Average rates show that buying now is better
Here are some highlights from the cost-across-time comparison:
- It’s easy to put today’s low rates — now hovering around 3 percent — in perspective when we take a look back at mortgage rate averages over the past 40 years.
- Mortgage rates plummeted this past year. Now, they’ve started to rise. By the end of 2021, rates are expected to increase to around 3.6 percent.
- Your mortgage interest rate has a huge impact on your monthly mortgage payment. With today’s rates, you have the potential to save over $1,600 a month compared to just a few decades ago.*
- Today’s homebuyers are better off buying sooner rather than later and locking in a low rate while they can.
Rates are great. Why wait? Prequalify now.
It can depend on the amount of the home loan you qualify for, but even a half a percent increase in your interest rate could add hundreds to how much mortgage you’re paying each year.
In the 1970s, the average mortgage rate of 8.86 percent came with an average $1,986 monthly mortgage payment. In the 1980s, the average 12.7 percent rate came with a $2,707 monthly mortgage payment. In the 1990s, homeowners with an average 8.12 percent interest rate paid $1,855 a month in mortgage. And in the early 2000s, this came out to an average $1,546 monthly mortgage payment at a 6.29 percent rate.*
Today’s average 3.13 percent mortgage rate may come with a much more affordable $1,072 monthly payment.* You could pay over $1,600 less each month on your mortgage than you would have paid at peak rates in the 80s. Even with an expected increase in the next 12 months, rates still sit far below historic levels.
These historically low rates may seal the deal if you’re on the fence about buying.
To ensure you’re making the right decision, it can also help to ask two questions:
- Is it likely that home values will be higher in a year?
- Is also likely that mortgage rates will be higher in a year?
Coming at it from a strictly financial viewpoint, if you answer “yes” to one of the questions above, it’s a strong sign that you should consider buying a home now. If you answer both questions with a “yes,” you could definitely benefit from buying today.
While no one can guarantee what mortgage rates or home values will look like in 12 months, multiple housing authorities appear to be answering a definitive “yes” to both questions. Rates, as mentioned, are predicted to rise. Home values are also projected to keep appreciating.
What does this mean for you as a buyer? Let’s say we stick with the assumptions: that rates will rise to around 3.6 percent this year and that home values will appreciate by nearly 6 percent. Let’s also suppose you’re interested in buying a $250,000 home with a 10 percent down payment.
If you wait until next year to buy a house in this scenario, you could see financial repercussions like:**
- Paying as much as $15,000 more for your house.
- Needing an extra $1,500 for your down payment.
- Paying an additional $133/month for your mortgage payment (adding up to $1,596 more per year).
- Missing out on a $15,000 wealth increase through growing equity.
Of course, there are many factors to consider when preparing to buy a home. But if you look at it from a purely financial standpoint, buying now is likely to benefit you much more than purchasing next year.
Wait now, pay more later?
Buying at today’s lower rates can give you a lot to be thankful for. You’re getting a better rate than your older siblings did 10 years ago, your parents did 20 years ago, and your grandparents did 40 years ago. Because of this, many homebuyers find themselves facing a golden opportunity. See how much house you can afford before rates rise.
*MBS Highway payment estimate, 2021. Rates listed are for illustrative purposes only.
The housing market this year is unlike any we’ve ever seen. So, if you’re thinking about buying, it’s smart to do a little digging. Use these helpful guidelines to determine if you should start home-shopping now or wait until summer.
4 things every homebuyer needs to know about this spring’s housing market
Maybe you’re a renter who wants to start building something permanent (in the form of home equity that’s been growing at an astonishing rate). Or perhaps you already own a house and are ready to swap out your starter for your family’s forever place.
Even with the economic changes of 2020, market factors show there’s no need to put your dreams on hold. In fact, the latest report from ShowingTime, a supplier of real estate showing management technology, found that winter homebuyers never hibernated, showing instead a 49.5-percent year-over-year traffic increase. Springtime buyer activity is expected to climb even higher.
In a market this hot, there are many advantages to buying now instead of later:
1. Housing prices will keep going up.
Based on CoreLogic’s latest U.S. Home Price Insights report, housing prices have appreciated 10 percent in the last 12 months alone. And, the report projects that home prices will not drop but should continue to increase by more than 3 percent.
Some housing experts say home prices may rise more than that — as much as a 5.7-percent increase. If you’re ready to buy a home, it may cost more to wait.
Click here to connect with a local loan officer who knows the ins and outs of today’s market and can help you close fast.
2. Mortgage rates are currently low.
They’ve hit multiple record lows, with Freddie Mac’s Primary Mortgage Market Survey showing around 3.17 percent as a recent 30-year fixed rate. Income growth may be affected by today’s economic changes, but mortgage rates are still projected to stay low and affordable. Close to half of first-time buyers said that, because of low rates, they were surprised to find they could afford even more than they expected.
Mortgage rates have a direct impact on your monthly payment. That’s why waiting to purchase until later in the year is a gamble: Rates are inching upward, which causes your monthly housing cost to automatically increase.
3. Either way, you’re paying someone’s mortgage.
Some renters may feel uncomfortable with the idea of taking on a mortgage and might put off buying their first house. But unless you happen to be living with a loved one rent-free, you’re going to be putting money toward a mortgage — whether it’s yours or your landlord’s.
As a homeowner, the monthly payment for your mortgage will function like “forced savings.” Each time you pay on your mortgage, your money will help to begin building your home equity with the potential to cash out on it in a few years. Monthly rent, in contrast, contributes to a landlord’s home equity and will most likely help their worth increase.
This may be an ideal time to start putting your monthly housing expense to work for you.
4. You can start your next chapter.
The actual cost of homeownership can be broken down like this: a home’s market value coupled with the current interest rate. As mentioned, home prices still appear to be rising.
What if these factors weren’t on the table? Would you still prefer to wait? This can tell you much more about the reason you want to buy and if it’s worth it to delay. Financial factors matter. But ultimately, you can’t put a price on having a secure place to raise your family; more room for kids, pets, and remote work; total control over how you decide to customize and renovate; and a deeper connection to your community.
The fact that now is an ideal time to buy is icing on the cake.
Signs point to a unique opportunity for this spring’s homebuyers
It’s been a big year. As a result of the pandemic, mortgage rates dropped to new lows 16 times in 2020. Moving into 2021, rates are beginning to rise slightly as vaccines become more available — though they remain within “historically low” territory.
With mortgage rates as low as this, close to 13 million homeowners* still eligible to refinance could see substantial savings.
How to tell if the time is right
Refinance applications shot up 224 percent when rates dropped at the onset of the pandemic. A year later, and millions of homeowners could still take advantage. Black Knight’s recently released Mortgage Monitor Report* found that around 13 million homeowners with a 30-year mortgage may qualify for and benefit from refinancing.
There are a few ways to know if it’s the ideal time to refinance. You may:
- Be looking to lower your current interest rate.
- Be hoping to lower your monthly mortgage payment.
- Have a need for cash, i.e., covering unforeseen expenses or paying for college.
- Have improved your credit score.
- Need money for home improvements or upgrades.
- Need to consolidate your debts.
- Want to change your loan terms.
- Want to shorten your loan term and pay your mortgage off early.
Shortening a loan term can be a smart choice at a time when mortgage history is being made. Converting from a standard 30-year home loan to a 20- or even 15-year loan term could offer significant savings. This week’s average mortgage rate is around 3.05 percent.
Reduce a loan’s term, and your payment may not necessarily change, but you’ll pay off your mortgage sooner. This may save you upwards of $42,000 in interest.
Otherwise, you could keep your 30-year loan term and refinance to lower your monthly payment. Refinancing a $269,000 median-priced mortgage at roughly 4.5 percent interest to today’s rate of around 3.05 percent (with an estimated 3.23 percent Annual Percentage Rate) may make a monthly payment (estimated at $1,141) about $222 cheaper.** Annual savings could add up to over $2,600.
Tap into an extra $17,000
Refinancing can pay off when rates are low or if your home’s value has recently increased. With low inventory causing home prices to rise, this is likely.
The average home equity has risen an astonishing $17,000 (seen below). This factor alone may make more homeowners eligible to refinance:
Home equity is a portion of the total wealth you’ve accumulated as a homeowner. Refinancing is one of the most common ways to leverage this growth in your investment.
Compared to last year, the average equity is 10.8 percent higher. Accounting for the $17,000 in equity gains, the average homeowner with a mortgage may have $194,000 in equity available.
Since today’s rates are still at historic lows, it’s possible that you could refinance to access considerable cash, without changing your monthly payment. This cash can go toward college, renovations, vacations, and other big purchases. In the past year, many homeowners facing hardships have also used their equity to help cover household expenses.
As CoreLogic’s Chief Economist Frank Nothaft explained:
“Strong home price growth has created a record level of home equity for homeowners… This provides an important buffer to protect families if they experience financial difficulties and is one reason for the generational-low in foreclosure rates reported.”
When market mortgage rates are over 1 percent lower than your current mortgage rate — as is the case for millions of today’s homeowners — it’s a good idea to meet with your loan officer.
In fact, keeping the same mortgage rate for the life of a loan isn’t necessarily encouraged. It’s not an industry standard. As a rule of thumb, having a regular mortgage check-in can help ensure a loan’s numbers, and its savings, are still competitive.
If you’re shopping around, it’s always smart to request rate quotes from a minimum of three lenders. Once you get your quote, don’t just look at the rate. Comparing APRs (apples to apples) can give you a clearer picture of how much a mortgage actually costs, including additional expenses. Loan terms and other perks — like a lender that offers you access to the latest remote mortgage technology and has the in-house manpower to expedite your closing — might also influence your final pick.
Cash out or save thousands
Lock in a historically low mortgage rate today, and you’ll automatically lower your monthly payment. Or, you could reduce your loan term to see long-term savings or even cash out to pay for the unexpected. All while keeping your monthly payment the same. Contact your loan officer to learn about your options.
What’s it really like to own a new house for the first time? Homes are more affordable than they’ve been in over a decade.* So, there’s a big chance that you or someone you love will be buying a house in the near future — and will be needing this advice.
The 9 totally unexpected tasks every new homeowner might face
We asked again, and homeowners answered. Here’s what first-time and seasoned homeowners on our team had to say.
As a homeowner, you might:
1. Install a new toilet.
Really. Whether it’s an upgrade or a much-needed replacement, a plumber’s price for putting in a new toilet doesn’t run cheap. It’s estimated at up to $260, not including the actual cost of the toilet. Thankfully, installing a new toilet isn’t as hard as you’d think.
“It’s shutting off the water, draining the remaining water, then unscrewing four to five bolts. The rest is essentially just reversing that process.” – Chris
2. Invest in rain gutters.
“Most homes don’t have new rain gutters unless you upgrade them. But rain gutters protect your home from a lot of potential damage: Rainwater can ruin your foundation, splash dirt on your siding, cause your fascia boards to rot, and more.” – Munni
3. Make minor improvements.
Get acquainted with YouTube tutorials: The odds of taking on a few home repairs yourself are high. Replacing light switches and fixtures is fairly straightforward — just remember to cut off the power at the breaker.
“From there, you’ll usually only need to undo three color-coded wires from the old fixture and replace with the new.” – Chris
“Upgrading from those ugly yellow plugs and light switches is easy to do and makes a huge difference. I’ve also fixed over-painted and over-patched drywall: Add coats of mud, wet sand with a sponge, apply PV primer and a can of spray texture, and paint, and it looks like a brand-new wall.” – Austin
If you want to dig deeper, here’s exactly what you can expect from us when you buy.
4. Mount and drill.
Compared to rental living where many landlords may limit or prohibit wall hangings, your walls are now your own to do with as you please. To get everyone settled in, your first move is likely to be mounting your TV.
“Wall-mounted TVs are life. But if you’re going to hide the wires, do it correctly and safely. Your TV’s power cord isn’t rated to be run through a wall, which can be a fire hazard and potentially void your home warranty. Amazon kits allow you to install two outlets with an electrical cord rated for interior walls using a stencil and drywall saw. Just think of it as a wall-rated extension cord no one will see.”
Also: “Be careful where you drill. I was hanging shelves in the nursery. Using my stud finder, I located what I thought was my stud. What it ended up being was a copper pipe running up to the hot water heater in my attic. In hindsight, I was moving too quickly. The pipe was an inch over from the actual stud. Know where your main water shut-off valve is too.” – Matt
5. Reinsulate your attic.
After spending time in isolation, you may be looking for creative ways to convert previously unused space. Insulating a garage or a shed can give you access to another room to use in all seasons. Insulating or reinsulating can also reduce energy consumption, lower heating bills, and even increase your home’s value.
“I’m about to reinsulate my attic with blown-in insulation by myself. I’ll also be insulating my garage walls the same way — I’m turning my garage into a gym/office and adding a mini-split AC.” – Austin
6. Replace your carpets.
This can be a big help for adults and children with allergies — especially in a family with pets. It can also improve aesthetics. Carpets collect allergens, dust mites, and dander. And with daily foot traffic, they’re notoriously hard to clean.
“Our toddler had eczema, asthma, and allergies, and we couldn’t figure out what was triggering them. Seasonal allergies really can’t be helped, but we saw a difference when we removed all the carpet from the kids’ rooms and put in air purifiers.” – Mark & Bethany
7. Upgrade your AC.
Start by installing ceiling fans in every room; not all rooms come with ceiling fans in a new house. This will help with air circulation and keeping the house cool. Don’t forget to reverse the direction of the blades on cold days to circulate the warm air throughout the house.
Then ask: How comfortable and cool do I want to be? “Invest in your AC unit to ensure you have a proper cooling system fit for your home during those hot summers. You don’t want to get caught in the heat with a huge, unplanned expense.” – Fernando
8. Use your home warranty.
It’s there for a reason. But until something breaks or malfunctions, you might not give a second thought to the home warranty you picked — and purchased — when you bought your house.
“My advice would be to look at your home warranty and see what’s covered! I thought all my major appliances were covered, and when my dishwasher broke, I hadn’t paid for the ‘upgraded’ coverage, so it wasn’t included.” – Shelbi
9. Winterize your sprinkler system.
For those who have a sprinkler system: When grass has gone dormant, and you’re no longer watering, it’s time to prep your system for the winter.
Every system is a little different, but generally speaking:
- Locate your sprinkler valve and turn the handles 45 degrees.
- Then locate a small hole with what looks like a screw head near it.
- Using a Phillips screwdriver, turn the head until the bleed valve opens.
- If you look inside the small hole, you will see it open up.
“This allows excess water to bleed out of the line, preventing water from freezing in your pipes and leaving you to discover a break when you start the system back up in spring.” – Matt
Have you spent some time working remote this year and last? Odds are, as health officials are still trying to contain the pandemic, you’ve been working at home much longer than you first anticipated. To keep doors open and team members productive and safe, businesses across the U.S. have started to operate mostly remotely.
Move to a new area, get a better house?
This unexpected shift has caused Americans everywhere to rethink what they need — and desire — from their living space, whether it’s a change of location, floor plan, or size. Some remote workers require extra room, especially when kids are learning at home. Others want to downsize.
Whether you rent or own your house, you might be considering a move while mortgage rates are at record lows to better accommodate remote work for the future.
Crunch the numbers and find out if you should rent or buy.
You’re not alone. Upwork’s recent study confirms that:
“Anywhere from 14 to 23 million Americans are planning to move as a result of remote work.”
To paint a clearer picture, 6 million U.S. homes sold last year. Right now, in comparison, about 2 to 4 times the amount of people are thinking about moving, directly connected to their transition to working at home.
Roughly 45 percent of these workers plan to remain within a two-hour driving distance from their current house, Upwork’s study shows. But coming in a close second, 41.5 percent of people preparing to move as a result of working remotely would consider purchasing a home over four hours from their current location.
These numbers are depicted in the graph below:
This could be because, sometimes, moving farther away from your current area could allow you to get more for less, i.e., buying a larger or more updated home without increasing your housing budget. If you’re able to work from home, you might find many more homes just by broadening your search.
Of the remote workers polled, Upwork also says:
“People are seeking less expensive housing: Altogether, more than half (52.5 percent) are planning to move to a house that is significantly more affordable than their current home.”
Maybe you’d like to do away with your daily commute. Or, perhaps you just want more home office space. Either way, you might be changing your plans. If so, now is an ideal time to connect with a local loan officer to assess your new needs and discuss which low-cost loans are available.
More homebuyers than usual appear to be preparing to purchase, taking advantage of a uniquely affordable housing market at the end of 2020. Real estate is typically slow in the winter, but economists believe that’s unlikely this year. Low housing inventory and high buyer demand triggered by historically low rates are keeping the market booming.
Inventory might be an issue, depending on where you live. But again, there’s that silver lining.
Expanding your home search radius, as millions of remote workers are doing, can uncover hidden gems and give you more options. Once you find a home you love, it’s important to act quickly. Prequalifying for a mortgage now, even before you begin house-hunting, can give you a competitive advantage in a potential bidding war, making your offer more attractive.
Here’s a great reason to break up with your landlord
You can stop paying someone else’s mortgage, for starters. Not only that, you’ll be building your own investment. By paying your own mortgage each month, you’ll automatically begin to grow equity in your house. If your needs have changed because of working remotely, get in touch with a local loan officer and prequalify now.
Mortgage rates have dropped over a full percentage point within the past year, hitting new lows 16 times. This is a strong driver toward homeownership: Today’s lower rates give consumers even more benefits. Although, they’ve gone up in the past few weeks, rates are still at historic lows.
Let’s take a look at the top three:
- Downsize or move up. Low rates open up opportunities to sell and move into a new house, whether it’s bigger and better or smaller and located in a more desirable place. You could put your equity gains (soaring to an impressive average of $17,000) from your current home toward a new down payment — securing more room if you’re working at home or have kids learning remotely.
- Purchase your first home. The non-financial and financial benefits of becoming a homeowner are well-documented. But what matters is deciding when the timing is right. This is only for you to determine, but it may help to know that now is an ideal time to purchase if you feel that other factors fall into place. Take a closer look at how much it could cost you to wait.
- Refinance. If you’re already a homeowner, it may be helpful to think about refinancing. This can be a smart way to lock in a lower rate, along with a lower monthly payment, and see substantial savings over time. But upfront closing costs may also apply. You can read on to answer the question: Is refinancing right for you?
Are you going to save more money if you trade up, rent, or buy? There’s only one way to decide.
Why 2021 could be a great year for anyone who’s ready to buy
A little over a year ago, mortgage rates were significantly higher, sitting at around 3.93 percent. You, like many people, may have been waiting for market conditions to improve to make your move. Current record-low rates have helped homeownership to become more affordable and attainable than it was just one year before.
This chart depicts how much you might save when buying at today’s (early 2021) rates compared to the amount you could have paid last year, also depending on your home’s purchase price:
This is a time when you’re likely to get more house for your money and may also pay less each month for your mortgage.
Today’s rates are historically low: See how much you could save
Getting prequalified is the first and most important step to take to find out how much more house you can afford at today’s low rates. It’ll also provide you with your new house-hunting price range. The icing on the cake? It takes just a few minutes. Using our free LoanFly app, you can prequalify from anywhere. Make 2021 your year to buy.
Even in a normal year, you can expect clients to ask routine questions — and you’ll give them routine answers back. However, last year and the start of this year have been anything but typical, for our country and for real estate.
With so many changes taking place related to the pandemic, the economy, and the political sphere, your clients are going to come to you with some complex questions. As the market professional, it’s your job to respond as well as you can and to provide insights that support your insider opinion.
Addressing today’s biggest questions in your real estate marketing plan also serves another purpose: You can help guide your clients through a competitive market, demonstrating your value and supporting a successful year ahead.
4 smart answers to your clients’ top 4 questions
Prepare yourself — these questions are likely to come up often:
1. Is now a good time to sell?
Okay, you’ve probably been asked this more than a few times already. But with all that’s going on, you know your standard answer won’t cut it.
The short answer: Yes, it’s a prime time to sell.
The long answer: Here are several solid reasons why:
- Housing inventory remains at record lows, while buyer demand has reached record highs. A prospective home seller is looking at a great opportunity to sell rapidly and at a lucrative price.
- Low rates may lower a monthly mortgage payment, making now an ideal — and affordable — time to trade up or downsize.
- In a market this competitive, a seller has an advantage. They may have the upper hand when they negotiate terms, moving dates, repairs, and more.
Partner with a local loan officer who has the tried-and-tested technology to help you and your clients move fast.
2. What happens if I sell my house and can’t find a new home to buy?
It’s another question you’re probably going to hear a lot in 2021, and this is why.
Many homeowners hoping to sell have concerns. If they do sell successfully, will they be able to get into a new home that they love in time for closing?
You can use this question as an invitation to explain your stellar approach to negotiating, along with your availability and dedication to helping your seller find the right house in a short timeframe. And, it may help to point out that though preowned homes may be in short supply, many more new build homes are regularly entering the market.
Closing dates are also up for negotiation. Especially in a market this tight. Partnering with a lender that offers a 100-percent commitment to on-time closings (with the reviews to support this) can ease both you and your seller’s minds.
3. Housing prices have increased. Am I better off waiting to buy?
From what we’ve seen of 2021, affordability is already a trending topic in real estate. Along with this comes much misinformation.
It’s expected that a prospective buyer might see rising home prices as being less affordable. But in actuality, multiple factors influence a home’s affordability — not only its price.
To better communicate this, share visuals with your clients. The graph below is extra-helpful in showing that even as housing prices increase, affordability also climbs.
Add this to your listing presentation, post it on social media, and keep it saved in your phone or tablet to help assure clients when they ask (and they will often):
4. If there’s a surge of foreclosures, will home values start to decline?
Potential homebuyers and sellers have another major concern this year — that homeowners in forbearance related to the pandemic may foreclose.
This can cause worry for two main reasons:
- A buyer doesn’t want to purchase a home in a hot market, only to have values plummet.
- A seller may prefer to put off their plans and wait until the market is stable.
But the truth is, banks are taking continued precautions to prevent a repeat of the happenings from 2008 to 2012 — even more so as the housing market is currently playing a significant role in the recovery of our economy.
Highlight these three points to help ease any concerns:
- About 30 percent of homeowners in forbearance are staying up-to-date on their mortgage payments.
- Banks don’t want to create the circumstances of the Great Recession again. Many are willing to provide modification plans for their borrowers this time around, helping homeowners to retain ownership.
- With the impressive amount of home equity among today’s homeowners, many are opting to sell instead of entering foreclosure.
Though each market is different, it can help to remember that most homeowners make decisions based on what they see in the media. That’s why using visuals, market data, and expert quotes as part of your real estate marketing strategy can help to better break down these hot-button topics for your clients.
You can fill your feeds on social media with marketing materials that help answer these questions before clients ask. An informed homebuyer or seller is one who’s confident. As an agent, you’re there to supply them with the freshest information to showcase your value and earn their trust.
Find a loan officer who cares as much as you do
Each year, Americans decide whether it’s time to renew another lease or take the plunge to officially become a homeowner. This can involve looking at income and savings and then determining what finances allow for. It’s also likely that this equation will factor in monthly housing expenses, tax breaks, and other add-on costs.
With all this in mind, the latest studies still show that it’s cheaper to own a home than to rent in most areas of the U.S.
That’s not all: There’s another financial benefit of homeownership that’s often overlooked — the wealth you’ll grow by owning a home in the form of home equity.
I want to buy a house: How much equity can I expect to gain?
As First American’s Deputy Chief Economist Odeta Kushi recently explained:
“Once you include the equity benefit of price appreciation, owning made more financial sense than renting in 48 out of the 50 top markets, with the only exceptions being San Francisco and San Jose, Calif.”
ATTOM Data Solutions — responsible for one of the top property databases nationwide — also just assessed the average home-price gain for U.S. homeowners who sold their houses.
This is what they found:
The sooner you buy, the quicker you can start building your equity. See how LoanFly makes homebuying a breeze.
In the past five years, the typical home equity gain in a sale has risen dramatically. CoreLogic — another curator of property data — recently published their Homeowner Equity Insights Report. It showed that the average homeowner earned $17,000 in equity within the past 12 months alone.
So, what can homeowners anticipate for the future of their equity?
This is what seven major authorities are forecasting for home prices in 2021:
According to the National Association of REALTORS® (NAR), the median-priced home in the U.S. sits at $309,800. Should homes appreciate by 5 percent in 2021 — as forecasted — then a homeowner’s wealth will increase by $15,490 this year due to rising equity.
There are a few other strong reasons to consider homeownership today:
- Mortgage rates have begun to increase but are still sitting around record lows, making it a historically affordable time to buy.
- You may also be spending more time at home and, thus, requiring more space for remote work and schooling.
- Along with this may come the need for more outdoor space – which could be limited or shared if you’re renting.
It’s a common argument that renting does away with extra expenses like home repairs and property taxes. But it’s important for prospective renters to know that all these extras that a landlord pays are lumped into your final monthly rent — also padded for profit. Renting doesn’t save you money.
When First American compared the net worth of renters and homeowners based on income, only one category (those earning $127,000 to $192,000) yielded a greater net worth for renters. Homeowners came out on top in all other categories, showing higher wealth gains.
As you weigh whether you should rent or buy this year, make sure to count the cost benefits of increasing home equity. If other financial factors fall into place, this is an ideal time to become a homeowner and see the rapid growth of your investment.
Let’s make mortgage friendly (and fast and easy) again
No more waiting around on paperwork and getting frustrated by unnecessary delays. LoanFly puts you in the driver’s seat — and gives you back control over your mortgage. Use our free app to stay connected with your local loan officer, keep tabs on your loan’s progress, and fast-track your mortgage to closing day.
It’s a good time to be a homebuyer. Mortgage rates are still around historic lows, even if they have gone up in the past few weeks and in what was usually supposed to be a slow winter season, homebuyer traffic has stayed up. Housing affordability is also at a high.*
Working with a great lender and knowing what you want in a mortgage is a winning combination. But even after you’ve found the right lender, the second part can still be tricky. How do you know what to look for in a mortgage when there are so many options to choose from?
Do these 6 things before you decide on a mortgage
Sticking with our best-practice dos and don’ts, based on our 33 years of experience as a leading lender, can simplify the process of picking a mortgage:
1. Do keep an eye on your credit.
- You’re entitled to a free credit report each year by federal law from one of the top three credit reporting agencies in the U.S. Having a better grasp on your credit score puts you in the driver’s seat.
- Your credit score can affect your mortgage rate. This can impact your monthly mortgage payment, for better or for worse.
- Checking in on your credit annually can give you time to improve your score. Or fix any errors. AnnualCreditReport.com is authorized by federal law to provide a free yearly credit report to the public.
2. Do choose a lender based on reputation.
- Real estate is all about location, location, location. And mortgage lenders are all about reputation, reputation, reputation.
- Looking into a lender’s rep is one key way to protect yourself from predatory lending. Reading customer reviews (and asking for references) is a smart place to start.
- Our company, for example, is award-winning and community-driven. Our loan officers, like Marcie, are known for their warmth, connection, and how much they truly care.
3. Do continue to pay your mortgage or rent on time.
- Life happens. But even one 30-day-late payment on a credit card or another loan could set you back in your mortgage qualification.
- Paying your rent more than 30-days late within the past year might affect your loan terms, resulting in a higher down payment or interest rate.
- A mortgage application will typically be denied if a borrower has three or more 30-day-late payments in the last 12 months.
4. Do get prequalified first.
- Prequalifying for a home loan before you start searching for houses can make it that much easier to nab your dream home when it becomes available.
- In a nutshell, a home loan prequalification tells you how much house you can afford before you begin shopping.
- Because there’s currently a lack of inventory in the housing market, buyers need an advantage; prequalifying first could strengthen your offer by showing a seller you’re prepared.
Keep it simple: Use our free LoanFly app to prequalify remotely.
5. Do keep track of all your paperwork.
- After you prequalify, your loan officer is going to ask you for several important documents to get the loan process moving.
- Gather your Social Security Card, work history, employer information, pay stubs, bank statements, and tax returns to avoid scrambling at the last minute.
- At this time, it’s also important not to change bank accounts: Your loan officer needs to source your assets, which can be difficult when paper trails are inconsistent.
6. Do notify your loan officer of any big changes in your life.
- If you hope to get into a new home without delays, try not to rock the boat for a little while.
- Changing jobs, moving, and even switching insurance companies are all boat-rocking variables that could delay your mortgage approval and affect interest rates.
- Interestingly, closing a credit account can also count as a big life change — negatively impacting your credit score by altering scoring factors like your percentage of available credit and length of credit history.
Don’t waste your time making these 6 mortgage mistakes
If it all possible:
1. Don’t start house-hunting before you know what you can afford.
- Once again, that’s the beauty of getting prequalified. It’s quick. It’s easy to do online or via an app.
- And ultimately, it’s going to tell you exactly how much you can afford so that you don’t lose valuable time viewing houses out of your price bracket.
- Taking the steps beyond early prequalification to early loan approval is an even better bet in today’s still-booming market, helping you to gain a competitive edge by acting as a cash buyer.
2. Don’t take mortgage advice from just anyone.
- It’s a bitter pill to swallow. But it’s never a good idea to take your mortgage advice from a friend, a hairdresser, or even a real-estate-savvy neighbor.
- You’re making one of the biggest investments of your life. So, get your mortgage information and rate quote straight from the source — your lender.
- Homebuyers who are better informed are more likely to get better financial terms on their mortgage; you could save as much as $44,500 over the life of your loan just by shopping around and finding your preferred lender.
3. Don’t make any major purchases.
- Remember that thing about not rocking the boat? Buying a new car, appliances, or furniture before signing your home loan contract could impact your financial criteria for qualification.
- Taking on new debt signifies that you’re increasing your monthly obligations. Additional obligations may trigger new qualifications for a mortgage.
- If you have more debt, this could increase your DTI, or debt-to-income ratio. A higher DTI makes a loan risker; in some cases, a previously qualified borrower might not qualify.
4. Don’t apply for a new line of credit or loan.
- Likewise, taking out a new line of credit or a new loan, whether it’s for a car or education, can change your current financial picture. Changes in your finances may indicate instability and could delay or influence the loan process.
- It’s also critical that you don’t deposit cash into any accounts before running it by your loan officer. A lender needs to track your funds, and cash is hard to trace.
- Before making a cash deposit, talk with your loan officer. They’ll let you know how they’d like you to document the transaction.
5. Don’t drain your savings.
- All that money you saved for a rainy day can go toward your down payment and closing costs.
- If you have little-to-nothing in savings at the moment, we suggest checking out a big-picture budgeting app like Mint.
- Any cash you can set aside may help to offset the often-unexpected costs that arise when buying a house.
6. Don’t be a stranger.
- There’s no such thing as a stupid question. And there’s no wrong time to contact your loan officer.
- That’s what we’re here for. If you have any questions about your mortgage quote, or if you foresee any life changes coming up, give us a shout.
- We’re the professionals who can troubleshoot and keep you on track, helping you to reach your closing day on time.
When is it in your best interest to dispute your property taxes? If you’re a homeowner, you could benefit from appealing your property taxes if you feel like your home’s value has been assessed too high.
The National Taxpayers Union Foundation estimates that 30 to 60 percent of properties are over-assessed. But less than 5 percent of homeowners will challenge this.
Before you begin, it helps to remember:
- Disputing your property taxes doesn’t mean you’re fighting with your local taxing body.
- Really, it’s a matter-of-course; appealing property taxes is simply a request for review.
- You won’t be penalized more in tax by requesting a review.
- You can dispute your property tax on your own — without an attorney or realtor, though professional guidance can help.
- Even if you bought your home this year, your property taxes may not necessarily be valued at the recent purchase price.
And, you can dispute your property taxes in about the time it takes to read this step-by-step guide: Think 15 minutes. It may be foolish not to. For many homeowners, appealing is worth it, considering the hundreds to thousands of dollars a year you could save. Your Free Guide to Disputing Property Taxes. Download Now.
Why do I need to dispute my property taxes?
The two most common reasons most homeowners dispute their property taxes are:
1. You realize you haven’t filed the correct exemptions.
Exemptions may vary by state and can include a main residence exemption, veteran or disabled person status, assistance for senior citizens, and disaster relief. The homestead exemption could exempt hundreds of thousands of dollars from being taxed on your home’s assessed value, in some states.
Example: Let’s say you’re a veteran who’s entitled to a discount on property taxes, or maybe you’re using your property for religious purposes. Both of these scenarios could grant you an exemption.
2. You suspect the assessed value of your home is higher than its true market value.
Counties use crude methods to calculate property taxes: Your home’s assessed value is multiplied by your local tax rate. Most properties value annually, by January 1 of the year. Homes are valued based on fair market value, which is the amount a buyer is willing to pay and a seller is willing to sell for in an open market. In some cases, property valuations can be extremely low or extremely high.
If the property valuation is too high, you’ll pay taxes higher than you should. Not only will you be paying more taxes, but it could make your house harder to sell. In the case of a double assessment, you may be on the hook for two times the taxes if your property was accidentally valued twice.
Having an incorrect assessment is a lot more common than missing the correct exemptions. Remember:
- Property taxes are generally based on the assessed value of the home.
- Sometimes, there are errors.
- Changes to your property can change its value. A home that once had an inground pool but doesn’t any longer may have a new assessed value that must be reflected in a lower tax bill.
Appealing the Valuation Notice you received for your property is called an equalization appeal. You may have less than 30 days to dispute after you receive this letter or notice, but regional timelines vary. If your property was damaged in a natural disaster, you may have up to six months to contest. Your Free Guide to Disputing Property Taxes. Download Now.
When do I need to dispute my property taxes?
When you need to appeal your property taxes varies by the state and county you live in. In Colorado, for example, there’s a small window to dispute property taxes in the spring.
Take two minutes now:
- Check with your county or use the National Property Tax Group calendar to find the deadline to dispute in your state.
Set yourself a reminder to appeal your property taxes whenever your local taxing body sends its assessment of your home’s value. In some areas, that’s once a year. In others, it’s every few years. Note that if you’ve suffered financial hardship as a result of COVID-19, you can also contact your county to see if you’re eligible for an extension or another form of tax relief. Your Free Guide to Disputing Property Taxes. Download Now.
Your guide to protesting property taxes: Do it in 5 steps
Onto the legwork. These simple steps can help you prepare for filing and completing your property tax dispute:
1. Keep meticulous records of everything.
If you want to come out ahead in the property tax dispute process, you’ll need to do your prep work. The most effective way to appeal property taxes is by taking care of the details first.
- Pay on time. Paying property taxes can normally be done online. Appealing your property taxes does not release you from your annual payment. You may be entitled to a return when your appeal is resolved, in which case the tax auditor will process your refund.
- Be organized. Keep copies of all paperwork related to your home assessment and tax payment receipts. Paperwork may also include proof of any changes to your property, like removing an attached garage or adding an extension.
- Find out who to talk to. Locate the office in your municipality that deals with property tax issues. Most towns have three to five elected officials on the property tax board of listers.
- Set a reminder. Use it to alert you of all the local deadlines you researched above.
- Ask about the process. Reach out to your contact person at your local municipality to get their recommended steps for disputing.
- See what you can appeal. In some states, you may be able to contest your home’s appraised or market value, wrongful inclusion of property, denial of an exemption, incorrect determination of the property owner, and more.
Above all, do your research. The more you know, the more prepared you will be.
2. Contact your local assessor’s office.
It’s always a good practice to ensure all deductions entitled to you are granted. This can happen when you first check your property assessment. You can also contact the local assessor’s office directly at any time to do your homework.
- Check the assessor’s math. If the County Assessor reviews the grounds for your dispute and finds an error (like an incorrect number of bedrooms), your property tax amount may be corrected without the need to appeal.
- Check the description of your property. Look for missing details and lot size and structural accuracy.
- Compare this information. It can help to contrast your property against at least five equivalent homes in your neighborhood.
- Set up an informal meeting. Some counties use a preliminary informal meeting with the County Appraiser or their designee (if required by your county) to allow you to explain your grounds for dispute. After the meeting, the County Appraiser will mail you the written results.
If you aren’t satisfied, you can progress to the property tax appeal hearing.
3. Contact your realtor.
You can look up comparable properties on your own to complete the steps above, but it may be easier to request them from your realtor.
- Chat with your agent. See if they’re willing to help you pull five comparable sales to show the county what your property is actually worth.
- Ask about cost. Many real estate agents will be more than happy to give these comps to you at no charge. But be mindful: Some agents have begun adding property tax appeals to their list of services.
- Consider their opinion. Based on their knowledge of local comps in your area, your realtor can provide you with helpful insight into if they think an appeal is worth making.
Realtors are typically the experts when it comes to value, so they can point you in the right direction, answering most, if not all, of your initial questions.
4. Contact your local assessor’s office again to set up an appointment to appeal.
If the first three steps check out, meaning you believe you’ve missed some exemptions you’re entitled to or that your property value assessment is too high, you’re now ready to take step four.
- Call your local assessor’s office. Set up an appointment to appeal. If a letter is required to make the appeal, submit using this sample format.
- Fill out the property tax assessment appeal application. It can be found on your county tax website. Then, follow the necessary instructions.
- File your completed appeal application. Submit it to the county tax clerk, either in person or through the U.S. mail.
- Pay any required fees. The cost to appeal property taxes is normally charged upfront and varies by area and property value. Filing fees may start at $10. Some states may also allow you to file without payment, if you’re eligible for support and can’t afford the filing fee.
- Wait for a confirmation postcard. This will tell you when the application arrives, normally sent within two weeks.
- Prepare to share. You can request an “exchange of information” from your County Assessor at any time to find out what comps or other documents they may present to determine your property value. If your home’s assessed at over $100,000, the assessor will usually request the exchange from you. You have up to 30 days prior to your hearing to request, and then the other party must respond at least 15 days before the hearing.
- Hire a professional. If you don’t want to do this on your own, consider contacting a company that specializes in this service.
A third-party property tax appeal company will normally charge you for about half of the amount they save you in taxes if their dispute is successful.
5. Make your appeal.
It’s the big day. If you’ve completed steps one through four, you have the power of preparedness on your side. Most taxing bodies make it clear how to dispute your home’s property taxes. As a homeowner, the best thing you can do is be thorough and meet posted deadlines.
- Find out whether your city allows you to appeal in writing. Otherwise, they may require your attendance at the appeal. You can find this information in your Notice of Assessment or by contacting your municipality in step one.
- Gather all the relevant info. This may include items needed for your appeal, like recent sales information for properties in similar condition and of similar age, a sales contract for your home if you’ve purchased within the last two to three years, photos and contractor estimates of the cost to repair any structural damage to your property, a recent appraisal report (ideally from an outside, nationally-certified source), and income and expense statements for the property for the past three years, if used as a rental.
- Don’t be late. Aim to arrive to the local assessor’s office for your appointment early or on time. Your appeal can also be denied for nonappearance and potentially closed if you forget or miss your hearing date.
- Think about bringing representation. You can represent yourself at your hearing, or, in many states, you can bring a licensed property tax consultant, a CPA, a licensed attorney, or a tax service employee to argue your appeal with you. If bringing representation, you may need to sign and submit written authorization permitting that person to represent you prior to the hearing. You may also be allowed to fill out a Declaration of Representative form to let another person (i.e., an immediate family member) represent you.
- BE PREPARED TO ARGUE. YOU’LL GET ABOUT FIVE MINUTES TO PRESENT YOUR APPEAL BEFORE THE LOCAL BOARD OF REVIEW. THE HEARING WILL TYPICALLY BE HELD WITH THE APPRAISAL DISTRICT STAFF AND WILL BE INFORMAL, NOT UNDER OATH. EACH SIDE WILL BE GIVEN TIME TO PRESENT EVIDENCE.
- Wait for a decision. The outcome of your dispute may be announced at your hearing, or the board may review the matter in private. If a judgment isn’t made at your hearing, the Board Clerk will mail a written decision to you or your representation.
- Take it higher. If you aren’t happy with the decision and believe you have proof your property taxes have been over-assessed, you can appeal to your state’s appraiser or the Superior Court. It’s recommended to consider hiring an attorney if you appeal to the Superior Court. For an appeal to the State Appraiser, you may still represent yourself. You’ll have 30 days to appeal from the day you receive the decision from your local tax board.
When you’ve finished your appeal process, pat yourself on the back and remember: A human will review your appeal. Being organized and presenting your appeal coherently puts the odds in your favor. Your Free Guide to Disputing Property Taxes. Download Now.
Take on the taxman: Property taxes are probably going to increase
Property taxes by state can vary, according to U.S. Census Bureau data and WalletHub’s 2020 stats. Top-ranking states like New Jersey and Connecticut, where annual taxes on a home priced at the state median value pay out at $8,104 and $5,746 respectively, are the most expensive. Cheaper states include Arkansas, West Virginia, and Alabama, where $776, $678, and $572 pay out in annual property taxes.
Of course, property taxes have a purpose — to fund city and county services. Your property taxes often go to nearby schools, social services, fire departments, road and bridge development, and more, strengthening your local community. New Hampshire, a state without broad-based income or general sales tax, is one of the most reliant on property tax revenue.
After owning your home for several years, you, like many homeowners, may notice your property taxes continue to rise. Even after you’ve paid off your mortgage, property taxes are likely to increase.
This is because property taxes are based on the assessed value of your home, or its grand list. As a result, your property taxes may rise or fall as the economy changes, related to current interest rates, inflation, tax laws, and the state of the housing market. As mentioned, renovating your home can be beneficial to increase its value, with the side effect of causing your annual property taxes to increase.
For many homeowners, taxes go up every year. Property taxes may also rise in 2021 because of the pandemic; the closing of small and larger businesses has left countless cities hurting for tax revenue. To combat rising tax bills, your annual property taxes are always worth investigating – and disputing. Need guidance? Your loan officer is only a call or an email away.
Cornerstone Home Lending, Inc. and its affiliates do not provide tax advice. Please consult your professional tax advisor for specific guidance.
For educational purposes only. Please contact a qualified professional for specific guidance.
Sources deemed reliable but not guaranteed.
CARMLA 41DBO-95730 ; Licensed by the Department of Financial Protection and Innovation under the CA Residential Mortgage Lending Act
Tim Harrison: Producing Branch Manager NMLS# 170960
1164 N. Monte Vista Avenue, Suites 3 and 4 | Upland, California 91786 | CARMLA 41DBO-95730
© 2020 Cornerstone Home Lending
Company NMLS ID#2258
Branch NMLS #1832234
Company AZ BK #0908763
Equal Housing Opportunity
For educational prusposes only. Please contact a qualified professional for specific guidance. Sources are deemed reliable but not gauaranteed.