It seems that Janet Yellen, Chair of the Federal Reserve, and her colleagues at the Fed have been talking about raising interest rates for a long time now. With the increasing housing prices, it appears it will finally happen at some point this summer or fall. Forbes predicts the rates to move up from the roughly 3.5% we’ve seen recently to somewhere between 4% and 5% by years end. Regardless of the exact numbers, there is a common consensus that the rates will rise. Thusly, it is important to know what that could mean for potential homebuyers.
Higher Monthly Payments: This one seems obvious, but it is important to reiterate. If rates rise from 3.5% to even just 4.25% on a $200,000 loan, you will see monthly payments move up by around $75. Multiply this over the duration of your loan and the difference is huge.
Harder to Qualify: These rising rates, which lead to rising payments, make it a bit tougher to qualify for a home loan. Homebuyers typically try to use the entire potential of their budget, but as rates are higher, their potential debt-to-income ratio changes as well. The debt-to-income ratio is a metric used by banks to measure the potential that a buyer has to pay back the loan. When the debt will be higher each month, it is more difficult to qualify for loans as the ratio is affected adversely. This means budgets will decline as buyers will not be approved for the amounts they seek today.
Home Prices May Decrease: This is the only real potential upside for buyers. Because the higher rates mean lower buyer power across the board, sellers may be forced to lower prices a bit in order to compensate. A CNBC article reported that a 1% decrease in rates allows sellers to raise prices by 12%. While the decline in prices will most likely not be that extreme, it is not unreasonable to think that a similar trend in the opposite direction will occur.
Overall, rising interest rates are bad news for buyers. There is some potential to have prices dip, but any savings will be more than lost in higher payments over the duration of a mortgage. It seems the best plan of action is to buy now before the rates rise.
In the real estate market today, there is little chance that as a prospective buyer you are entering a house before you’ve seen pictures of it online. While these shots can give you a good idea of whether or not you like a house, visiting it is still a primary requirement. An open house can be a great opportunity to see a property in a more informal setting, letting you explore a bit on your own.
The first thing you should look into intently doesn’t even concern the house at all. Explore the streets surrounding the house and take note of those who live there. Well-kept yards and kids playing outside can be signs of a great neighborhood while overgrown lawns and a lack of activity may be bad signs. Especially if a family is part of your plans, the neighborhood could be a crucial factor and is something that is difficult to get a feel for without visiting.
Once you arrive at the house, take a look at the outside before you head in. Does anything need repair or new paint? Does the roof look sturdy and intact? Chances are most things you notice will be cosmetic fixes, but if anything does jump out at you, you’ll be happy you took a look. Further, taking a lap around the house will let you know what level of privacy you have. Some people like to be able to always chat with their neighbors while some want to be left alone. Whatever your preference, it is good to know what you are getting into beforehand.
Finally you should enter the house. Do a full tour and explore everywhere you are permitted. From the basement to the attic, you should look everywhere. It is always a great idea to take a tape measure with you to look at sizes of specific areas and the dimensions of drawers and cabinets. While you do not want to be overly pessimistic, it is vital to examine the home with a critical eye. Even the smallest spot of mold, for example, could be a sign of a bigger problem. Structural shortcomings can be tricky to spot as well, but are extremely important. Foundational cracks, leaky walls and windows, and uneven floors can all easily go unnoticed, especially in darker areas like the basement. Besides crucial issues, there are some other factors to consider, many of them intangible. Things like the flow of the house and the way light enters are virtually impossible to tell through pictures, but can make a difference in person
Another great area to focus on is the people around you: the sellers, their agent, and other potential buyers. While you always want to remain extremely polite, you are certainly entitled to ask questions of the sellers and their agent. While they will put a positive spin on things, getting them talking about their reasons for moving can provide extremely valuable insight. Ask their opinion on the neighborhood, schools, etc. Also, keep your ears open to other buyers. They may know more about certain aspects of the area or point out something you may have missed. You should take advantage of every potential information source at your disposal.
While we focus on a lot of small things here, it is still very important to consider the bigger picture. Things like layout, number of bedrooms, bathrooms, and square footage are all extremely important. However, chances are you are aware of all of these things before you visit the property. Even so, verify all of the details listed online to be sure there are no surprises later on. Between what can be discovered online and what you’ll see in an open house, you should be able to get a great idea of whether or not you are ready to proceed with an offer.
Planning for a vacation is always quite the process. People spend hours on dozens of websites finding the best deals on hotels and airfare, but something that people do not always consider is food. It can get extremely pricey to be eating out in hotel restaurants and other popular locations every night. By planning ahead, you can save a lot of cash and have more fun with the rest of your trip.
At home: The bulk of your money saving will come from work you put in at home. Knowing where you’ll eat or at least having a good set of options will make the trip less stressful for both you and your wallet. Perusing websites like Yelp and Urbanspoon can lead you to great local spots that won’t make you break the bank. Another great option is to join Groupon and LivingSocial to see if there are any special deals going on while you are in town.
On the road: Food costs can be high while traveling as well, whether you are flying or driving, food is astoundingly overpriced. In airports and at highway rest stops, restaurants know that they hike up prices because travelers simply don’t have other options. That is why packing some snacks and sandwiches is a great alternative to buying food. Just as a note, if you are traveling by air, the TSA requires that all food be wrapped up to pass through security.
During the trip: Even with a list of restaurants planned, there is no pressure to eat out for every meal during a vacation. Getting some food at a local grocery store and taking a picnic to a park or to the beach is a much cheaper option than a restaurant, but is still a very fun evening and a great way to enjoy the town. Another good option is to eat a late breakfast, as that can help you save a lot of money on lunch. By only having two large meals in a day and just a small snack in the afternoon, the savings can add up.
Overall, food can be an unexpected expense during vacations for a lot of people. It is very important to think ahead and set up a budget. If you take the time to plan your trip considering food expenses, it can be a lot less stressful when it comes time to pay the bills. There’s no worse feeling than worrying about money while you are on vacation and planning for all aspects of a trip, including food, will help you avoid that.
By Day: Here at Norcom, Matt is our Accounting Specialist. He stays busy constantly multi-tasking as he manages the accounting for 28 out of the 38 Norcom branches. He is in constant communication with all of these branch managers, taking care of their needs as he handles his regular day-to-day responsibilities at the corporate office. When Matt is not tending to our branch managers, he works closely with the Retail Department, the Human Resources Department, and ValueQuest. Matt enjoys working at Norcom because he loves the family atmosphere. He says, “Everyone here works together and truly enjoys working for the company”. This month marks Matt’s two-year anniversary working for Norcom.
By Night: After a day at the office, Matt goes home to have dinner with his family. He then takes some time to hang out with his son, get some things done around the house, and watches the NY Mets game, if it’s on TV. In his spare time, Matt works as a bartender at Portofino’s Restaurant in Berlin, CT. He has been working at the restaurant for about 12 years now. He also runs and plays on a men’s baseball team, plays softball, plays golf and works on various projects around his house. For fun, Matt enjoys spending time with family and friends, going out to dinner, having backyard barbeques, playing sports or going to a concert. He also takes pleasure in cooking, specifically grilling and trying new recipes. Matt’s wife Jess, his son Lucas and his soon-to-be newborn daughter, Mia, are number one in his life, but all his friends and family are important to him. Most people don’t know that Matt is originally from Long Island, but has also lived in Tennessee and Texas before settling in Connecticut.
If you are buying or selling a property, you will need to know how much it is worth. An appraiser, through an inspection and evaluation known as an appraisal, determines the value of a property. Appraisals may be required for any type of property including single-family homes, apartment buildings, condominiums, office buildings, industrial sites, shopping centers, and farms. The reason for a property appraisal varies, however they are usually required whenever property is sold, mortgaged, developed, taxed, or insured.
The Role Of An Appraiser: According to the Appraisal Institute, the appraise role is to provide objective, impartial and unbiased opinions about the value of the real property, providing assistance to those who own, manage, sell, invest in and/or lend money on the security of real estate. The appraiser considers many factors when assessing a property including age, condition, size, location and overall amenities. The appraiser will then compare the home being appraised to comparable homes that have recently sold in the area. Positive or negative adjustments are made for any dissimilarities and a reconciled value is determined.
Why An Appraisal Is Required: Lenders require appraisals to be done on a property to determine the value before they decide to lend money to a buyer. The reason for this is because lenders do not want to lend more than the property is worth. If the value is supported, typically the house is appraised at or above the sales price and the loan goes through. However, occasionally the appraisal comes in less than the selling price. What happens next depends on the lender’s guidelines, loan amount you applied for, renegotiations between buyer and seller, as well as other potential scenarios.
Selecting An Appraiser: All states require appraisers to be state licensed or certified in order to provide appraisals to federally regulated lenders, according to the Appraisal Institute. Licensing or certification at the state level requires that specific education and work experience standards be met. Initially appraisers must pass a state exam and then they must meet continuing education requirements in order to maintain their license or certification. Appraisal orders are placed by the lender using a third party vendor, typically an Appraisal Management Company (AMC.) Even though the borrower pays for the appraisal upfront, the lender is still the client and will be first to receive the appraisal report. The borrower must then receive a copy of the report at least 3 days prior to any scheduled closing.
