Six Musts Before You Buy a Home

 Purchasing a home is one of life’s biggest adventures and you want to make sure your decision is the best for the long run. This is why it is so important to do these six important things before you take the plunge into homeownership.

Figure out how much home you can afford

You do not want to be house poor, which means you purchased a home that you really cannot afford. A good rule of thumb is to never spend more than 30% of your take home pay on a home. This means that it not only includes the price of the home, but also things like mortgage interest, taxes, insurance, maintenance and renovations. Some professionals in the industry also advise not to spend over 28% of your gross monthly income on housing costs and no more than 36% on total debt. They call this the 28/36 rule.

When a mortgage lender wants to see how much you can afford, they usually use the 28/36 rule. You do not want to exceed more with your debt-to-income ratio. If this happens you will end up paying a higher interest rate if you even are qualified for a mortgage.

Budget for closing costs

Closing costs can be different for different areas of the country and the different loans that are available. If you purchase a home for $250,000, you will need to come up with around $5,000 to $17,500 for closing costs. Closing costs include a charge for obtaining your credit score, application fee, property taxes, appraisal fee, loan interest, homeowners insurance and title insurance.

“The biggest mistake that first time homeowners make is they forget that they need closing costs – not just the down payment of say 10% or 20%,” says Barbara Corcoran.

Save for a down payment

There are some loans out there that do not require a down payment, but these are far and few in between. Usually a down payment is the buyer’s choice of how much they want to put down. Just remember, that the less you put down up front, the more the mortgage loan will be which will make your payments higher. Most in the industry will suggest at least a 20% down payment which will clear you of any private mortgage insurance.

Check your credit score

Your credit score can be the ticket to a mortgage and good rates. “This is the number that mortgage lenders will look at to determine whether you are creditworthy, and thus dictates whether you’ll qualify for a home loan, and the rates you will get. Major lenders often require a minimum credit score of at least 620, if not more,” reports Realtor.com.

Get pre-approved for a mortgage

This is a must when it comes to making an offer. A pre-approval lets a seller know you can afford their home and you mean business. “In hot markets, mortgage pre-approval is almost required for a seller to take your offer seriously. That’s because it spells out exactly how much a lender has agreed to loan you, thus assuring the seller that you’r both willing and able,” says Realtor.com.

Make sure the neighborhood is a good fit

You want to be able to grow into your home and your neighborhood. Getting to know the area is a must. You would hate to move in and not be able to sleep the first night because of a street light outside your bedroom window. “You’re not just buying the property you’re looking at. You’re also buying into the whole neighborhood. That’s why you have to be certain that it has the vibe and amenities you want,” explains Realtor.com.

A Realtor can help you through the home buying process from start to finish. A real estate agent knows the ends and outs of the current market and will help your buying process be a huge success.

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Upgrades To Make a Home More Appealing

 In today’s market, buyers seek energy-efficient and eco-friendly features when searching for a new home. According to the National Association of Realtors‘ 2023 Realtors and Sustainability Report, almost half of consumers in the current market are focusing on sustainability.

“Buyers often seek homes that either lessen their environmental footprint or reduce their monthly energy costs. There is value in promoting green features and energy information to future home buyers,” says Jessica Lautz, Deputy Chief Economist and VP of Research at NAR.

In the report, there are many green features that are most important. These include proximity to frequently visited places, a comfortable living space, utility bills plus operating costs, and a home’s windows, doors and siding. These all can be changed while the location of your home cannot.

ENERGY STAR also points out that there are other features that can be updated that will make your home not only more comfortable but energy efficient as well. Make sure your HVAC system is maintained and working properly. This also goes with your hot water heater which should ideally be upgraded to a heat pump water heater. Upgrade to a smart thermostat that can regulate temperature settings and reduce the cost of your energy bill. Proper sealing and insulation in your attic can also help with the heating and cooling of your home. Air can also seep out of windows, so upgrading to energy-efficient windows will reduce the transfer of heat.

Not only will an energy-efficient home sell for more money, but you can also benefit from tax credits and rebates for energy-efficient upgrades. Focusing on energy efficiency and eco-friendly features will make your home very appealing to buyers.

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Financial Benefits of Downsizing

 You do not have to wait to downsize just because you become an empty nester. Sometimes downsizing to a smaller home can have its advantages no matter what stage of life you are currently in. Here are some nice advantages for those who want to downsize.

1. More Financial Freedom

A smaller home will have a less expensive sale price than a larger home in the same area. If you have a good bit of equity in the home you are downsizing from, you might even be able to purchase a smaller home outright. If this is the case, you do not have to worry about a monthly mortgage payment. If you cannot purchase a smaller home without a mortgage, then you will more than likely get a good chunk out of the equity for a large down payment. The larger down payment will allow you to enjoy a smaller monthly payment, low-interest rates and more cash each month.

2. Greater Ability to Diversify Your Assets

The wise old saying, “don’t put all your eggs in one basket” can apply to your assets as well. If you have all of your cash tied up into residential real estate and the housing market crashes, you could stand to lose a lot of money. If you buy a smaller house, you will have extra cash that you can invest in assets other than just real estate.

3. More Energy Efficient

A smaller home, equals less square footage to heat and cool and light. This not only helps you save money, but you also reduce your carbon footprint.

4. Less Time Spent Cleaning

A bigger home makes for a bigger space to have to clean. Even if you do not use all of your rooms on a daily basis, dust still gathers in the space. It takes less time to clean a smaller space, making way for other things to enjoy.

5. Cozy Atmosphere

You can feel lonely in a big space but a smaller home feels cozy and homey. Having one family room area is a great benefit because it gives you a lot of time to bond with loved ones. A smaller home encourages closer relationships with those you live with.

If you are looking to downsize, contact a local real estate agent who can help you find the right home for your needs. Remember you do not have to be an empty nester to downsize into a smaller home.

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A New Mandeville Lakefront Development

 A new age-restricted community was approved called Sucette Harbor which will house 201-unit apartments, an events venue, restaurant, marina and an 82-room boutique hotel all along Mandeville’s lakefront. The Mandeville Planning and Zoning Commission approved the plans so now it will be up to the Mandeville City Council to say yes to the 55 and older development.

The land is being leased by Woodward Interests, who is the developer, from LSU Health Foundation. Al Copeland’s family dedicated the land to the LSU Health Foundation. The proceeds from the leased property will be split up with 60% going to cancer research and 40% going to scholarships.

Although the development will help with a good cause, residents in Mandeville have some questions and concerns. There is a concern out there that the development would attract enough older residents to the area that qualify to live in the age-restricted apartments. Another big concern is the traffic it will bring to the community and the removal of old southern oaks.

Many commission members are also concerned about the project. Claire Durio suggested reducing the size of the hotel but this was shot down. Mike Pierce also agrees that the project might be too big for the community calling Sucette Harbor an anomaly that doesn’t fit with the older surrounding neighborhoods and fails on compatibility.

Other commission members say the development will be an asset to the community. Nixon Adams feels that it is a better option than just leaving the land vacant. He says that the area needs a hotel because there is not one in the area. He also suggested the city bring a walking and biking path to the lakefront which will open up the lakefront.

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What Questions To Ask Before Purchasing a Home

 No matter if you are a first-time homebuyer or this is one of many home purchases, it can be an exciting time.  According to the National Association of Realtors, homeowners stay in their homes an average of 8 years before moving. Purchasing a home is a long-term investment, and you should take a moment to ask yourself these questions before making the purchase.

1. What can I comfortably afford?

When you are considering what is comfortable for you to spend each month, this doesn’t just include your mortgage payment, but other home expenses as well. These additional expenses include taxes, homeowner’s insurance, homeowner’s association dues, utility cost and maintenance. A good rule to follow is to make sure that all your expenses which include your total house payment, taxes and insurance should be below 28% of your gross monthly income.

2. Which loans do I qualify for?

In order to figure this out, you will need to already have a lender. Your lender can go through all of the options and help you weigh the pros and cons of each. For example, if you want to have a monthly payment that stays the same, you would want to go with a conventional fixed-rate mortgage.

3. How much will you need for your down payment?

A lender can help factor in what kind of loans you will qualify for which in turn will determine your down payment. A VA loan requires a low down payment and in some circumstances no down payment at all. Other loans such as a conventional loan like to have a 20% of the home’s purchase price as a downpayment. On some loans, a higher down payment can lower your monthly payments and your interest rate.

4. What’s PMI? Do I have to pay it?

PMI is also known as private mortgage insurance and is required on many loans if the down payment is less than 20% of the home’s sale price. For example, if you do obtain a conventional loan and put less than 20% down, you will also have to pay PMI. Once you pay your loan down, your PMI can come off.

5. What interest rate do I qualify for? How can I lower it?

Your mortgage interest rate is very important in the life of your loan as it has a direct impact on your monthly payment. When you are shopping around for a lender, compare their APR (annual percentage rate) and their lender fees. Once you have chosen a lender, they can help you with ways to lower your interest rate.

6. What will my monthly payment be?

A lender can estimate your monthly payment based on the purchase price of a home, your down payment and your interest rate. There are also tons of monthly mortgage payment calculators online that can help you with a ballpark figure of how much you will pay a month.

7. What are the closing costs?

Closing costs include origination fees, discount points, appraisal, document preparation, title insurance, and home inspection. Closing costs run anywhere from 2% to 5% of your loan amount. Before you close on your home, your lender will provide you with an itemized list of estimated closing costs.

8. How long will the closing process take?

You want to make sure to give yourself enough time to get your financing in order, so put a reasonable closing date on your offer. Obtaining financing and getting everything in order for your home to close can take between 30 to 60 days.

If you are in the market for a new home, now is a great time to ask a real estate agent for their expertise. They can not only help you with the home-buying process, but will also be able to direct to a good lender.

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What To Consider When Purchasing a Second Home

 A second home to many is a vacation home or an investment home.  In order for it to be a smart investment, you should do your research and plan ahead.  So it will not become a financial heartache, here are several things to consider before you purchase a second home.

1. What Will You Use It For?

As mentioned before, a second home can be used for a vacation home or investment and can even be used as a secondary residence for work. You will need to decide what you are using your second home because a lender will need to know.  Investment properties are more risky for a lender while a vacation home or secondary residence are not as risky.  The secondary residency and vacation homes will usually have a lower interest rate than an investment property.

2. How WIll You Finance It?

Unless you have a chunk of cash on hand you will more than likely need to get a loan to purchase your second home.  Remember depending on what you are using your second home for will determine which loan option is right for you.  If you are purchasing a second home as a vacation home, then you will more than likely qualify for a conventional mortgage, secondary mortgage, or a jumbo loan.  If you have a current mortgage and a lot of equity in your primary home, you might be able to obtain a Home Equity Line of Credit (HELOC) or cash-out refinance.

3. Do You Have the Funds?

You want to create a budget to make sure you can afford closing costs as well as ongoing costs that come with owning a second home.  When creating the budget, keep in mind the down payment for a second home is typically a minimum of 25% of the purchase price.  Your debt-to-income (DTI) ratio is 43% or lower in order to qualify for a mortgage for a second home.  As far as homeowner insurance goes, you will need to take out comprehensive insurance on a second home no matter if it is a vacation home or you are renting it as an investment.

4. You Don’t Have To Go It Alone

To make it a bit more affordable and easier for financing, many purchase a second home with friends and family and split the costs.  In order for it to work, you need to treat the arrangement as a business.  Everyone can benefit, gain an asset and save money by splitting the costs.

5. Make a Plan for When It’s Not in Use

A second home might have times when it is not being used, so it is good to have a plan for this time.  If this is a rental income property, you need to come up with a plan if you do not find a tenant right off the bat.  If it is a vacation home, think about renting the home out to other vacationers when you are not using it. If this is the case, there are tons of management companies that can take care of the process.

If you are in the market for a second home, now might be a perfect time for you to purchase one.  Choose a realtor from the area that can help with the process from start to finish.  A local sales agent can be especially beneficial when it comes to vacation homes, as they know the area best.

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Exciting New Trends for the Current Homebuyers

 The current housing market is starting to cool along with the buyer frenzy. Professionals in the industry have three trends that can benefit a buyer when they go to buy a home.

1. More Homes To Choose from

For the past several years, the housing market has hit a record low in housing inventory. This coupled with high buyer demand made it hard to even find a home to purchase. The Calculated Risk reported that homes for sale increased by 39.5% in the last week of October 2022 from the same time in 2021. It is still a seller’s market, but the good news for buyers is that there is more inventory to choose from when finding your new home.

2. Bidding Wars Have Eased

With the demand for buyers over the past several years came huge bidding wars. Luckily, for buyers today, things are different. According to the National Association of Realtors (NAR) the offers on sold homes have declined recently. This fall, September showed the average was 2.5 offers per sale, which was down from the 3.7 offers per sale from last September 2021. Since this has started to slow down, the bidding wars are as well, making it a great time to get back into the market and search for a home without the huge influx of competition.

3. More Negotiation Power

When there is less competition for buyers, then there is more negotiation power on your side. The last couple of years has seen buyers willing to skip things like appraisals and inspections in order to win a bidding war. The National Association of Realtors (NAR) shows that buyers in today’s market are not waiving all contingencies. Appraisal and inspection are two very important factors when it comes to purchasing a home. A survey from Realtor.com shows that 95% of current sellers are accepting a house inspection from a buyer. Sixty-seven percent of sellers negotiated with buyers on repairs found during an inspection.

There are still challenges buyers must face in today’s market, but they are becoming more scarce. Now is a great time to purchase a new home, first find a local realtor who can help you on your journey to getting your dream home.

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MAKING SURE YOU ARE IN GOOD STANDING BEFORE PREAPPROVAL

 Preapproval for a home mortgage can be confusing, especially if you are a first-time homebuyer.  Many homebuyers want to know if they are preapproval ready.  In order to know, here are some things that lenders look for when preapproving someone for a home loan.

Mortgage pre-approval is not a mortgage pre-qualification.  A preapproval is more in-depth than just answering a few questions from your lender.  There is a lot of paperwork involved which includes employment verification, checking records, savings records and investment records.  Lenders nationwide will like for the same elements when pre-approving for a loan. These include a minimum of two-year employment history in the same job or field, a credit score of 620 or higher, a savings track record, financial asses records, proof of down payment  (3% to 20% of home price), and an all-in debt to income ratio fo 43% or less.  The majority of lenders nationwide will not charge for a pre-approval, however, there are some out there that will ask for reimbursement to pull your credit report.

Your job and credit history play a big part in the pre-approval process.  The two year employment rule is very strict.  If you are a current graduate and can prove future income from your employer this will suffice, but if you change from W-2 pay stubs to self-employment this is a no go.

A credit score of at least 620 is also the rule of thumb.  Before you go to a lender to get pre-approved, you can check your credit score for free through the credit unions.  In today’s market, the loan approval for credit scores is every strict.  For a mortgage, the middle score is what counts and is derived from all three of the provideers, TransUnion, Equifax, and Experian.  If you and your partner are purchasing the home together, the worst middle score of the two will be used to determine preapproval.

Another important factor is your assests and downpayments.  “The ability to budget and save shows financial discipline,” says Staci Titsworth, a regional manager for PNC Mortgage in Pittsburgh.  If you received a big bonus, or an intertance, the lender will also have to show the underwriter where the money came from and that it is not borrowed.  Lenders know that life is not perfect and there will be bumps in the road.  Examples include job loss, job changes, and unexpected expenses.  For many of these reasons, people have to dip into their savings to cover these unexpected expenses. In a nutshell you want to be able to have enough info for the lender to explain to the underwriter your financial ability to repay a loan.

Your debt and income ratio is also very important aspect of the process. Lenders desire to see a debt-to-income rati of 43% or less.  If you make $10,000 a month gross before takes, and $4,300 of it goes towards your debt you are okay. This needs to include you future house payment, monthly property taxes and homeowners’ insurance. There is some room to negotiate when it comes to this. Let’s say your DTI is 46% but you have a great credit score and 5% in the bank for a downpayment.  More than likely most lenders would approve you.

Starting the process early is a good idea in case you need to work on some areas to help with your credit, this will give you time to do so.  If you are going to purchase within the next year, then you will want to start looking at getting preapproved now. Note that preapprovals usually are only valid for 60 to 90 days but can be extended if you keep updating with your current financial situation.

If you are in the market to purchase a home, remember to use both a real estate agent and a lender who can help you with all your homebuying needs.  Going to see a home with a preapproval in hand will show that you are a serious buyer.

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New Homes Constructed With Central AC Are More Common in Some Regions Than Others

Ninety-five percent of new single-family homes built in 2020 were built with central air conditioning (AC) systems according to the Census Bureau’s Survey of Construction (SOC). Homes with central AC have been increasing since 2000 when there were only 85.5%.

The percentage of new single-family starts with central AC is different in the nine Census divisions. In West South Central, South Atlantic and West North Central divisions 100% had central AC installed, in East South Central 99%, and in East North Central 96%, in New England 83% and the lowest in the Pacific with 80%.

Ninety-nine percent of new single-family homes were built with an air or ground source heat pump or a forced-air system for the primary heating source of the home. As for each division, in the East South Central 77%  air or ground heat pumps were used, in the South Atlantic 75% and in the West South Central 20%. Air or ground heat pumps are primarily used in warmer climates because they are less efficient in colder regions. As for fuel, 50% of new homes built in 2019 used natural gas while only 45 used electricity.

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Strong Custom Home Building Numbers in Louisiana

Custom home building is going strong in Louisiana and at Ron Lee Homes in West St. Tammany Parish. The 2014 Census Bureau’s Survey of Construction (SOC) reports that 34 percent of the homes built in the South Central Region were custom built.  This means the home was built for you the owner, by a custom home builder, who will either build on your lot or build on a lot owned or purchased by the builder in the area of your choice in St. Tammany Parish. The other 66 percent were spec homes (speculatively-built homes) meaning they were houses built for sale or houses finished on a builders’ lot, ready for a home buyer to purchase. The house was sold to the potential buyer at one total sales price instead of selling the house and selling the land separately.

The SOC defines new home starts into several different categories which include houses built for sale, houses built by contractors, homes built by owners and for rent houses.  Not only does the SOC report if the houses are built for sale, by contractors, owners or for rent, they also report if the new home starts are being built in a community development with a homeowner’s association (HOA).  The HOA is created while the development is being built, and then ownership is turned over to a homeowner board which enforces private deed restrictions and maintains common areas.  In 2014 it is reported that 58 percent of single-family homes were built in a community with a homeowner’s association.
Why the uptick in the custom home market?  Many speculate that the limited builders’ means to borrow money via Acquisition Development and Construction (AD&C) loans have put a damper on their ability to purchase land, build a home on the land and sell the house to a potential buyer. Borrower restrictions are not new, so custom home building is the logical route to take for any builder that has vast experience and “comfort” in being able to build custom.  It was estimated that in 2014 one in four new home starts were custom homes. The custom home market is still on the rise and has reached levels above 2012-2013 but is still below the 2008-2011 levels.

At Ron Lee Homes, we build custom homes in many different subdivisions in the area including Terra Bella Village, Bedico Creek Preserve, Maison du Lac, and many more.  These communities also have established homeowners associations as well, and have lots available to buy and build a new custom home.  If you are interested in designing and having the home of your dreams built in St. Tammany Parish, Contact Ron Lee Homes at 985-626-7619 or e-mail Info@RonLeeHomes.com.

Conventional Mortgages for New Homes Increase for the 5th Month in a Row

When the bottom dropped out of the real estate market, the biggest indicator that the economy was in trouble was that home owners and new home buyers found themselves paying more for their home than what it was worth.  One of the biggest indicators that the housing economy has been in recovery has been the increase in house pricing regionally nationwide.  These home prices went up steadily during the end of 2013 and 2014, so much so, that investors were concerned that they would cause a housing bubble and throw the entire economy back into a Recession.  Once again, though, supply and demand allowed for free market commerce to dictate the real estate market, and prices started to stabilize in the 1st quarter of 2015.

For the 5th month in a row, conventional mortgages for new homes have increased to an all-time high of $352,500 in June, and this is also a record for the average loan amount which has not yet so far been above $350,000 after the Recession.  In addition to the average amount of a loan going up, home prices also increased in June to $462,100 from $447,600 which is a 3% increase.  Also a record-breaking statistic, this is the first time that new home prices have been above $460,000 since the Recession as well.

Even though the average initial fees and charges on loans decreased by 3 basis points to 1.08%, the effetive interest rate on conventional mortgages went up to 3.98%.  Home buyers and people interested in refinancing their homes have been “spoiled” with the phenomenally low interest rates over the past 5 years, but an average overall interest rate in the 4% range is still a historically low rate and will probably not be seen again for quite some time.  The Fed was set to increase interest rates in September, but this is not a guaranteed move and has been in limbo for over a year.  Interest rates are still low, credit is easing allowing higher borrowing amounts for conventional mortgages, and Ron Lee Homes is building new, custom homes in St. Tammany Parish for interested home buyers.  Contact Us today to help you start building the home of your dreams.  Call 985-626-7619 or e-mail Info@RonLeeHomes.com.

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