I hear this question a lot: What is the best time to sell my home or to buy a different one? Let’s take a look at the retail world of clothing. Consumers get the best deal on summer clothes after July 4th or later, just as they get the best deal on winter clothes at the end of winter. So does this trend hold true for the purchase and sale of homes? Not really. There are some considerations a buyer or seller should think about that could have an impact on the transaction.
What time of the year is a better time for buyers to buy?
First off, you can’t ever time a home purchase. It is not like going out to buy a car or a cell phone. Buying a home is a journey done in your own time and after you have done the research, looked at homes and have your finances in order. At any time there are buyers coming into the market and there are other buyers who have done their research and are serious buyers. No one gets to control this ever-changing flow. What is important to remember is that the inventory of homes fluctuates by the season. In spring (March-May in Minnesota), there is an increase of homes on the market and more homes means more options for buyers. It also means more buyers are looking, which means more competition to get that perfect home. While there are fewer homes listed from October-December, buyers may find the best buys during those slower selling months of the year.
When should sellers sell then?
Conventional sellers most likely would not list their home before the holidays or in the dead of winter for obvious reasons (snow and cold….brrrr). But serious buyers really don’t care about the season or timing. They are motivated when they are ready to buy. After the Thanksgiving, Christmas and New Year’s festivities are done, buyers start to think about resuming their home search or entering the marketplace as a new buyer. So what are the pros and cons to listing then? Listing January-June/July, sellers will have more competition, however there will be more buyers in the marketplace looking for homes then. If you list in the “off season” (August-December), you may be ahead because there will still be serious buyers out there and they will have fewer homes to choose from.
So as buyers and sellers strategize about when is the “BEST” time, the reality is – it is never easy, and it truly depends on your situation, what you have to buy or sell, and the market in general. Major retailers like Target can control inventory and monitor competitive activity. In real estate, there is not one buyer or seller – they are all unrelated and disconnected and there are all types of homes at all price ranges making it nearly impossible to pick the “perfect” time to buy or sell. I would be happy to help you figure out what time of the year is best for you to start your home search or put your home on the market.
Contact me at 651-341-6020 or [email protected] to start your real estate adventure.
If you’re considering the purchase of a new home, you may be concerned with the issue of finance. Attaining the right mortgage is a key step in the home buying process, but it doesn’t have to be a stress-inducing one. Most lenders offer prequalification, pre-approval or both to help you know where you stand. Let me explain the difference between prequalification and preapproval:
Prequalification: Prequalification is a preliminary estimate of how much you can afford to pay for a home based on information you provide. Because credit and employment information aren’t validated for prequalification, it can only be considered a rough idea of a monthly mortgage payment and loan size. This can be a useful guide as you begin the home buying process, however.
Preapproval: Preapproval is a written commitment from a lender to finance your home purchase up to a set amount. This indicates that the lender has taken a close look into your financial history and has agreed to lend you a specific amount of money, reliant on certain details like a finalized sales contract and professional inspection. Pre-approval indicates to sellers that you are a serious homebuyer.
I recommend you take both steps and you’ll be able to shop with much more confidence. Why wait until you find the perfect home to discover problems with obtaining a mortgage?
Fannie Mae has recently announced the waiting period requirements for borrowers who have has a previous deed-in-lieu of foreclosure or pre-foreclosure sale are being updated to now require a four-year waiting period; through a two-year waiting period will be permitted if the event was due to extenuating circumstances. The loan-to-value restrictions previously tied to different waiting period time-frames are also being removed.
This is good news for those conventional mortgage loan borrowers who do not have the 20% down payment and only have the 10% down payment on a home purchase. You no longer need a 10% down payment to qualify for a conventional mortgage load after the 4 year waiting period requirement. Fannie Mae will allow a home buyer to only put a 5% down payment on a home purchase to qualify for a conventional mortgage load 4 years after a short sale or deed in lieu of foreclosure.
Short Sale/Deed in Lieu of Foreclosure
(Changes for applications taken on August 16, 2014 or later)
Waiting Periods Under the Old Guideline (On or before 8/15/2014)
Waiting Periods Under the New Guideline (On or after 8/16/2014)
Summer is here and a new crop of buyers are shopping for a new home—Are you one of them? If so, you want to be well prepared to get that home you have always wanted.
“Pre-qualified” sure sounds good, but in fact, it doesn’t ensure that homeowners or realtors will consider your offer. Getting “pre-approved” for a bank loan will signal to an informed seller that your offer is within your means and should be given serious consideration which can tip things in your favor in a tight housing market. Pre-approval is more difficult now than in the past, so, beginning the process early allows you to be prepared to make an offer that will be considered seriously when you find your dream property.
When signing mortgage papers, get any help needed to understand what you are agreeing to, including all of the terms, closing costs, and fees. Take the time to understand the difference between the various types of mortgages including fixed rates, adjustable rates and balloon payments as well as the benefits and costs of different loan terms such as 15 and 30 year mortgages. Also, be sure to explore if you qualify for discounts or credits based on income, being a first-time buyer, or a veteran.
Higher credit scores garner lower mortgage rates and monthly payments. Financial experts recommend reviewing your credit report to identify and remedy any erroneous entries prior to making major purchases to ensure you attain the highest credit score possible. In addition, since applying for credit can lower your credit score, prospective home buyers should avoid applying for additional credit during the year prior to buying (and through closing) your new property. Credit scores of 750 and above often get the best rates, and while you can get a mortgage loan with scores below 650, you will generally have higher costs. A little planning and preparation can reap significant financial rewards.
Know Your Budget
A safe “rule of thumb” for mortgage payments is that it should not exceed 28% of your gross monthly income. This ensures you have enough discretionary income available for upkeep, maintenance, and insurance. Buying within your means will also help in the event of any unforeseen circumstances. While plenty of lending institutions are willing to give you a higher mortgage, be mindful of all the costs of owning your home, your other financial commitments as well as the cost of pursuing your hobbies and interests.
Online calculators can help you estimate monthly payments on homes you are considering, and you can see how those payments compare to your current payments. If you plan on buying a home with larger payments than you pay now, think about putting the difference into a savings account each month to confirm the higher payments are realistic. An added benefit is these funds will be available to apply toward a down-payment or closing fees when you are ready to purchase your new property.
Location, Location, Location
Decide where you want to live, both in terms of general areas and specific geographic requirements. This is as important as the actual house you buy, it will affect your commute, schools, your neighbors, and where you shop and do business. This preparation might be more difficult if you come from further away, however, a real estate agent who gets to know you will help steer you in the right direction. Some locations have specific issues – parking, grounds fees, or other specifics that come with living in a certain locale and a realtor that knows your desires will be able to evaluate any issues accordingly when searching for properties.
You can build your knowledge of an area by reading the local newspaper, visiting local stores and schools, dining at local restaurants, and shopping at a local supermarket.
When do you want to move? Often, buying a home is a game of hurry up and wait — except when it’s not. Sometimes buyers or sellers want to move quickly, and want expedite the process. Be up front with your moving schedule, and willingness/ability to be flexible. While you may or may not be able to impact the schedule, the more prepared you are with the logistics of the sale; the better off you will be in the long run. Paperwork takes time, and depends on how fast the bank and other institutions move, and how much additional information is needed. Following up with lenders, escrow officers, and your agent can be critical to ensure that documents move through the system in a timely fashion.
Timing affects moves in multiple ways, from the moving of possessions, to completing repairs, to enrolling in schools. Moving on the fly can cost more than those with a little planning. Establish a timeline. If you plan in advance for the home purchase and for the actual move, you gain time to shop around for the best deals on everything from mortgages to moving vans. Additionally, advanced planning and research enables you to move faster on things if you need to move up closing dates or shift schedules for any reason.
Terms of Endearment
Are the terms that you agree to going to work for you? Negotiate terms you can love as you finalize the sale/purchase of a home. While everything might not be exactly what you want, know the terms you are agreeing to. If you compromise in one area, you might be able to use that compromise to get something in another area.
For example, if the owner needs extra time in the home after closing, and you don’t have to move right away, you can agree to a rental agreement so that they can stay a bit longer while you are orchestrating your own move. In exchange, you might let them know that you will be having some repairs made while they are renting and before you move in. This can all be spelled out in the terms of sale.
How Handy are You?
Biting off more than you can chew with a fixer-upper can come back to haunt you in the end. Properties that require extensive work might also require more time and money for the move, and any building permits you might need to get. Purchasing a home in good repair or one in which the seller has recently replaced the roof, carpets, and flooring may come with a higher price, but it might still be worth it if you don’t intend to make those repairs yourself.
On the other hand, if you want your home to be your new project, come prepared with what it will take accomplish various tasks in your new area. Doing some things in climates that differ from your own might surprise you — projects that include roofing, heating and cooling can differ substantially between regions.
If you purchase a home with remodeling in mind, take a cursory look into permits before assuming that you can do what you want to. The permitting issues of communities and towns, time-frames around getting those permits and inspections, and costs involved, can all vary. Be certain that the permissions needed for the desired improvements are within your budget and schedule, on top of the cost of materials and labor. There might also be special restrictions if this is in an apartment or community.
It isn’t every day that you shop for a home, but when we do, its best to do it with us much knowledge and preparation as possible. Doing your homework can be daunting and challenging, but on that closing date, you’ll be glad you followed through and got the best home you could get.