Buying a home is a major decision—one that you should spend plenty of time thinking about. But for many people, that thinking stage quickly becomes filled with anxieties—about money, about mortgages, about lenders—and they may decide to postpone their buying plans.
While a 20% down payment is preferred, it’s far from required—even though 22% of renters and 31% of homeowners believe that it is! In fact, buyers often overestimatehow much they need for a home—so much so that it delays their plans.
A recent report from Freddie Mac found that if a 20% down payment was actually required, 70% of people planning on buying the next three years would delay their purchase. Not only that, but 30% of buyers said they would never be able to afford a home under those conditions.
In reality, there are a number of programs available to buyers that help lower your down payment, from VA loans to FHA loans. Give us a call, and we can help you figure out what you qualify for.
Myth #2: The Stellar Credit Score
Many people think a “good” credit score is right around 780—and that you need a “good” credit score to qualify for a loan. But according to Ellie Mae’sOrigination Insight Report, that number is way above average. In fact, over 50% of approved mortgages had credit scores anywhere between 600 to 749—way below what most people consider “good.”
Even if you don’t have an outstanding credit score, odds are, it’s still good enough to snag the right financing. Need some tips on upping your credit score? Just reach out to my team, and we’ll help you out!
Don’t Let Buying Myths Hold You Back
Buying a home is certainly a tricky process, but it’s often more attainable than people think—especially when you work with a professional. At Linda Craft & Team REALTORS®, we have over 100 years of combined real estate experience around the Triangle, and we’d love to leverage our skills to help you find your dream home.
Buying a home can be challenging, especially when you factor in low inventory levels in top cities like Raleigh. High demand and low inventory have created something of a seller’s market, and while conditions are slowly improving for buyers, the market is still tipped favorably towards sellers.
But don’t give up! While finding a home that’s just right and within your price range can be tricky, it’s by no means impossible. Use these six tips to streamline your home search in Raleigh.
Have a question about buying a home and want to speak to an expert? Give us a call, we’re always here to help.
Tip 1: Get Pre-Approved Right Now
Getting pre-approved for a mortgage will save you so much time as you navigate searching for a home. Essentially, the pre-approval process works like this: you’ll sit down with a lender who will review all of your finances. The lender will crunch some numbers and then give you an estimate with an interest rate—that’s how much the bank is willing to lend you.
Look at this number as your budget, and then do some extra calculations on the side. Based on your down payment, interest rate, and loan length, are you comfortable with what those monthly payments look like? Adjust your budget as necessary until you hit your sweet spot.
Tip 2: Clearly Define Your “Must-Haves” and “Like-to-Haves”
Balancing your needs and wants is tricky in any buying situation, but can quickly become overwhelming when you’re searching for a home. Think about your lifestyle essentials to determine exactly what you need in a home. This typically includes things like “three bedrooms,” “two bathrooms,” and “10 miles from Downtown.” These are your deal breakers.
“Like-to-haves” aka wants are nice to have in your potential home, but not deal breakers. These are things like walk-in showers, finished “man caves,” and farmhouse-style sinks.
Tip 3: Carefully Research Local Neighborhoods
In addition to finding a home that’s the right fit, you want to make sure the neighborhood has everything you need. Do some research to make sure any particular community has the amenities, features, and location that you need in a home.
We can help with that!
Tip 4: Stick to One Type of House
Would you like one level of living (a ranch-style home) or something more like a Cap Cod with bedrooms on multiple levels? Assess your needs and narrow down your housing preferences to one specific style.
This will make it easier to find homes that meet your needs in the greater Raleigh area!
Tip 5: Write Everything Down and Take Pictures
As you tour multiple homes in Raleigh, document every visit so you can go back to them later! Jot down notes on your smart phone or a notebook as you walk around, and try to take pictures of things that you like and dislike.
Having thorough documentation will make it easier to sit down and make a decision—especially if you’re considering more than one home!
As you start saving for your next home, you may find yourself wondering: how much should I have for the down payment?
While 20% is the most common number thrown out for your down payment, it really depends on the type of mortgage loan you take out. Some loans require a down payment of just 3% while the military-specific VA loan doesn’t require a down payment at all!
However, if you have the means, putting 20% down for your home is a great idea. Here are some of the biggest benefits to using a 20% down payment to buy a home in Raleigh.
It Lowers Your Monthly Payments
The larger your initial down payment, the lower your loan will have to be. This guarantees a lower monthly payment than if you were to put down less than 20%.
In addition, that means there’s less money remaining on your loan to rack up interest!
You’ll Pay Lower Interest Rates
Your bank will offer you an excellent interest rate on your mortgage loan if it feels confident that you are financially stable. Nothing demonstrates this quite like a heft initial down payment.
Say Goodbye to “Private Mortgage Insurance”
When you put down a lower payment for your home, your bank may be less confident in your ability to pay it back. In order to protect themselves, they may require you to take out Private Mortgage Insurance (PMI).
This is a policy that protects the lender in case you’re unable to pay off your loan. It is a monthly free included in your mortgage payments. Typically, PMI is required for down payments less than 20%.
Best of All, It Makes Your Offer More Competitive
Sellers are likely to be more confident in your offer when it includes a high down payment. You’ll be seen as a stronger buyer whose financing is more likely to be approved, making you stand out in the seller’s eyes.
While renting has a number of unique benefits, it also has one big disadvantage in the Raleigh area: it’s skyrocketing.
While rent prices have gone up significantly every year since 2005, the average mortgage payment has actually decreased since then. In fact, according to Core Logic, the average rent has increased by 36% between 2005 and December 2018. In that same time period, the average monthly mortgage payment went down by 4%.
This goes without saying. For renters, there’s no assurance that your landlord won’t jack up the rent prices every year you continue living there. Landlords do this to keep up with inflation, but also because they can.
If you buy a home, however, you can expect payments that are both lower and set. Depending on the type of mortgage loan you take out to finance your home purchase, you can probably expect to pay the exact same amount every month during the term of your loan.
Is Buying a Home Really More Affordable?
Yes. It all has to do with your mortgage. Your monthly mortgage payments depend heavily on your loan’s interest rates. Luckily, mortgage rates right now are some of the lowest they’ve been since 2005.
According to the Economists’ Outlook Blog, the percentage of income needed to purchase a home throughout the United States has decreased steadily since November of 2018. This is great news for potential buyers: it means that they’ll need less of their income to afford a home.
Want to Learn More About Buying a Home in Raleigh?
Interest rates are at a historic low. In fact, they’ve been on a slow decline since November of 2018, resulting in some of the best mortgage interest rates we’ve seen in a while!
In fact, these are the lowest they’ve been since January 2018. If you’ve kept up to date on the Raleigh real estate market, you may have encountered conflicting information about whether or not now is a good time to buy a home. We’re here to set the record straight.
Market experts at Freddie Mac predict that rates will rise back to 4.6% by the end of 2019. This is sending would-be homebuyers a strong signal: now is the best time to buy a home in the greater Raleigh real estate market!
Lock In Those Low Interest Rates
If you buy a home in Raleigh now, or before the end of the summer, you’ll lock in these historically low interest rates. Your mortgage interest rate has a huge effect on your monthly payment, and the lower they are the less you’ll have to pay over the long run!
So, if you’ve been thinking about about buying a home in Raleigh, now is the best time to act. With high inventory and low mortgage rates, you stand to make the deal of a lifetime.
If you’re in the middle of buying a home in the greater Raleigh area, you’ve probably already listened to a lot of unprompted advice. Home-buying, and real estate in general, is one of those topics that elicits some pretty strong opinions.
At the end of the day, however, it all boils down to what you think and what you’re looking for in a home. That’s why I recommend sitting down to ask yourself three big questions before you buy a home.
1. Why are You Buying a Home?
Put aside the financial side of things for a minute. Why do you really want to buy a home? If you have kids, you might be thinking about living within a great school district. If you’re nearing the retirement age, you might want to be closer to your family and friends (as well as your favorite golf course).
It may be for a different reason altogether! There are plenty of reasons to buy a home, and each one is just as valid and important as the last.
In fact, did you know that the top four reasons Americans buy a home, according to a study at Joint Center for Housing Studies at Harvard University are:
A good place to raise children and provide them with a good education
A place where you and your family feel safe
More space for you and your family
Control of that space
What non-financial benefits do you hope to gain from owning a home? Those are the most important things to consider when you start searching.
2. How are Home Values Faring in this Market?
Over the past several years, home values have appreciated steadily. According to the National Association of Realtors’ Existing Home Sales Report median price of homes sold in February was up 3.6% from this time last year.
In their recent Home Price Insights report, Core Logic predicted that home values would rise 4.6% over the next year.
With home prices increasing so steadily, now is the best time to buy. For example, if you’re looking at a home that is worth $250,000 today, it will cost around $11,500 more if you wait until next year to buy it.
3. What are Mortgage Interest Rates Like?
The long-term cost of a home is largely based upon mortgage interest rates, which dictate how much you’ll end up paying every month for your home.
Right now, mortgage rates are at their lowest. However, both the NAR and the Mortgage Bankers Association predict that mortgage rates will increase over the next year.
So, now is the time to buy a home and lock in those low mortgage rates! This will ensure a steady, low monthly mortgage payment in the Raleigh market.
How to Know When It’s Time to Buy a Home
Truthfully, only you can know when it’s the right time. Buying a home is a huge decision, and whether or not it makes sense for your right now depends entirely on how you answered those three questions.
Have additional questions about buying a home in Raleigh? Linda Craft & Team REALTORS® is here to help. Give us a call to talk home buying. We’d love to walk you through your different options in the greater Raleigh real estate market.
If you’ve long been considering buying a home in the greater Raleigh area, now is the time to act. You might be worried about the financial side to buying a home: the hefty down payment and the mortgage approval process—but it’s really not that complicated.
In fact, there are ten simple steps to buying your first home in the Raleigh real estate market!
Save Your Down Payment
It’s a common misconception that you have to put down 20% of the home’s overall value. That’s simply not true!
There are a number of loans out there that require less than 20%, with some like the USDA Loan requiring only a 3% down payment and the VA loan requiring 0% down!
While it’s true that the more you save up for a down payment, the lower your monthly mortgage payments will be, 20% is not the end-all be-all.
Determine Your Credit Score
Whenever you’re making any large purchase that requires a loan, it’s important to have a handle on your finances. Use a free service like CreditKarma or FICO to check your score. This will give you a good idea for what kind of interest rates the bank is willing to offer you.
Find an Agent
While it is possible to buy a home without an agent, it is twice as stressful. An agent handles a lot of the “invisible work” associated with buying a home.
This process typically includes sitting down with a lender to review your finances. The lender will go over your credit score, savings, outstanding debt, annual income, and anything else relating to your money situation. Then, they’ll give you an offer for the amount of money (and the interest rate) the bank is willing to lend you. Boom: your budget is set.
Now it’s time for the fun part! Think long and hard about what you want in a home, and get to searching. To make it a little easier on you, feel free to use our complimentary home-search tool.
You can easily filter results by price, location, neighborhood, size, special features, and more. Happy house hunting!
Make an Offer
Once you’ve found a home that you can’t live without, work with your agent to make an appropriate offer. It’s important to make an offer that is both competitive enough to sway the seller, while still staying within your budget.
Remember that pre-approval letter? This makes you a more competitive buyer as well!
Get an Inspection AND an Appraisal
This is crucial. Before you sign any closing documents, you HAVE to make sure the home is a worthwhile investment. The best way to do that is by hiring an inspector to come out and review the property. This way, if there are any hidden issues with it, you’ll be able to negotiate with the seller to have it fixed.
After the inspection, your lender will arrange for a home appraisal. This is to assure the bank that your new home is worth the price you’ve agreed to pay for it.
Close the Sale & Move In
Once your loan is approved, your bank will schedule a closing date. This is when you cross your T’s and dot your I’s.
Congratulations! After some heavy negotiating and serious home shopping, you’ve finally found your dream home and made it your own.
Having a low credit score doesn’t mean you can’t afford, or won’t be able, to buy a home. There are a number of unique loan programs out there that don’t have a credit score minimum, and may not even require a hefty down payment.
Here Are Some Loan Examples
The Fair Housing Administration offers a unique FHA loan that only requires a credit score minimum of 580, if you want to qualify for the low down payment advantage.
The U.S. Department of Agriculture does not set a minimum, but lenders throughout the industry typically require around 640.
For active-duty or retired military members, the Veterans Affair loan does not set any credit score minimum requirement.
Don’t Have a 700+ Score? You Can Still Buy a Home in Raleigh
Be honest: when is the last time you checked your credit score? Many Americans refrain from checking it because they fear it’s too low.
However, according to FICO, the average credit score has steadily risen year after year! In 2009, the average FICO credit score was around 680. In mid-2018, it had risen to around 704.
If you’re worried about your options as a homebuyer, we highly recommend checking your credit score. The result may surprise you!
Still Worried About Buying a Home?
Please give us a call. We would love to sit down with you to discuss your home-buying options in the greater Raleigh area. In addition to our extensive real estate network and resources, we are connected with a number of lenders in the area we’d love to recommend.
Homeownership is more attainable than you think! Please reach out to us at Linda Craft & Team REALTORS® to learn more about buying a home in Raleigh.
If you’re currently searching for a home to buy in Raleigh, chances are you’ve already thought about applying for a mortgage.
Obtaining a mortgage loan is a huge part of the buying process, as it has an enormous impact on how much you can afford and how much your monthly payments will be.
As such, it’s important to be extra cautious with your finances—and your credit—while you’re applying for a mortgage in Raleigh. Time and time again, we hear from clients about the mistakes they’ve made while waiting for their mortgage loan to finalize. We want you to make decisions that guarantee financial success—which is why we want to share with you the following list of things to avoid after you’ve applied for a mortgage:
Don’t Change Jobs or Get a Demotion at Work
While this may sometimes be out of your control, do everything in your power to maintain consistent employment during the approval process.
Changing from salary to commission, or deciding to go freelance, should really wait until after you’ve closed on your home.
Avoid Depositing Large Sums of Cash Into Your Account
Cash is untraceable, and during the approval process your loan officer will be taking a close look at your checking account.
They want to make sure your cash flow is accounted for and traceable, so if you do need to deposit cash into your checking account make sure you talk it over with your bank first.
Do Not Make Any Huge Purchases
This includes buying a car, expensive furniture, or anything else that’s going to put you in any more debt! Hide your credit cards from yourself if you must.
If you go into too much debt during the approval process, you may no longer qualify for that loan amount. This happens if your ratio of debt to income becomes too debt-heavy.
Don’t Volunteer to be a Cosigner
When you cosign on someone’s loan, you’re then obligated for their loan if they default. This affects your debt-to-income ratio which may then disqualify you from the loan that you’ve applied for.
Don’t Change Bank Accounts
Remember, your loan officer needs to be able to track your sources of income and spending. Having a consistent bank account and transactions makes this ten times easier.
Don’t Apply for New Credit Cards or Loans
Don’t apply for any new credit accounts! Hard inquiries on your credit may negatively affect your FICO score.
If your score drops too much in a short amount of time, you may no longer qualify for your loan.
Don’t Close Any Accounts
Closing a credit account also negatively impacts your score! Your credit score is based upon both the length and depth of your credit history.
Closing an account affects that depth. Your credit score is essential to your mortgage loan interest rates, so it’s critical to keep them as high as possible when applying for a mortgage!
Still Shopping for a New Home? Our Team is Here to Help With That
After the housing market crash of 2008, homeownership rates throughout the country have decreased dramatically. At one point prior to the crash, the homeownership rate was over 69%. In the years following, it dropped to its lowest point at 63.7%.
As homeownership in Raleigh continued to decrease throughout the late 2000s and early 2010s, many began to wonder if it was no longer an essential part of the American dream.
Here’s our take on it:
Homeownership Will Always Be a Cornerstone of the American Dream
Owning a home is as American as apple pie and baseball. According to a recent report by the Census Bureau, the home ownership rate has actually increased steadily over the last two years.
The Desire for Homeownership is Strong Across All Generations
With millennials poised to take over the real estate market, we’re expecting homeownership rates to continue rising steadily in the following years.
After all, there are so many benefits—both financially and emotionally—to buying a home. We’ve written about it extensively, but owning a home improves your life in more ways than one. It gives you financial security, allows you to grow your wealth by building equity over the longer term, and provides you a stronger emotional attachment and investment in your community.
If you’ve long been thinking about joining the ranks of homeownership, now is the time to act!