But Why Now?

 

Brought to you by Morgan Financial

Written by Matthew Langdon

Is Real Estate a Smart Investment?

Buying a house can be both a wise investment just as much as a great financial decision. But how do you know if it is the right time for you? There are important distinctions to consider as buying a home is often the largest purchase a person will make in their lifetime.Try out this math. Calculate what you would spend on housing if you were renting. Include the monthly rent, utilities, renter’s insurance, everything. Take that figure and set it aside. Now calculate what you would spend on owning a house. Include tax, insurance, repairs, sewer, water, possible HOA, etc. Any down payment you’d spend on the purchase of the home, closing costs plus any costs when you eventually sell. Divide this number by the number of years you’ll supposedly live in the house, then add it all up. The difference between these two numbers is the additional cost of investment you’re making upon the purchase of the home itself. This is excluding the increased quality of life that comes with home-ownership. For most people, that difference will be much smaller than the mortgage payment. If you divide your equity and appreciation of the house by this investment cost, the rate of return for many people can be considerably larger.

Busy Season

Pro tip:The busiest four months in any given year when it comes to home buying are May June, July & August. On average, these months account for about 40 percent of all annual home sales. Why do you ask? One of the major reasons is that most traditional school schedules end their year around May or early June and return back to school in August. As a result of this time-frame, many families with children will want to try and coincide their moving dates with the summer months. It’s also a nice bonus that it’s so much nicer outside! If you’re looking to buy, then you’ll simply have more options during these time frames. You’ll likely have more competition too!

Selling one home to buy another

If you’re looking to change locations, move to another state, or even just getting tired of your house and wanting something new or different, selling your home to buy a new one is something many families do for a variety of different reasons. Here are some suggestions to get started. First step, have a realtor come to your house so they can take a look around. Local is best, as they most likely are familiar with the area, the going rate of houses, and what you should update or replace. They’ll help to serve as the guideline for what you’ll need to do in order to get your house in selling or renting order.Roof inspection. These are usually either free, or low-cost. If your roof is good, then you most likely will not need to do any additional cosmetic updates to your home unless the buyer brings it up in negotiations. If you’re wanting to sell your home quickly and qualify for all types of financing including FHA, and VA, you’ll be required to have solid roofing and foundation. Not to mention that an updated roof is highly appealing to home buyers.Contingency during purchase. When you place a contract on a new home, you have the option to add an addendum upon the conditions of purchase. In this case it would be, “Contingent on sale of current home”. This is basically saying that if your current home fails to sell, then the contract is cancelled after a certain amount of days. You’ll have the option to recall the contract as it was originally agreed upon for up to a certain time period, say 90 days for example. We should mention this is all contractual based upon you and your real estate agent. Close on a new house a few days prior to selling your current home. This will allow you to move your stuff from house A to house B, rather than having to figure out the complex logistics of storage. It takes a large portion of stress out of the equation, and who really wants to deal with storage units or renting pods? However, note that if there is a contingency, you might not be able to do this unless you sell your home before your next home purchase. Every situation varies, so make sure to ask your realtor or lender lots of questions.

Do you plan to stay 5+ years?

On average, 5 to 10 years is considered the average length of time a homeowner remains in a house before moving on, as it is not all too common that families stay in one place as their “forever home”. The specific reason why this is the advertised length, is due to something called appreciation. Appreciation is the increase in a home’s value over a set period of time. How much a home appreciates depends on the state of the local real estate market, as well as any improvements that have been done to the home since purchase. A home’s appreciation value is determined based on the fair market value of comparable homes for sale in the same neighborhood.A car for example, will depreciate because the more you use it, the worse off it will become. The more miles are put on, the more the engine will wear and tear. Transmissions fail, paint will fade and chip, or your check engine light will remain on for an annoyingly indiscernible period of time.A house does the opposite because even though there is wear and tear just like the car; which brings the value of the home down, the land itself is still highly valued. If you bought a house cheap and the area surrounding the home undergoes a revitalization, then your home’s appreciation would soar.

What Mortgage Lenders are looking for

Someone reliable with a solid history (proof) of fiscal responsibility. That’s really the gist of it. When you’re applying for a mortgage the first thing your lender is going to do is ask for an application. This information is going to tell them not only basics about you, but it’s going to provide documentation relating to your income, assets, and credit. How much money do you pull in, are there any tangible or intangible assets you own? How much do you have stored in savings? This paints a steady picture of your financial footprint and if you are eligible to apply for a loan program. Due to the stipulations and regulations of loan programs, you as a home buyer will need to fit within that loan program box if you want to be able to apply for a loan. Granted you are not ready to buy a house outright with large wads of cash – which most people are not.Choosing a local lender with the best combination of rates and fees are a great way to measure your options.

Reach out to us!

If you have any mortgage questions or need help, please feel free to reach out to us directly at 321-757-3570 or submit an application below.

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