Home Loan Focus

Archive for the ‘Renting v Buying’ Category

If you are going out today shopping for a home there are a number of tools that you really must have.  Times have changed and those people that are technically savvy will benefit the most during the home shopping experience.  Here are few items that you definitely should invest in and most of them are even on sale before you make one of the biggest investment of your life in your future home.

• A Good GPS Device - You need a GPS device these days to insure that while you are house hunting, you do not get lost, you have the option of reviewing routes from a prospective home to your work, to the store and your children’s school.  Plus, it helps you to remain orientated so that your realtor does not confuse zipping in and out of subdivisions and backroads!
• A Radio - Make sure you have a good radio in your car.  Its kind of a weird item as things go extra digital, but many homes have the option at the curb that allows you to listen to information about a home.  Use this to your advantage!
• Laptops and Wireless Cards - Take your laptop with you and look into investing in a cellular air card while you are house hunting.  It will help significantly, if you can review other homes in the area, check comparables on the spot, and even find the next house to visit if necessary.  Plus, if you happen to drive by a great looking house on the way there, you can check its listing on your computer!
• Digital Camera with lots of Extra Flash Cards - Don’t be shy, take pictures of everything and Video is even better.  Make sure you snap a picture of the address or mailbox as the first shot so that you will know one set from another as you review them later!
• Cell phone – Really we shouldn’t have to mention this, but don’t forget it.  You will need it and while you are in the house check to see how many (if any) bars you have for cellular reception in all the rooms of the house. 
• Take your own car - This is not the time to save gas money.  You will need private time after each house viewing to think things over and talk with your spouse or family.  Give yourself that by taking your own car.

Looking to get a little extra juice out of the seller? Ask for a cellular repeater antenna to be installed on the house for a couple hundred bucks.  It is a buyers market and if the house doesn’t get signal this could help and make it home sweet connected home.

If you ar

For many people in the corporate world, at some point or another your company is going to ask you to relocate somewhere around the country and offer to foot the bill. This may sound like a great deal because they’re offering to pay for you to move, but the reality is there are thousands of dollars of hidden expenses involved in this process.

When your company offers you a chance to move, you need to make sure that they’re also offering you a major payraise. If you’re not going to see a payraise of at least $15-$20000, odds are this move is going to take many years to pay off or for you to at least break even. I realize were going through a recession right now and so many people will be tempted to take what they can get and keep what they have, but with inflation increasing you definitely don’t want to move across the country for the same amount money that you received today.

You have to also watch out for all of those third-party contract companies that are there to assist you with your move. They are probably working on a very cozy contract with your company and they don’t necessarily have your best interests in mind and maybe not even the best interest of your company. Even though your company is paying for some of their services make sure that you give them a critical look at every decision they make on your behalf. They might offer to put you in corporate housing for a month for example, charging your company $4000 a month for your rent. That’s a lot of money and if you don’t get out of corporate housing on time you may have to pay that $4000 a month rent bill. So before you move in a corporate housing make sure you can get out on time!

You have to be careful when it comes to storing your stuff as well. Your company might offer to store your valuable possessions for that month while you’re in corporate housing. However if you are unable to close a deal on a house for example within 30 days you could be stuck paying the bill for corporate housing as well is paying the bill for additional storage of your stuff.

So where possible don’t sell your original house until the last minute if you can. Keep your stuff in a place where it’s cheaper free as long as you can. You might even consider trying to avoid corporate housing even if you have to pay the bill. It might not be bad for a week or two while your house hunting, try and stay away from it as long as possible.

Consider also that your company is footing the bill and that money is coming out of their budget. If your bonuses tied to the budget of the new department that you’re moving to and you are inflating the cost of that department your chances of receiving a bonus which could be worth a lot more than a couple thousand dollars could be jeopardized by your own actions.

There are many other areas where relocations can cost you some serious money so make sure you keep a critical eye open to everything that’s going on and try not to get rushed in your decisions while you’re moving. Sometimes the best move is not to move at all.  You might be better off looking for a different job, even one that pays slightly less in the location you live in now.  A move can cost you a great deal of money in the first few years following the move.  Taking a couple thousand dollar pay cut with the option of staying put, could actually enable you to move financially ahead.  Then you can use some of that money that you saved from staying put, to take the family on a couple Disney cruises or invest some money in solar panels for the house or a better telecommuting setup so that next time around, you will be prepared to not move and to work from home permanently!

I happen to be moving to the one area in the country that saw rising home prices in January, Charlotte, NC.

That is not exactly a good thing for me is I’m looking to buy a home in the area.  Charlotte, North Carolina did not benefit from the rapid escalation in home prices during the housing boom but the prices there have gone up.  I do see a number of houses on the market in Charlotte, North Carolina that seem to have inflated prices.  And as the correction continues to go around the country, I’m going to wait and see a prices cracked in Charlotte before I buy.  The last thing I want to do is buy a home in Charlotte only to see 10 to 20% of the value knocked off of it after the fact.

If you read any of the news reports coming out of Charlotte and you believe the realtors Association (which I do not) then you would believe that people are snapping up houses in Charlotte, North Carolina.  That could be, but I’m not exactly sure where they’re doing that because I see a lot of houses on the market there that have been sitting there for months.  Normally it would be a benefit to have your house sales price holds steady, but given the uncertainty in the market I suspect that there may be many other buyers looking at the Charlotte area and waiting for the correction to actually hit and so the January numbers could actually hurt Charlotte over the next few months as it possibly experiences a delayed curve in the housing correction.

If I am wrong, then this could be an excellent time to sell your house and Charlotte because you may not see that value for a decade.

These may be crazy times in the real estate market, but that doesn’t mean that you have to make crazy decisions.  Take your time, figure out what is going on with your own eyes and information, question what you read in the media and look at the sources for those articles and then act when appropriate.

In the meantime, this weekend I’m working on my own house in the Atlanta area.  This was another one of those fabled areas it was not supposed to experience any downturn when the real estate correction came.  I didn’t trust that either, and I think I was right to not trust that sentiment as I have seen a number of corrections in the Atlanta area.  I’ve been sitting on my house all winter and I’ll probably continue to sit on it through the summer before actually list it.  If the market doesn’t correct, in interest rates go through the roof because of inflation, then I’ll just rent the house out.  The meantime I’m putting some Baldwin knobs on the cabinets to make them look little fancier in case I do sell it.

Sources and Related Stories about Charlotte, NC home price hold out in Real Estate

Real estate in record freefall
London Free Press, Canada – Mar 26, 2008
Only Charlotte, NC, squeaked by as a gainer in the Case-Shiller index, with a 1.8 per cent rise in January compared to a year earlier. …

Pro Step Marketing strategy results in new custom website
TransWorldNews (press release), GA – Mar 28, 2008
Pro Step Marketing, a real estate-focused marketing strategy, design and implementation firm, worked with Paul and Karen McPherson of Charlotte, NC to …

Singing honors for 2 students
Charlotte Observer, NC – 11 hours ago
Catawba Valley Community College will offer two classes designed to meet annual continuing education requirements for real estate agents. …

Forsite Development, Inc., closes on buildings in Gastonia, NC …
Carolina Newswire (press release), NC – Mar 27, 2008
Forsite Development, Inc. (www.forsiteinc.com), based in Charlotte, develops commercial real estate space, both office and industrial, throughout the …

First American CoreLogic Releases January 2008 LoanPerformance …
FOXBusiness – Mar 28, 2008
"Twenty-eight states now show year-over-year real estate declines according to this latest LoanPerformance HPI release," said Damien Weldon, vice president, …FAF – OTC:CMTX

SABEW Announces Additional Winners in its 13th Annual Best in …
FOXBusiness – Mar 28, 2008
News-Press: "Southwest Florida real estate sellers beware" — James L. Martin, Erie (Pa.) Times-News: "Made in Mexico" Weekly Publications — Bryant Ruiz …

Business Calendar
Winston-Salem Journal, NC – 12 hours ago
The Piedmont Club Real Estate Council meets the second Friday of each month at 11:30 am for lunch at the Piedmont Club, 19th floor of the BB&T Financial …

Real Estate Agent Puts Allen Tate on the Map in South Charlotte …
PR Web (press release), WA – Mar 19, 2008
Charlotte, NC (PRWEB) March 17, 2008 — The #1 real estate company in Charlotte finally has a top agent in Steele Creek. Realtor Brian Wade is establishing …

More glum housing data
Minneapolis Star Tribune (subscription), MN – Mar 25, 2008
Foreclosures affected about 0.3 percent of the mortgages in the Twin Cities area, said First American CoreLogic Inc., a real estate information and …

Local home-price drop 4th-worst in metro survey
San Diego Union Tribune, United States – Mar 26, 2008
Peter Dennehy, senior vice president of the San Diego-based Sullivan Group Real Estate Advisors, said the prices dropped the most in the lowest-priced …

We previously tried adding some credit and finance calculation tools a couple weeks back.  The tools were sponsored by credit companies, and they did not deliver what we were looking for.  You’ve probably seen teaser calculation tools in the past.  They ask you for some information to calculate a new payment or what if scenario on your finances and before you know it, you have no answer and they are sending your personal information off like a loan application.  Well, we think that is bogus. 

If you want to check out our sponsors, more power to you, but we want you to do that with your eyes wide open and preferably when you have all the facts in front of you and all your ducks in a row.  When you negotiate a new mortgage or even a refinance, you need to have everything in your finances straight and tight if you are going to actually get the highest rate possible.

With  that in mind we have established several tools to help you with this without having to send any information at all to a sponsor.  If you have ideas about additional tools that we should add, please let us know and we will try and develop it.  The bottom line is that we want you prepared to get the best deal no matter if you are financing a jumbo mortgage in San Francisco, looking into the real estate Branson market for a possible relocation, or refinancing credit cards into a home equity loan (not a good time to do that in general.)

As the real estate market starts to settle out, and as inflation starts to enter into the picture, it is very likely that America will see a period in real estate very similar to what we experienced in the 70s and early 80s.  Fewer people will own their own home and more people will write.

The equation has not changed in that there are still many many people looking for places to live.  The population across United States is expected to increase by 100 million people over the next 15 to 20 years.  Those people have to live somewhere in those places do not exist today.

Some people would point to the Federal Reserve and state that the Federal Reserve is lowering interest rates and that mortgage rates should follow soon.  The problem is that inflation has entered into the equation.  The Federal Reserve cannot control inflation especially when the United States has a massive debt that is building on a regular basis.  That inflation essentially adds percentage points to the real mortgage rates banks can offer.  Let’s say that the Federal Reserve sets rates at 3%, and inflation is running at 3%, and banks need to make a profit of 1 1/2 percent to keep operations going in to lure in investors to buy securitized mortgages.  That would mean that the real interest rate for a person with excellent credit would start off at 7 1/2 percent.  If that person has less than stellar credit the interest rate is going to be even higher.

If inflation increases, then interest rates in total will also go up no matter what the Federal Reserve does.  Now as those interest rates go up that points towards the need for many people looking for a home to live in to consider renting.  It also means that people that are sitting on homes today with low interest rates are likely to become landlords very soon.  If they are locked into an interest rate is lower than what can be had on the market, they may not make their money back in equity in the house but they could make it back in rent.  In doing that we are going to see a nation change from being a flip that house nation into a rent that house, sublet the apartment, where sublet that room.

For a similar example, you can look at what is going on in city centers around the US or even in the United Kingdom or Europe.  We all face the same inflation and the same rising population centers.  All those baby Emily crib sets have to go somewhere.

If you are looking to buy a house this year, think about buying a house that you can afford.  Here’s a simple will rule to follow when considering just how much you can afford.

Do not go by what the bank tells you that you can afford — the bank makes more money if you buy a bigger house, so you simply can’t trust them.  Be your own advocate.

If the bank tells you that you can buy a $300,000 house, buy a $200,000 house.  As a general rule of thumb, shoot for a value that’s about 65% to 80% of what the bank tells you that you can afford.  Alternatively, if the bank tells you that you can afford a house over $400,000 in value, consider spending less just so that you don’t have to spend money on something you do not really need.  Warren Buffett, one of the richest men in the world, lived in the plain House in the suburbs driving a 20-year-old car for many years without having to go out and purchase a house that he could “afford”.

It is definitely tempting to go out and purchase as big of a house as you can afford, and who wouldn’t want to live in a mansion or at least a Mc-mansion.  But remember, you have to pay the bill, the entire bill and not just a single monthly payment from time to time, so consider what you are really getting into here. 

• Do you really need to spend a half million dollars on a house? 
• Duty to spend $300,000 on a house? 
• Could you be perfectly happy living in a house that cost $200,000, $100,000, or $80,000?
• Would you be happier living in an apartment, not a condominium but an apartment at someone else owns?

The great American dream is to own a home.  The great American dream is not to purchase a home.  Purchasing a home is not owning a home there is a distinct difference.  When you finance a home and purchase it, you do not yet own that home.  Making the purchase of a massive McMansion, is not achieving the American dream, and it might just lead you into the American nightmare of foreclosure.

So be careful with your money and your finances and don’t just go purchase a home because you can, because a bank allows you to make that purchase, like a dealer in Vegas would allow you to place a bet.  Because that’s what you’re doing when you purchase a house, you were betting on the value of that house and you are betting on the ability of your self and your wife to pay for that house every month until you finally do Own that house.

Car donations

as a side note I like to mention a charitable organization that accepts a car donation, so that they can use the money and the proceeds from selling those cars to make videos for kids.  The organization has some admirable goals, and for some people it’s just too difficult to get rid of that old clunker in the front yard.  This could be one way that you could do it and you could be helping some other kids when you get that eyesore out of your front yard and make your home a little more appealing for sale.  If you have the time, I recommend that you sell the car yourself and just donate cash if you feel like donating the cash.  However, the donation of a car could save you some time and effort and might be a little less hassle when you have other things to take care of. 

The history of renting property may possibly go back as far as the history of buying or owning.  Over the last few years, many many more people that would historically rent a home have been purchasing homes or condos.  For some of these people this has been a great opportunity.

Credit was easier, sub prime mortgages were easier to qualify for and some of these people had the resources financially to make the purchase work.  For some buyers, easy credit was a trap and the easy credit may have set them back more in time and credit ratings than if they had followed a traditional route working their way up through rentals first  until their finances were strong enough to buy.

During the credit boom and real estate bull market, many people completely forgot about renting as an option unless they lived in Manhattan or were looking for nyc apartments for rent with New York’s notoriously high property prices and rent control pricing opportunities.

So now Sub prime and the mortgage companies that offered them are at some of their lowest points ever.  Credit has dried up considerably and people are looking to rent again, not by choice but by necessity.  Along the way they might even learn that renting can be the right financial choice for their future as well.