Blog :: 02-2014

Shop and Lock

Are you shopping for a home and concerned about the potential of increasing interest rates?  Are you getting quotes for mortgage interest rates today and finding that two weeks later the rates are 0.25% higher?  Do you know what a 0.25% in interest rate means to your monthly payment?  How much could you afford if the rates went up a half point, or even 1 full point?

At today's rate of 4.5% on a 30-year fixed mortgage, the principal and interest payment for a $250,000 loan is $1,266.71 a month.  If that rate goes up to 5.00% the payment would go up to $1,342.05 per month.  An increase of $75.03 a month in payment.  If it increased a full point to 5.5% the same loan would cost you $1,419.47.  An increase of $152.76 per month as compared to the 4.5% rate. That is over a 10% increase in each payment.

Interest rates do not typically jump a full point very fast, but I have seen them increase a half a point in a matter of days.  In typical fashion they go up faster than they come down.  So, the question becomes, if you are shopping for a house, how do you protect yourself from the unstable economic market?

There are programs that allow you to lock a rate while shopping for a home.  Here's some insight into how these programs work.  You complete your pre-approval application, put in a TBD (to be determined) address, and lock in your rate for a specific period of time.  You then have time to both identify a property and finalize the purchase.  During this period of time you should consider getting started on the credit approval portion of the loan to speed up the back process, leaving you with only the appraisal and title work to be completed.   This makes your contract offer look especially desirable, as you would not only be pre-qualified, but fully pre-approved.

Now you ask, what happens if the economy swings and interest rates improve? Normally, once you are locked in, you are locked in to that rate.  But, be sure to ask if the lender offers a "float down."  What this means is that even if the interest rates improve you can still get the better rate.  This is a true win-win situation.

Article written for NELR by Jeff Teplitz, Mortgage Loan Officer, EverBank.

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Buying Your Starter Home: Setting Expectations

Watch enough HGTV, and you'll quickly realize that the majority of first-time home buyers have no idea what types of amenities they can actually afford. Going from renting to owning your home opens up a wide range of opportunities in your life, but it also requires some sacrifices. It's important to consider whether the first house you shop for is one that you want to live in for your entire life or if it's more of a starter home. While you may still be wary about giving up too many amenities when buying a starter home, you have to realize that some demands are going to cost you big bucks for a place you only plan on staying in for a few years. Here are six things you might need to sacrifice when buying your first home. Prepare yourself now, and you will fell much less anxiety during the actual house hunting process.


1. Giant Yard - After you've been cooped up in an apartment for several years, it's only natural to dream of a house with a big yard for you to enjoy. Unfortunately, most starter homes are built on relatively small lots. Property is expensive, so you will typically have to sacrifice major interior amenities in order to get a house with a big yard. You should also consider how ready you are to assume the commitments associated with caring for a large plot of land. Between routinely mowing the lawn and maintaining plants and trees, many young homeowners find a big yard is actually more trouble than it's worth.

2. New Appliances - You should never rule out a house just because you walk in and see an ancient dishwasher or refrigerator. While almost all first-time home buyers dream of finding a place with brand new stainless steel appliances, the truth is that the benefits of those machines are mostly cosmetic. A white fridge will keep your food just as cold as a stainless steel one, and you may be able to get a better deal on a house because it has older appliances. Plus, if you save up enough money while living in the home, you can always replace your appliances with the ones you want anyway.

3. Master Bathroom - Everyone wants a home with an en suite master bathroom attached to the bedroom because of the added convenience and privacy, but most people looking for starter homes are either single adults or childless couples. If you don't have kids yet, then there's no real reason why you will absolutely need a dedicated master bathroom. Most couples can survive just fine sharing one bathroom in a home, even if it's not the most convenient scenario. Ditch your demands for an en suite master, and you will be able to open up your pool of potential houses to include several more options.

4. Updated Kitchen and Bathrooms - Similar to new appliances, updated kitchens and bathrooms are mostly cosmetic demands, and you may not be able to find a starter home with granite counter tops and rain shower-heads. It's common knowledge among realtors that kitchens and bathrooms are the most expensive rooms in the house to redo, which means that sellers aren't likely to put the money into refinishing them in a starter home. It's important for first-time buyers to insist on functionality over appearance--as long as everything in the bathroom works, you can live with it for a few years.

5. School District - If you don't have kids (or even if you do have very young children), you shouldn't worry too much about finding a home in a good school district. Desirable school systems make housing prices skyrocket, so you should only put that extra money into a house if you know you'll be living there when your children begin their education. For many buyers, it's better to buy a cheaper starter home now and work on saving money so that you can afford to move into a good school district when it comes time for your little one to enter kindergarten.

6. Move-In-Ready Condition - So many first-time home buyers are scared of doing any sort of renovations on their starter homes. For this reason, some people rule out perfectly good properties just because they don't like the color of the walls or the type of flooring. As long as your house has good bones, you can fix almost all cosmetic issues--and many fixes cost next to nothing when compared to the overall price of a home. Do your best to look past anything that can be easily changed, and you may be able to find a diamond in the rough.


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Reforming VT Education

New call to reform Vt. education funding system.

According to a report comissioned by The Vermont Realtors there is a desperate need for innovation in the financing infrastructure of our Vermont schools. This is a system which Vermont Realtors President Donna Cusson says reflects 19th century Vermont lifestyles instead of a system that will prepare our students to be as successful as possible in the modern world that we live in. According to the U.S. Department of Education, Vermont has the highest high school graduation rate in the nation. Imagine how much Vermont students, parents, and communities could gain from even more improvements to the system. As Education Secretary Rebecca Holcombe stated, we need to target our education spending in order to receive the best return and Vermont Realtors suggests that the following results could come from doing just that to reform education spending in our state.

  • Reduced property taxes enable saving for our children's future education and our underfunded retirement investments
  • Surplus funds currently spent to sustain an inefficient education system could be used to enhance curriculum and acquire innovate teaching tools
  • Lower property taxes would make Vermont a more attractive place for business creation, expansion and relocation providing jobs for our graduates to stay home in the Green Mountain State and stem the flow of the 'brain drain'
  • Buyers shopping for a second home or looking to retire would be encouraged to choose Vermont, a state that leads the nation in the areas of excellent medical care, a healthy environment and low crime
  • The creation of better, lower-cost schools helps us to compete in a global economy
If Vermont can enhance it's educational value, some of the many fantastic outcomes for Vermont communities will be reflected in the real estate industry. More people will be attracted to move their families or start new ones in Vermont and the young minds of our educated high school and college students will be more likely to invest their future in staying in the state.



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