Home buyers are increasingly taking on co-borrowers to help gain an edge, defray costs and shoulder the burden in a housing market characterized by relentless demand and tight inventory.
A new report from real estate information provider Attom Data shows that in the second quarter, 22.8% of mortgage purchase applications involved a co-borrower, up from 21.3% in the prior quarter and 20.5% in the year earlier.
As MarketWatch has reported, there are dozens of programs, and a few private companies, that act as co-borrower by offering down payment in return for a share of equity in the home.
Of course, there are plenty of other ways to enter into a co-borrowing situation, including simply by enlisting helpful family members.
The public records data Attom gathers don’t show ages or other demographic characteristics of buyers who are doing co-borrowing, let alone the types of arrangements they’ve made, but the data does offer some fascinating information about borrowers and the market.
Attom did a deeper dive through their records for MarketWatch and determined that home buyers with a co-borrower are buying smaller but more expensive properties – and doing it with lower interest rates and more money down, which allows them to avoid paying mortgage insurance.
The table below comes from records for which Attom could provide all the data for each field noted, a restriction which the company says means it tends to skew toward higher-priced markets like those in Illinois, California, and Florida. “My takeaway is that co-borrowers are buying in more expensive markets but having to put more down to compete in those markets,” Attom Vice President Daren Blomquist said.
“The more money down along with a co-signer who may have better credit is helping these co-borrowers secure a lower interest rate, but the homes they are buying tend to be smaller, an indication these skew toward first time homebuyers,” he added.
The median down payment for first-time buyers across the nation, among all types of borrowers and properties, is 6%, while among all borrowers it’s 10%.
Home-price gains remained strong in July, and there’s no slowdown in sight, according to a report released Tuesday.
The national home price index from real estate data provider CoreLogic rose 6.7% compared to a year ago, with particular strength in the Pacific Northwest and Western mountain states. CoreLogic forecasts 5% price growth for the year ahead.
But the firm has underestimated home price growth for several years, as have many housing economists. Most have expected a return of some rational balance of economic fundamentals to the market. After all, home prices can’t continue to rise at a pace that far exceeds wage growth indefinitely, they believe.
But so far they have. Average hourly wages grew just 2.5% in the 12 months ending July, the Labor Department reported last week. As CoreLogic’s deputy chief economist Sam Khater told MarketWatch, the market is responding to a “pressure cooker effect”: relentless demand and ultra-lean inventory.
It’s worth noting that Khater expects July’s reported price changes to be revised down slightly. Last July CoreLogic forecast a 5.4% price increase for the year ahead, so that may turn out to be closer than some of the others from the past few years.
And there’s some evidence that the ferocious pace of selling is dampening some buyer enthusiasm. Sales of previously-owned homes fell to an 11-month low in July as inventory fell 9% compared to a year ago. ata provider CoreLogic rose 6.7% compared to a year ago, with particular strength in the Pacific Northwest and Western mountain states. CoreLogic forecasts 5% price growth for the year ahead.
Do-it-yourself home improvement projects are all the rage right now, and for good reason. They can be budget-friendly, resourceful, and offer “Weekend Warriors” a great sense of self-satisfaction from a completed project. However, DIY can quickly go awry. While there is no right or wrong answer, here are five things to consider before deciding between picking up your hammer or picking up your phone to call a pro.
Research the Project
A good old-fashioned research expedition can make a world of difference in knowing the scope of the project. For instance, you may relish the thought of knocking down a wall in your home and expanding your space, but this could be very tricky, or impossible and in the specific case of a wall, possibly structurally damagin g to your home. Also, will you need permits for this task? Check with your local zoning office. Online tutorials and videos can make even the most complicated projects seem simple, so ask around to see if others have experience in this project. Be sure to also look over the tools needed and directions to follow. If you are unfamiliar with even a few of the items listed or the directions, this may be something you leave to a professional.
Assess Your Skill and Interest Levels
This is the most basic of all questions when it comes to deciding who should tackle a project. Now that you’ve got the lay of the land, you can see if it aligns with your skill and interest levels. Keep in mind that skill and interest levels may be different and one does not equal the other. An honest assessment of your skills (Plumbing? Electric?) is essential. Availability of tools, equipment and man power are also critical to success. Your interest level is also a crucial aspect to completing your DIY project in a timely fashion. Finally, assess if you are willing to accept small flaws and imperfections that may arise from your own work.
Assess Your Time and Money Available
It may seem like a DIY project is bound to be more budget-friendly, but this doesn’t necessarily follow. If you have to take time off work, rent or buy equipment, and may need to redo work, your time and money are easily eaten up. Be sure to factor in overages as projects — especially those requiring new skills — always seem to require more time and money than originally planned. If you need your whole house painted, hiring a professional who can quickly mask off trim and use a spray may be a more efficient use of your time and money than spending weeks doing it yourself.
Get a Quote
Call a couple of contractors you trust or that comes highly recommended and get a few quotes for the job. This may factor into the decision more than you think. Many people are willing to pay extra for the convenience of knowing the job will be done quickly and efficiently. But many also find the satisfaction of their own job-well-done outweighs any monetary savings. A good old-fashioned pros/cons list can come into play at this point if the other factors line up.
Stick it Out
Most contractors won’t take on a miscalculated DIY, so keep that in mind ahead of time. Being able to stick it out in a complicated project is important whether or not you’re hiring a pro. Follow-through is the most important part of any project, and sometimes the most difficult. If you’re going the do-it-yourself route, set a schedule and keep pace. If you’re hiring a professional, ask for a schedule and make sure the project is on pace.
Owning a home and making mortgage payments is like putting money in the bank. Barring a market reversal, that nest egg of equity in your home will grow and grow. And for most homeowners, their house is their largest asset—which means there’s a lot of money at stake when it comes time to sell.
Want to get as much money back as possible from this big-ticket investment? Of course you do! So avoid doing these nine things when you put your home on the market.
1. Ignoring your agent's advice
Although you don’t technically need to use a real estate agent to sell your home, hiring one can help you get more money in your pocket.
A good listing agent can assist you with pricing your home, marketing it, negotiating with buyers, and guiding you through the closing process. That's a lot of responsibility—and you might feel slightly uncomfortable putting your faith in a stranger's hands. However, because your agent has a fiduciary responsibility to look out for your best interests, you need to trust the person's advice. So, if your agent says to do something—like make a price reduction—you should do it, says Daniel Gyomory, a real estate agent in Northville, MI.
2. Neglecting important repairs prior to listing your home
Most home buyers will require a home inspection contingency. But that doesn’t mean you should wait for the home inspector to tell you what to fix. If your home has noticeable flaws, go ahead and ask your agent whether you should address them before putting your house on the market.
“Something as small as a leaky kitchen faucet can be a red flag to a buyer, since the person might assume there are bigger issues with the home,” says Gyomory.
3. Being restrictive with showings
You want the greatest number of potential buyers to see your home, says Bellevue, WA, real estate agent Holly Gray. Hence, you need to be extremely flexible when responding to showing requests, says Gray. (Read: Be ready to leave your house at a moment’s notice.) Bear in mind that if you decline a showing, the buyer might not come back—and you could potentially lose out on a great offer.
"Expect little privacy when selling your house,” says Karen Elmir, a luxury real estate agent in Miami.
4. Failing to keep the house tidy
To be prepared for last-minute showing requests, you have to keep your home relatively clean, neat, and organized at all times.
“Your home should look as much like a model home as possible,” says Gray. In other words, try your best to make the place look spotless (or close to it) before buyers arrive.
5. Being present for showings or open houses
Home buyers are already apprehensive about touring a stranger’s property, so don’t make things even more awkward by sticking around for open houses or showings. Buyers need to be able to envision your home as their own, which can be difficult to do if they see you hanging around the house, says Danielle Schlesier, a real estate agent in Brookline, MA.
6. Letting a pet spoil your sale
Even though you love your pet, a home buyer might not feel the same way. Also, dogs, cats, and other animals often leave behind a bad odor, which can be an immediate turnoff.
Plus, “some home buyers are allergic to pets,” says Gyomory. So, instead of crating or confining Fido to a special area of the house during showings, take him with you for a walk while buyers are viewing your home. Even better: Drop him off at Grandma’s house for an extended stay while the home is listed for sale.
7. Reviewing offers with a closed mind
Many people form an emotional attachment to their home. But don't let those feelings cloud your vision, especially when you receive offers.
In an ideal world, you’ll nab a full-price (or higher) offer for your home, but be willing to negotiate if you receive an offer that’s below list price.
“Some people will have their mind made up that they won’t take a dollar less than their asking price,” which can kill a potential sale, Gyomory says. Trust your agent to negotiate on your behalf to help you get the best deal.
8. Balking over requested repairs
No matter how well you’ve maintained your house, a buyer’s home inspector is going to find issues with the property. Be prepared to make repairs during the home inspection negotiation period—or at least offer the buyer credit at closing.
Whatever you do, “don’t fight over a few hundred dollars,” says Gyomory.
9. Overlooking closing costs
While home buyers shoulder the lion's share of the closing costs, home sellers still chip in a good chunk of cash at settlement—roughly 1% to 3% of the home’s final sales price. Unfortunately, many sellers don’t budget for closing fees. In fact, "a lot of sellers only look at their agent’s commission” when calculating their closing costs, says Gyomory.
As a home seller, you can expect to be responsible for these closing costs:
•A closing fee, paid to the title company or attorney's office where everyone meets to close on the home
•Taxes on the home sale
•A fee for an attorney, if the home seller has one
•A fee for transferring the title to the new owner
Pro tip: After you sign a sales contract with a home buyer, ask the buyer’s title company for an estimate of what you’ll have to pay at closing, so that you can budget appropriately.
Attention, coupon-clipping queens and Craigslist kings! If you’re an avowed bargain shopper who believes only chumps pay full price, the thought of purchasing a home at (or sometimes even above!) asking price can be painful. You're used to shopping around and weighing all your options before taking the plunge—shouldn't that be the case on something as expensive and significant as real estate? Surely there are ways to go about buying a house with the same fiscal savvy you bring to other purchases in life, right?
Yes, indeed. And we're not talking about merely submitting a lowball offer. No, we're talking about tactics. We’ve pulled together some tips to help you level up your real estate game.
1. Keep an eye on 'price reduced' properties
If a home has been languishing on the market, the sellers might be eager to cut a deal—even if the price has already been reduced. Listing websites make it easy to find homes whose prices have been cut. On realtor.com®, for example, just search for the city you want to buy in. Then on the right side, click on the drop-down menu that defaults to "Relevant Listings" and select "Price Reduced."
You can also contact a local real estate agent who will have extensive knowledge on properties in specific neighborhoods.
2. Sweeten the deal for the seller
Try to understand the sellers' specific needs and situation. Do they need to relocate for a new job, like, yesterday? Offer to move up your closing date. Do they want to finish out the school year in their old home? Let them stay put for a few extra weeks after the sale—in exchange, of course, for a reduction in price.
It never hurts to ask your agent to speak with the listing agent to find out what terms might make the sellers jump at a lower offer.
3. Look for a kitchen with potential
An ugly kitchen can drive buyers away, causing a home to sit on the market for months. So instead of fixating on an HGTV-worthy dining and entertainment space, look for a kitchen you can work with. Are all the appliances in good working condition? How's the flow and layout? Then consider the things you can easily fix.
For example, for a relatively modest investment, you can repaint solid wood cabinets, update the lighting, replace the faucet, add distinctive cabinet pulls, and redo the floors and counters. Then you'll have a kitchen you'll swoon over.
4. Make an all-cash offer
Even if your offer comes in a little lower than asking price, the words “all cash” can go an awfully long way.
"Cash buyers generally have an advantage when there are multiple offers on a property," says Anne Elizabeth Oliver, a Realtor® with Roy Wheeler Realty Company in Charlottesville, VA. With a cash offer, sellers won't have to worry about the deal falling through because of an issue with the mortgage or appraisal.
Also, if the seller needs to close the sale fast, a cash offer could catapult your offer to the top of the list. Of course, this tactic is fully dependent on whether you have that very big chunk of cash available.
5. Put down at least 20% to avoid paying mortgage insurance
It's not exactly groundbreaking news, but you can’t beat the benefits of offering a substantial down payment, says Denise Supplee, a Realtor with Long & Foster in Doylestown, PA. By putting at least 20% down, you can avoid having to pay costly mortgage insurance and help keep your monthly mortgage affordable.
6. Find a home that's being sold 'as is'
Homes that are listed "as is" are often in disrepair because the sellers can't afford to fix the flaws. They're typically listed at a lower price that takes into account the cost of repairs or upgrades that the seller might normally be expected to make. This situation can net you a great deal. Plus, you can make sure that repairs or replacements will be completed to your liking.
7. Shop mortgages to save big bucks
Start inquiring with different mortgage lenders around three to six months before you plan on buying a home. You can compare rates and, if necessary, spend time boosting your credit score. A FICO score of 760 or higher will qualify you for the best interest rates, according to Richard Redmond, mortgage broker at All California Mortgage in Larkspur and author of “Mortgages: The Insider's Guide.”
A solid-gold credit score is as good as money in the bank, because it can significantly lower your interest rate, allowing you to pay less every month for the life of your loan. Make sure your credit score is 660 or higher to be approved for any mortgage at all.
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