interest rate hike. As a result, according to Freddie Mac, the 30-year fixed mortgage rate fell to 6.31% from 6.33% the previous week.”

So, what does that mean for your homeownership plans? As mortgage rates fluctuate, they impact your purchasing power by influencing the cost of buying a home. Even a small dip can help boost your purchasing power. Here’s how it works.

The median-priced home according to the National Association of Realtors (NAR) is $379,100. So, let’s assume you want to buy a $400,000 home. If you’re trying to shop at that price point and keep your monthly payment about $2,500-2,600 or below, here’s how your purchasing power can change as mortgage rates move up or down (see chart below). The red shows payments above that threshold and the green indicates a payment within your target range.

Mortgage Rates Are Dropping. What Does That Mean for You? | MyKCM

This goes to show, even a small quarter-point change in mortgage rates can impact your monthly mortgage payment. That’s why it’s important to work with a trusted real estate professional who follows what the experts are projecting for mortgage rates for the days, months, and year ahead.

Bottom Line

Mortgage rates are likely to fluctuate depending on what happens with inflation moving forward, but they have dropped slightly in recent weeks. If a 7% rate was too high for you, it may be time to contact a lender to see if the current rate is more in line with your goal for a monthly housing expense.

* This post first appeared here.

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You May Have More Negotiation Power When You Buy a Home Today

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You May Have More Negotiation Power When You Buy a Home Today

Did the frequency and intensity of bidding wars over the past two years make you put your home search on hold? If so, you should know the hyper competitive market has cooled this year as buyer demand has moderated and housing supply has grown. Those two factors combined mean you may see less competition from other buyers.

And with less competition comes more opportunity. Here are two trends that may be the news you need to reenter the market.

1. The Return of Contingencies

Over the last two years, more buyers were willing to skip important steps in the homebuying process, like the appraisal or the inspection, in hopes of gaining an advantage in a bidding war.  But now, things are different.

The latest data from the National Association of Realtors (NAR) shows the percentage of buyers waiving their home inspection or appraisal is down. And a recent article from realtor.com points out more sellers are accepting contingencies:

“A year ago, sellers were calling all the shots and buyers were launching legendary bidding wars, waiving contingencies, and paying for homes in cash. But now, the shoe is on the other foot, and 92% of home sellers are accepting some buyer-friendly terms(frequently related to home inspections, financing, or appraisals), . . .”

This doesn’t mean we’re in a buyers’ market now, but it does mean you have a bit more leverage when it comes time to negotiate with a seller. The days of feeling like you may need to waive contingencies or pay drastically over asking price to get your offer considered may be coming to a close.

2. Sellers Are More Willing To Help with Closing Costs

Before the pandemic, it was a common negotiation tactic for sellers to cover some of the buyer’s closing costs to sweeten the deal. This didn’t happen as much during the peak buyer frenzy over the past two years.

Today, data suggests this is making a comeback. A realtor.com survey shows 32% of sellers paid some or all of their buyer’s closing costs. This may be a negotiation tool you’ll see as you go to purchase a home. Just keep in mind, limits on closing cost credits are set by your lender and can vary by state and loan type. Work closely with your loan advisor to understand how much a seller can contribute to closing costs in your area.

Bottom Line

Despite the extremely competitive housing market of the past several years, today’s data suggests negotiations are starting to come back to the table. To find out how the market is shifting in our area, let’s connect today.

* This post first appeared here.

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