Getting A Mortgage: Why So Much Paperwork?

We are often asked why there is so much paperwork mandated by the bank for a mortgage loan application when buying a home today. It seems that the bank needs to know everythingabout us and requires three separate sources to validate each and every entry on the application form. Many buyers are being told by friends and family that the process was a hundred times easier when they bought their home ten to twenty years ago. There are two very good reasons that the loan process is much more onerous on today’s buyer than perhaps any time in history.

1. The government has set new guidelines that now demand that the bank prove beyond any doubt that you are indeed capable of affording the mortgage. During the run-up in the housing market, many people ‘qualified’ for mortgages that they could never pay back. This led to millions of families losing their home. The government wants to make sure this can’t happen again
2. The banks don’t want to be in the real estate business. Over the last seven years, banks were forced to take on the responsibility of liquidating millions of foreclosures and also negotiating another million plus short sales. Just like the government, they don’t want more foreclosures. For that reason, they need to double (maybe even triple) check everything on the application.

However, there is some good news in the situation. The housing crash that mandated that banks be extremely strict on paperwork requirements also allowed you to get a mortgage interest rate probably below 5%. The friends and family who bought homes ten or twenty ago experienced a simpler mortgage application process but also paid a higher interest rate (the average 30 year fixed rate mortgage was 8.12% in the 1990’s and 6.29% in the 2000’s). If you went to the bank and offered to pay 7% instead of <5%, they would probably bend over backwards to make the process much easier.

Bottom Line

Instead of concentrating on the additional paperwork required, let’s be thankful that we are able to buy a home at historically low rates.

4 Reasons to Buy Before Winter

It's that time of year, the seasons are changing and with them bring thoughts of the upcoming holidays, family get togethers, and planning for a new year. Those who are on the fence about whether now is the right time to buy don't have to look much farther to find four great reasons to consider buying a home now, instead of waiting.

1. Prices Will Continue to Rise

The Home Price Expectation Survey polls a distinguished panel of over 100 economists, investment strategists, and housing market analysts. Their most recent report released recently projects appreciation in home values over the next five years to be between 11.2% (most pessimistic) and 27.8% (most optimistic).

The bottom in home prices has come and gone. Home values will continue to appreciate for years. Waiting no longer makes sense.

2. Mortgage Interest Rates Are Projected to Increase

Although Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage have softened recently, most experts predict that they will begin to rise later this year. The Mortgage Bankers Association, Fannie Mae, Freddie Mac and the National Association of Realtors are in unison projecting that rates will be up almost a full percentage point by the end of next year.

An increase in rates will impact YOUR monthly mortgage payment. Your housing expense will be more a year from now if a mortgage is necessary to purchase your next home.

3. Either Way You are Paying a Mortgage

As a recent paper from the Joint Center for Housing Studies at Harvard University explains: “Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return. That’s yet another reason owning often does—as Americans intuit—end up making more financial sense than renting.”

4. It’s Time to Move On with Your Life

The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise. But, what if they weren’t? Would you wait? Look at the actual reason you are buying and decide whether it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer or you just want to have control over renovations, maybe it is time to buy.

Bottom Line

If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.

Your alarm wakes you up at 6:30 in the morning. One minute later the lights in your room automatically turn on. You get out of bed and walk down to the kitchen to get a fresh brewed cup of coffee and catch up on the morning news, which, conveniently, is already playing on the TV. You check the time and head back to your bathroom where the shower is on and heated up. When you finish, the bathroom lights turn off as you leave the room. Dressed and ready for work, you head out to the garage. Last year you had to deal with a garage door opener. This year, the door opens automatically just like your programmed it to. At work you get a text from your thermostat alerting you that the temperature is going to drop. You open up your home automation app and schedule your thermostat to increase the temperature 30 minutes before you usually get home.

And while such a scenario might seem far-fetched -- or, at least, expensive – it’s possible due to the increasingly connected world we live in. It’s the Internet of Things: the virtual representations of real objects in a connected structure. It’s your weather app “talking” to your thermostat to ensure your home is as comfortable and efficient as possible. It’s motion sensors detecting movement and turning on hallway lights so you don’t trip in the middle of the night. It’s pulling up your home automation app and shutting the garage door that you accidentally left open. In short, it’s what makes home automation a reality.

Get Automated

When it comes to home automation, your options will be primarily dictated by your budget. Interested in home automation but not sure if it’s something you want to fully commit to? For about $249 you can pick up a Nest Learning Thermostat^® that features Wi-Fi connectivity and software that programs itself based on your usage and schedule. If you’re looking to add a little more automation, Belkin’s WeMo^® system allows you to quickly and affordably automate individual lights and devices with easy-to-install motion sensors.

Of course, once you discover the convenience of home automation, we wouldn’t be surprised if you decided to step it up a bit. For some, this means going the whole nine yards and installing a whole-house system that links all your home’s major components (lighting, HVAC, media, security). If this is the case, you’ll want to talk to a licensed home automation pro. They’ll be able to design and install a secure system that delivers the features you want at a budget you can afford.

If you’re less concerned about having a smart home and more so about having a safe home, home automation is a great way to improve your home’s security. From motion sensors to video surveillance to fire and water monitoring, companies like Xfinity, ADT, and AT&T offer customizable security solutions that keep you safe when you’re in your home, while letting you keep tabs on it when you’re not.

Additional Considerations

The convenience of home automation is not without its drawbacks. Privacy and security will remain an issue so long as your devices are connected to wireless networks. However, given the pace at which technology has, and will continue to evolve, it’s safe to assume that these issues will be resolved sooner than later, making home automation a standard feature in every home.

5 Questions You Should Ask Your Real Estate Agent

Whether you are buying or selling a home, the process can be challenging. That is why we always suggest that you take on the services of a real estate professional when embarking on a potential home move. However, not all real estate agents are the same. A family must make sure they hire someone who truly understands the current housing market and, not only that, knows how to connect the dots to explain how market conditions may impact your decision. How can you make sure you have an agent who meets these requirements? Here are just a few questions every real estate professional should be able to answer for their clients and customers:

• Are home values approaching a new bubble or will prices continue to appreciate?
• Is it better for a first time buyer or a move-up buyer to wait until they save a bigger down payment before they purchase a home?
• Where will 30-year mortgage rates likely be in 12 months?
• Why do I need an agent when I can just as easily find the house online myself?
• Is buying a home still a good investment for my family?

Make sure you hire an agent that can answer questions like those above. That will guarantee the home buying or selling process will be much easier for you and your family

Understanding Bathroom Remodel Costs

Like all major remodeling projects, one of the keys to a successful bathroom remodel is careful planning. From the contractor you hire to the materials you choose, you’ll be faced with big decisions. To make sure you make the right ones, you need to know your budget. However, knowing how much to spend and what to spend it on are often some of the toughest decisions you’ll have to make. Understanding the cost-factors involved will help make them that much easier.

One of the first things you need to do is figure out how much you should spend on the entire project. (Note: this isn’t to be confused with how much you can spend. While you might have $50,000 to allocate to your remodel, it might not make sense to spend that much if the market won’t support the investment.) According to cost reports submitted by HomeAdvisor users, most homeowners spent between $8,342 and $11,568 on their bathroom remodels. How much you can expect to spend depends on a few key factors.

First, you need to decide how important it is that you get a return on your investment. If you want to maximize your ROI, you need to make sure you don’t over-improve for the market. In many cases this means spending no more than 5% of your home’s value on your bathroom remodel. For homeowners looking to maximize ROI, choosing mid-grade materials typically yields the highest returns.

What’s the (Floor) Plan?

Next, you’ll need to determine if you’ll be changing the room’s floor plan. If you’ve been dreaming of transforming your small bathroom into an expansive master bath, you can expect your costs to increase up to $6,000 (or more) if existing walls need to be removed and new retaining walls need to be installed. Add in the costs of installing or rerouting pipes and electrical wiring and you can quickly see your costs jump an additional $2000-$4000.

Factoring in Fixtures

From here you’ll need to factor in the costs of fixtures (these include toilets, sinks, tubs, showers, and faucets), flooring, tile, cabinets, countertops, and lighting. Not surprisingly, your costs will be directly tied to the quality of each. If you’re on a budget, you might find that it pays to be flexible. Know where you can compromise on quality and where you can’t. If this is a high-end remodel you’re obviously not going to want to install inexpensive, contractor-grade materials. That being said, just because you’re doing a high-end remodel doesn’t mean all your materials have to be high-end too, especially if you’re the only person who will notice.

Last but not least, you’ll need to factor in labor costs. While skilled DIYers occasionally tackle parts of the project themselves, hiring a licensed pro is the way to go. But here’s the thing: the quality of your remodel and the remodeling experience is dependent on the quality of the pro you hire. We can’t stress enough how important it is to find a pro you feel comfortable working with and who has the skills to bring your remodeling vision to life. If that means you need to talk to a half-dozen pros before you find the one you feel comfortable hiring, then talk to a half-dozen pros. The results will be worth it.