Area Real Estate News & Market Trends

You’ll find our blog to be a wealth of information, covering everything from local market statistics and home values to community happenings. That’s because we care about the community and want to help you find your place in it. Please reach out if you have any questions at all. We’d love to talk with you!

Jan. 31, 2018

How Much Mortgage Can You Afford?

4 Tips to Determine How Much Mortgage You Can Afford

By: G. M. Filisko from HouseLogic.com

What's a rule of thumb to determine how much mortgage you can afford? There's no one rule, but these four tips will tell you.

 

Home ownership should make you feel safe and secure, and that includes financially. Be sure you can afford your home by calculating how much of a mortgage you can safely fit into your budget.

Why not just take out the biggest mortgage a lender says you can have? Because your lender bases that number on a formula that doesn’t consider your current and future financial and personal goals.

Think ahead to major life events and consider how those might influence your budget. Do you want to return to school for an advanced degree? Will a new child add day care to your monthly expenses? Does a relative plan to eventually live with you and contribute to the mortgage? Do you like to travel?

Consider those lifestyle issues as you check out these four methods for estimating the amount of mortgage you can afford.

#1 Prepare a Detailed Budget

The oldest rule of thumb says you can typically afford a home priced two to three times your gross income. So, if you earn $100,000, you can typically afford a home between $200,000 and $300,000.

But that’s not the best method because it doesn’t take into account your monthly expenses and debts. Those costs greatly influence how much you can afford. Let’s say you earn $100,000 a year but have $1,000 in monthly payments for student debt, car loans, and credit card minimum payments. You don’t have as much money to pay your mortgage as someone earning the same income with no debts.

Better option: Prepare a family budget that tallies your ongoing monthly bills for everything -- credit cards, car and student loans, lunch at work, day care, date night, vacations, and savings.

See what’s left over to spend on home ownership costs, like your mortgage, property taxes, insurance, maintenance, utilities, and community association fees, if applicable.

#2 Factor in Your Downpayment

How much money do you have for a down payment? The higher your downpayment, the lower your monthly payments will be. If you put down at least 20% of the home's cost, you may not have to get private mortgage insurance, which protects the lender if you default and costs hundreds each month. That leaves more money for your mortgage payment.

The lower your down payment, the higher the loan amount you’ll need to qualify for and the higher your monthly mortgage payment.

But, if interest rates and/or home prices are rising and you wait to buy until you accumulate a bigger downpayment, you may end up paying more for your home.

#3 Consider Your Overall Debt

Lenders generally follow the 43% rule. Your monthly mortgage payments covering your home loan principal, interest, taxes and insurance, plus all your other bills, like car loans, utilities, and credit cards, shouldn’t exceed 43% of your gross annual income. 

Here’s an example of how the 43% calculation works for a home buyer making $100,000 a year before taxes:

  1. Your gross annual income is $100,000.
  2. Multiply $100,000 by 43% to get $43,000 in annual income.
  3. Divide $43,000 by 12 months to convert the annual 43% limit into a monthly upper limit of $3,583.
  4. All your monthly bills including your potential mortgage can’t go above $3,583 per month.

You might find a lender willing to give you a mortgage with a payment that goes above the 43% line, but consider carefully before you take it. Evidence from studies of mortgage loans suggest that borrowers who go over the limit are more likely to run into trouble making monthly payments, the Consumer Financial Protection Bureau warns.

#4 Use Your Rent as a Mortgage Guide

Use a calculator that compares renting and owning to help you see what makes sense for you.

If you’re struggling to keep up with your rent, buy a home that will give you the same payment rather than going up to a higher monthly payment. You’ll have additional costs for home ownership that your landlord now covers, like property taxes and repairs. If there’s no room in your budget for those extras, you could become financially stressed.

Also consider whether or not you’ll itemize your deductions. If you take the standard deduction, you can’t also deduct mortgage interest payments. Talking to a tax adviser, or using a tax software program to do a “what if” tax return, can help you see your tax situation more clearly.

Posted in Buyers
Jan. 29, 2018

6 Tips for Buying in a Competitive Market

Buying real estate in Chittenden County feels a little bit like a Black Friday Sale (without the low prices) – only serious buyers show up and get ready to throw some elbows.  But, before you get your war paint out, let’s talk about positioning.  Positioning yourself properly in this market is going to be key to successfully securing your next home.  So, think through these items prior to falling in love in your next home:

1.)    Financing: If you can pay cash, this is a “cash is king” market. A cash position could out-leverage higher competing offers – so open up those pockets (just remember, you will need to show you have sufficient funds when making an offer). But, if you’re like most buyers, you will probably be seeking financing.  Be sure you are pre-approved for a mortgage prior to looking at properties.  In this market, a pre-approval letter should accompany any offer to ensure you are a “ready and willing” buyer. 

2.)    Current Homeowners: If you are a current homeowner, you’ll be competing with buyers who may not have a property to sell.  You should discuss your position with your Realtor.  Sometimes, it makes sense not to include “Contingent Upon Sale” in your offer. If you do need to sell your home prior to purchase, you should have your property on the market before making any offers – and ideally, it should be Under Contract.  This shows any Seller that you are well on your way in the moving process.

3.)    Contingencies: If you’re in competition, remember that less is more.  Sellers are looking for offers with fewer contingencies (i.e. Financing, Inspection, Appraisal, etc). Talk with your Realtor about which contingencies you definitely should have, and which you might be comfortable leaving out.

4.)    Offer: Home prices have inflated over the last year with such little inventory, and it is common to see offers that are above asking price. It’s important that you are shopping in the right price range – so instead of shopping at the top of your price point, you may want bring your price point down slightly – that way, if you need to stretch, you can go above asking price.

5.)    Act Quickly: Days on market (DOM) are at an all-time low. If you’ve done your homework ahead of time and have a good Realtor by your side, you should feel confident acting quickly if you walk into the home of your dreams. Time is of the essence, and we often counsel our sellers that the first offer is often the best offer – so act quickly if you can!

6.)    Resilience and Patience: It’s likely you will not get the first home you make an offer on.  This is where you need to draw on your resilience and patience to stay in the market and keep going. There are plenty of homes out there, and more than one can be right for you. Stay in the game, and keep looking.

 As a buyer, it’s important to have the proper counsel to understand the buying process and market conditions.  Our Real Estate Associates believe that informed clients are the best clients.  We’d love an opportunity to talk with you about your real estate needs.  Contact us to set up a Buyer's Consultation.

Posted in Buyers
July 31, 2017

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Curious about local real estate? So are we! Every month we review trends in our real estate market and consider the number of homes on the market in each price tier, the amount of time particular homes have been listed for sale, specific neighborhood trends, the median price and square footage of each home sold and so much more. We’d love to invite you to do the same!

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We can definitely fill you in on details that are not listed on the report and help you determine the best home for you. If you are wondering if now is the time to sell, please try out our INSTANT home value tool. You’ll get an estimate on the value of your property in today’s market. Either way, we hope to hear from you soon as you get to know our neighborhoods and local real estate market better.

Posted in Market Updates