More First-Time Home Buyers In 2015?
In October, 29% of home buyers were first-time home buyers, the lowest level in decades, according to the National Association of REALTORS®,
In Marin County, that percentage was higher. In October 2014, 53% of the homes that were sold were priced under $1 million. But the one to two million price range was also very active, and the average sales price of homes (single family and condominiums) peaked at $1,327,000 in March 2014. During 2014, Marin has had an average of 60-70% of its active listings, and an average of 80-85% of listings sold, in the under $2 million price bracket.
With mortgage rates averaging less than four percent this November, and with rents rising faster than home values all over the Bay Area, the percentage of first-time buyers is expected to climb.
More than 6 million U.S. consumers will buy a home between now and the end of 2015. If you’re planning to be among them, you’ll want to make a plan for your purchase.
Follow these steps before you start your search. By asking good questions, you’ll have a firmer grasp of the home buying process and, also, of your finances.
I sold this entry level 3 bedroom San Rafael home to first time buyers for close to $1 million with multiple offers last summer
1. Have You Planned For Homeownership?
Home buyers aren’t born overnight. The decision to buy a home is one which can take day, months, or even years. There’s no “right” or “wrong” timetable for it.
In Marin County, a lot of the first time home buyers are families from San Francisco: either they have outgrown their current home, or are growing their family and our excellent quality of life and schools are a major attraction. Other first time home buyers jump into homeownership when their rental lease ends. Landlords are often increasing their rent and they’ve decided against renting for another 1- or 2-year term.
If you are thinking of buying a Marin County home, regardless of your motivation, you won’t decide to buy a home overnight. And, with all the time you’ll spend asking “is it a good idea to buy a home?” you’ll have ample time to plan ahead.
Pre-home buyers should take a realistic look at their personal finances, as well as their goals for the future.
Using a mortgage calculator may come in handy, but there’s more to owning a home than low mortgage rates.
2. Have You Considered The Costs Of Homeownership?
Deciding whether to buy a home or rent? Make your current finances a major factor because, although mortgage payments may be lower than comparable rental costs in many U.S. cities, the ongoing costs of homeownership are often higher.
Remember — homeowners with a mortgage are responsible for more than just the mortgage. Homeowners are also responsible for annual real estate taxes and, in some cases, annual or monthly assessments to a community.
Plus, the cost of homeowners insurance can be higher than the cost of renters insurance. Well prepared buyers plan for these increases in costs.
Furthermore, homes — even new ones — require maintenance and upkeep. A good rule of thumb is to expect annual maintenance costs to average approximately 1.5 percent of your home’s value. This upkeep cost may include the cost of ongoing maintenance, new appliances; landscaping costs; window washing and gutter cleaning; and more.
Have a grasp on your income, your debts and your ongoing credit obligations to make sure you’re using your available money wisely.
3. How Much Home Can You Afford?
“How much home can I afford?” is among the most common home buyer questions. However, it may be the wrong financial question.
Instead of seeking your maximum home purchase price, it can be better to determine the maximum monthly payment you can reasonably manage on the basis of both your income/resources and your lifestyle, and then work backward using today’s mortgage rates to determine your maximum home purchasing power.
Remember that a mortgage rate change of just 1 percentage point, for example, can raise or lower your purchasing power 11%.
When you focus on a maximum monthly payment instead of a maximum home purchase price, you can be sure that you’ve made a budget which accounts for all of a home’s ongoing costs — not just its principal + interest.
4. Have You Decided On Your Down Payment?
Before buying a home, financial experts often recommend, and lenders now frequently require, that home buyers have 6 months or more of cash reserves set aside to cover living expenses, real estate taxes, and other monetary obligations in the event of a catastrophe. These funds should not be used for a home down payment. They’re a cushion against emergency. And, once those funds have been set aside, home buyers should consider their home down payment.
Down payments on a home can range from zero to twenty percent or more. In competitive bidding situations, which are very frequent in Marin for homes under $1 million, and common for homes up to $2 million, a higher down payment can give you a competitive edge and I have often seen down payments of 50% or more.
For buyers wishing to make the smallest down payment possible, the VA loan via the Department of Veterans Affairs and the USDA loan via the U.S. Department of Agriculture both offer no downpayment loans. However, each of these programs have unique eligibility requirements. For most home buyers, the minimum downpayment required is 3.5 percent, available with a standard FHA loan.
5. Are You Prepared To Pay Closing Costs?
In addition to a down payment, home buyers should set aside monies for home and loan closing costs, while leaving an ample amount of funds for living expenses and emergencies.
The Department of Housing and Urban Development (HUD) suggests that home buyers plan to have 4 percent of a home’s purchase price ready at settlement to account for costs and expenses, which include lender fees, title fees, government taxes and real estate taxes.
In some areas of the country, the real estate contracts provide for the home seller to pay for all, or a portion, of the buyer’s closing costs. This is an arrangement known as Seller Concessions. Sellers may contribute toward closing costs and prepaid items up to 6% of the home’s purchase price. In Marin County, it is customary for the buyer to pay for all fees, including title and escrow fees.
Your lender can also help you to lower your closing costs using a zero- or low-closing cost mortgage. If bringing cash to closing will deplete your personal reserves, have a talk with your lender about your options.
6. Have You Reviewed Your Credit Report For Errors?
For most mortgage loans, the rate you get from the bank is linked to your credit score. This is because your credit score reflects the likelihood of your loan defaulting and your home going into foreclosure. Higher credit scores are linked with lower default rates. This is why home buyers with high credit scores get access to the lowest rates available — the loans represent a lesser risk to the lender.
However, it’s been said that as many as one-quarter of all credit report contain an error. Some of these errors are minor and have little effect on the overall report. Some, however, are major and can affect a score by 100 points or more.
By law, U.S. consumers are permitted to receive one free copy of their credit report per year. As earlier in the home buying process as possible, you should execute on this right. Order your free credit report and review it for errors carefully. Correct or dispute the issues you uncover.
If you are thinking of buying a home, I have a Marin County Buyer’s Guide that my clients have found very useful. If you would like a copy, just send me an email at Sylvie@YourPieceofMarin.com. I would be happy to answer any real estate related questions as well. I can recommend an excellent mortgage professional if you don’t have one and want to start the mortgage process or just ask questions.
This article was adapted from The Mortgage Reports’ article: Ask these 6 Mortgage Questions Before Buying a Home.
About the Author: The above Real Estate information on Marin County Real Estate was provided by Sylvie Zolezzi. I can be reached via email at Sylvie@YourPieceOfMarin.com or by phone/text at 415.505.4789. I am an award winning Realtor specializing in luxury residential real estate in beautiful Marin County, just north of the Golden Gate Bridge.
I offer a wide range of real estate solutions for buyers, sellers and investors, attracting clients who demand excellence—in marketing, negotiations, market knowledge—and a genuine concern for their needs. My association with Decker Bullock Sotheby’s International Realty allows me to provide a high-end luxury experience to all my clients at every single price point. It also empowers me to leverage the unique combination of Sotheby’s global resources, Decker Bullock Sotheby’s International Realty’s growing market share and local knowledge with my unmatched social media networks to provide highly personalized service and unmatched exposure to my clients’ properties locally and worldwide.
I service all of Marin County’s beautiful towns: Sausalito, Tiburon, Belvedere, Mill Valley, Corte Madera, Larkspur,Greenbrae, Kentfield,Ross, San Anselmo, San Rafael, Fairfax, and Novato, with a special focus on Central Marin.