If You’re Worried about Mortgage Rates Control what You Can

Posted on by Mike Padlo

Chances are you’re hearing a lot about mortgage rates right now. You may even see some headlines talking about last week’s Federal Reserve (the Fed) meeting and what it means for rates. But the Fed doesn’t determine mortgage rates, even if the headlines make it sound like they do.

The truth is, mortgage rates are impacted by a lot of factors: geo-political uncertainty, inflation and the economy, and more. And trying to pin down when all those factors will line up enough for rates to come down is tricky.

That’s why it’s generally not worth it to try to time the market. There’s too much at play that you can’t control. The best thing you can do is control the controllables.

And when it comes to rates, here’s what you can influence to make your moving plans a reality.

Your Credit Score

Credit scores can play a big role in your mortgage rate. As an article from CNET explains:

“You can’t control the economic factors influencing interest rates. But you can get the best rate for your situation, and improving your credit score is the right place to start. Lenders look at your credit score to decide whether to approve you for a loan and at what interest rate. A higher credit score can help you secure a lower interest rate, maybe even better than the average.”

That’s why it’s even more important to maintain a good credit score right now. With rates where they are, you want to do what you can to get the best rate possible. If you want to focus on improving your score, your trusted loan officer can give you expert advice to help.

Your Loan Type

There are many types of loans, each offering different terms for qualified buyers. The Consumer Financial Protection Bureau (CFPB) says:

“There are several broad categories of mortgage loans, such as conventional, FHA, USDA, and VA loans. Lenders decide which products to offer, and loan types have different eligibility requirements. Rates can be significantly different depending on what loan type you choose.”

When working with your team of real estate professionals, make sure you find out what’s available for your situation and which types of loans you may qualify for.

Your Loan Term

Another factor to consider is the term of your loan. Just like with loan types, you have options. Freddie Mac says:

“When choosing the right home loan for you, it’s important to consider the loan term, which is the length of time it will take you to repay your loan before you fully own your home. Your loan term will affect your interest rate, monthly payment, and the total amount of interest you will pay over the life of the loan.”

Depending on your situation, the length of your loan can also change your mortgage rate.

Your Purchase Price

Huh? How can you control that? As many buyers wait for a change in interest rates, home prices are rising. They have been since 2010 and there is no change in that trend in sight. Depending on your market, it’s possible that any benefit you gain from a modestly lower interest rate in 6 or 12 months will be offset by the home you buy costing more than if you just bought it now.

Interest Rate (eventually)

Buying now at what will likely be a lower purchase price than 6 or 12 months from now will lock in the price you pay. When rates eventually come down you can refinance and gain the long term benefits of BOTH a lower price and a lower interest rate.

Bottom Line

Remember, you can’t control what happens in the broader economy. But you can control the controllables.

Let’s connect to go over the things you can do that’ll make a difference. By being strategic with these factors, you may be able to combat today’s higher rates and lock in the lowest one you can.

⚠️New Rules Could Make Waiting to Buy a Home More Costly

Posted on by Mike Padlo

Will Sellers Stop Paying for Buyer Agents while YOU Foot the Bill?

The recent National Association of Realtors (NAR) lawsuit settlement has sent shockwaves through the real estate market. A core issue was the traditional commission structure, where sellers typically covered buyer agent fees. Although this practice is still currently the norm, this could soon change when the mandatory changes resulting from the lawsuit go into effect on August 17, 2024. Here’s what you need to know as a potential buyer:

From Seller-Funded to Buyer Beware:

For years, the NAR advocated for a commission structure where listing brokers shared their commission with the buyer’s broker and agent, often a 50-50 split . This meant buyers felt their representation was “free” since the seller’s broker paid the commission. Although the lawsuit challenged this practice, it was not eliminated. The main problem was actually with the requirement that home listings in the MLS (multiple list service) were required to show some amount of compensation offered to buyer agents. This made sellers feel that they had no choice regarding the sharing of the commission they are paying to their listing broker. If the settlement requirements remain unchanged when they go into effect they will result in a ban on disclosing any shared commissions amounts in the MLS. Bottom line, this will require listing agents to provide a more complete and transparent explanation to seller’s regarding their options related to offering shared commission.

Here’s how the shift could impact your wallet:

  • The Seller Subsidy Shuffle: Sellers might be less inclined to automatically cover buyer agent fees. They could list their homes with lower commissions for buyer agents, or even zero compensation. This could leave the responsibility – and potentially the cost – of agent representation squarely on your shoulders. NOTE: Although this would be seriously poor judgement by the seller, that is the subject of a different article.
  • The Rise of a La Carte Fees: The traditional bundled commission might be broken down into separate fees for various buyer agent services. This can be transparent, but it also means you’ll be paying directly for things like showings, negotiations, and paperwork – services previously covered by the seller commission.
  • Locking in Potentially Higher Fees: Another requirement of the proposed settlement is that buyer agent fees be negotiated between the buyer and their agent and locked in by a buyer agency contract. Sellers paying for the buyer agent’s commission will not be permitted to pay more than that contract amount even if they were offering more. Therefore, it will be necessary for buyer agents to lock in contract agreement fees high enough to be profitable. Presently, buyer agents can agree to accept whatever the seller is offering, even if LESS than they would normally charge. With the proposed changes, buyers would have to cover the difference.

Why Choosing to Buy Without an Agent Can Cost You More :

You might be thinking of just not hiring an agent to help you buy your home. Going unrepresented can be risky. Here’s a look at why:

  • Losing Out: A good agent can help you prepare an offer that not only meets your criteria and budget. but also checks enough boxes for the seller to make them choose yours. In the current market we’re in right now, this can be a valuable benefit of working with an agent and can make or break your ability to find and purchase you’re ideal home.
  • Negotiation Nightmare: A skilled buyer’s agent can negotiate a lower purchase price, seller concessions, seller funded repairs and other various purchase terms, potentially saving you tens of thousands of dollars. Negotiating on your own can be stressful and lead to leaving money on the table.
  • The Knowledge Gap: The real estate market is complex. An experienced agent can navigate legalities, paperwork, and market trends, ensuring a smooth and successful transaction. Going solo can lead to costly missteps, delays and possibly overpaying for your home.

Bottom Line

The lawsuit settlement changes are currently scheduled to take effect on August 17, 2024. You can avoid dealing with any of these potential negative implications of the settlement changes by BUYING BEFORE August 17, 2024. Doing so will allow you to take advantage of the current system and ensure you will be able to get the valuable Realtor representation you need. If you have any questions about this subject or would like to get started with the home buying process don’t hesitate to reach out.

Lower Rates to Start 2024

Posted on by Mike Padlo

If you want to buy a home, it’s important to know how mortgage rates impact what you can afford and how much you’ll pay each month. Fortunately, rates for 30-year fixed mortgages have come down significantly since the end of October and are currently under 7%, according to Freddie Mac (see graph below):

 

This recent trend is great news for buyers. As a recent article from Bankrate says:

“The rate cool-off somewhat eases the housing affordability squeeze.”

And according to Edward Seiler, AVP of Housing Economics and Executive Director of the Research Institute for Housing America at the Mortgage Bankers Association (MBA):

“MBA expects that affordability conditions will continue to improve as mortgage rates decline . . .”

Here’s a bit more context on how this could help with your plans to buy a home.

How Mortgage Rates Affect Your Search for a Home

Understanding the connection between mortgage rates and your monthly home payment is crucial for your plans to become a homeowner. The chart below illustrates how your ability to afford a home changes when mortgage rates shift. Imagine your budget allows for a monthly payment between $2,400 and $2,500. The green part in the chart shows payments in that range or lower (see chart below):

 

As you can see, even small changes in rates can affect your budget and the loan amount you can afford.

Get Help from Reliable Experts To Understand Your Budget and Plan Ahead

When you’re looking to buy a home, it’s important to get guidance from a local real estate agent and a trusted lender. They can help you explore different mortgage options, understand what makes mortgage rates go up or down, and how those changes impact you.

By looking at the numbers and the latest data together, then adjusting your strategy based on today’s rates, you’ll be better prepared and ready to buy a home.

Bottom Line

If you’re looking to buy a home, you should know the recent downward trend in mortgage rates is good news for your move. Team up with a trusted real estate agent and lender to plan your next steps. 

Top 10 Remodeling Projects for Best ROI on Your Home Sale

Posted on by Mike Padlo

Are you a homeowner looking to maximize your home’s value before selling? Here, I’ll be presenting my handpicked top 10 best remodeling projects to give you the maximum return on your investment. We’ll look at some carefully chosen projects from the National Association of Realtors 2022 Remodeling Impact Report. I’ve balanced the mix with six stunning interior projects and four remarkable exterior upgrades. Click here to follow along with the information I’m highlighting.

You’ll see there are actually seven interior projects in the list because there was a tie between kitchen remodel and attic conversion. I think between the two, I would go with the kitchen remodel, unless your kitchen already looks pretty good. Then, maybe go with an attic conversion. But kitchen remodel seems to be the one that would apply to most people so that would be number six of the six interior projects presented here that I would go with.

As we take a closer look at each type of project I’ll be touching on three data points. The first one will be the average amount of money spent completing that type of project among all of those included in the 2022 report. The second data point will be the estimated amount of money gained on the sale of the home because of the project having been done. The third data point will be the return on investment expressed as a percentage by taking the amount of money gained on the sale of the home after having done the project divided by the cost to do the project.

The first interior project I’m discussing here is hardwood floor refinishing. On average the amount of money spent refinishing hardwood floors was $3,400 but the amount of money estimated to have been gained having done that Improvement was $5,000 for whopping 147% return on investment. Our second project is the installation of new wood flooring. The average cost spent on that project was $5,500 the amount of estimated return on average was $6,500 for a 118% return on investment. Project number three is an upgrade on insulation in the home. The average amount of money spent and the average amount of money gained on the sale of the home was identical at $2,500 each, resulting in 100% return on investment. The next project on our list is the conversion of basement area to living space. On average $57,500 was spent on these projects with a return of $ 49,250 or an ROI of 86%. Next on the list is closet renovation. Average cost for that type of project was $6,000 with a typical return of $5,000 or 83% return on investment. The last of our interior projects that we’ll take a look at here is the kitchen remodel I mentioned earlier. On average in the 2022 report $80,000 was spent on that project with about $60,000 gained back on the sale of the home or 75% return on investment.

Let’s head outside now. Number one on our exterior projects to do before selling your home for best ROI would be a roof replacement. Average cost on that was $12,000 with the same amount recovered in the sale of the home or 100% return on investment. Second on our list of exterior projects also had 100% return on investment and that is the replacement of the garage door. Average cost $2,000 average amount of money realized back on the sale the same $2,000. The last two projects in our exterior list are actually the same type of project, replacing the siding. They were listed separately in the 2022 report because of difference on the return on investment. For vinyl siding, about 82% return on investment while fiber cement siding saw about an 86% return on investment if you replace it. Well there you go, there’s the top 10 best return on investment projects to take on before selling your house.

One more piece of advice I’d like to pass along to you that I discovered in researching the information for this video is that you should not spend more than about 5% of the value of your house making repairs, upgrades and improvements that are not required to sell your house. By required I mean, for example, if your roof is leaking or your hot water tank is not functioning. Those are examples of things you typically would have to repair before selling your house. But if you’re going to take on other projects that are not necessary such as painting, carpet replacement, and landscaping – things you wouldn’t necessarily have to do to sell your house, try to keep that at or below 5% of the value of your home.

Click here to download the information used in this article.

The Role of Access in Selling Your House

Posted on by Mike Padlo

Once you’ve made the decision to sell your house and have hired a real estate agent to help, they’ll ask how much access to your home you want to give potential buyers. Your answer matters more now than it did in recent years. Here’s why.

At the height of the buying frenzy seen during the pandemic, there was a rise in the number of homebuyers who put offers on houses sight unseen. That happened for three reasons:

  • Extremely low housing inventory
  • A lot of competition from other buyers wanting to take advantage of historically low mortgage rates
  • And general wariness of in-person home tours during a pandemic

Today, the market’s changing, and buyers can usually be more selective and take more time to explore their options.

So, in order to show your house and sell it efficiently, you’ll want to provide buyers with as much access as you can. Before letting your agent know what works for you, consider these five levels of access you can provide. They’re ordered from most convenient for a buyer to least convenient. Remember, your agent will be better able to sell your house if you provide as much access to buyers as possible.

  1. Lockbox on the Door – This allows buyers the ability to see the home as soon as they are aware of the listing or at their convenience.
  2. Providing a Key to the Home – This would require an agent to stop by an office to pick up the key, which is still pretty convenient for a buyer.
  3. Open Access with a Phone Call – This means you allow a showing with just a phone call’s notice.
  4. By Appointment Only – For example, you might want your agent to set up a showing at a particular time and give you advance notice. That way you can prepare the house and be sure you have somewhere else you can go in the meantime.
  5. Limited Access – This might mean you’re only willing to have your house available on certain days or at certain times of day. In general, this is the most difficult and least flexible way to show your house to potential buyers.

As today’s housing market changes, be sure to work with your local agent to give buyers as much access as you can to your house when you sell.

Understanding Your Home’s Equity is Important When You Sell Your House

Posted on by Mike Padlo

One of the benefits of being a homeowner is that you build equity over time. By selling your house, that equity can be used toward purchasing your next home. But before you can put it to use, you should understand exactly what equity is and how it grows. Bankrate explains it like this:

“Home equity is the portion of your home you’ve paid off – in other words, your stake in the property as opposed to the lender’s. In practical terms, home equity is the appraised value of your home minus any outstanding mortgage and loan balances.”

Majority of Americans Have a Large Amount of Equity

If you’ve owned your home for a while, you’ve likely built up some equity – and you may not even realize how much. Based on data from the U.S. Census Bureau and ATTOM, the majority of Americans have a substantial amount of equity right now (see graph below):

Leverage Your Equity When You Sell Your House | MyKCM

And having such large amounts of equity is a benefit to homeowners in more ways than one. Rick Sharga, Executive Vice President of Market Intelligence at ATTOM, explains:

“Record levels of home equity provide security for millions of families, and minimize the chance of another housing market crash like the one we saw in 2008.”

Over time, your home equity grows. In addition to providing financial stability while you own your house, when you’re ready to sell it, that money could go a long way toward paying for your next home.

Bottom Line

By selling your house and leveraging your equity, it can be easier to pay for your next home. Let’s connect today so you can find out how much home equity you have and start planning your next move.

Today’s Homeowners Have Gained Significant Equity

Posted on by Mike Padlo

Today’s homeowners are sitting on significant equity, even as home price appreciation has eased recently. If you’re a homeowner, your net worth got a boost over the past few years thanks to rising home prices. Here’s what it means for you, even as the market moderates.

How Equity Has Grown in Recent Years 

Because of the imbalance between how many homes were for sale and the number of homebuyers in the market over the past few years, home prices appreciated substantially.

And while price appreciation has slowed this year, that doesn’t mean you’ve lost all the equity in your home. In fact, the latest Homeowner Equity Insights report from CoreLogic finds the average homeowner’s equity has grown by $34,300 over the past year alone.

And if you’ve been in your home longer than that, chances are you have even more equity than you realize.

While that’s the national number, if you want to know what happened in your area, look at the map below from the Federal Housing Finance Agency (FHFA). It shows on average how much home prices have risen over the past five years, which has been a major driver behind equity growth.

Why This Is So Important Right Now 

While equity helps increase your overall net worth, it can also help you achieve other goals, like buying your next home. When you sell your current house, the equity you’ve built up comes back to you in the sale, and it may be just what you need to cover a large portion – if not all – of the down payment on your next home.

So, if you’ve been holding off on selling, it may be time to find out how much equity you have and how it can help fuel your next move.

Bottom Line

Homeownership is a long game, and if you’re planning to make a move, the equity you’ve gained over time can make a big impact. To find out just how much equity you have in your current home and how you can use it to fuel your next purchase, let’s connect.

Everything to Know About Closing Costs

Posted on by Mike Padlo

Before you buy a home, it’s important to plan ahead. While most buyers consider how much they need to save for a down payment, many are surprised by the closing costs they have to pay. To ensure you aren’t caught off guard when it’s time to close on your home, you need to understand what closing costs are and how much you should budget for.

What Are Closing Costs?

People are sometimes surprised by closing costs because they don’t know what they are. According to Bankrate:

“Closing costs are the fees and expenses you must pay before becoming the legal owner of a house, condo or townhome . . . Closing costs vary depending on the purchase price of the home and how it’s being financed . . .”

In other words, your closing costs are a collection of fees and payments involved with your transaction. According to Freddie Mac, while they can vary by location and situation, closing costs typically include:

  • Government recording costs
  • Appraisal fees
  • Credit report fees
  • Lender origination fees
  • Title services
  • Tax service fees
  • Survey fees
  • Attorney fees
  • Underwriting Fees

How Much Will You Need To Budget for Closing Costs?

Understanding what closing costs include is important, but knowing what you’ll need to budget to cover them is critical, too. According to the Freddie Mac article mentioned above, the costs to close are typically between 2% and 5% of the total purchase price of your home. With that in mind, here’s how you can get an idea of what you’ll need to cover your closing costs.

Let’s say you find a home you want to purchase for the median price of $366,900. Based on the 2-5% Freddie Mac estimate, your closing fees could be between roughly $7,500 and $18,500.

Keep in mind, if you’re in the market for a home above or below this price range, your closing costs will be higher or lower.

What’s the Best Way To Make Sure You’re Prepared at Closing Time?

Freddie Mac provides great advice for homebuyers, saying:

“As you start your homebuying journey, take the time to get a sense of all costs involved – from your down payment to closing costs.”

Work with a team of trusted real estate professionals to understand exactly how much you’ll need to budget for closing costs. An agent can help connect you with a lender, and together your expert team can answer any questions you might have.

Bottom Line

It’s important to plan for the fees and payments you’ll be responsible for at closing. Let’s connect so I can help you feel confident throughout the process.

3 Ways You Can Use Your Home Equity

Posted on by Mike Padlo

3 Ways You Can Use Your Home Equity | MyKCM

If you’re a homeowner, odds are your equity has grown significantly over the last few years as home prices skyrocketed and you made your monthly mortgage payments. Home equity builds over time and can help you achieve certain goals. According to the latest Equity Insights Report from CoreLogic, the average borrower with a home loan has almost $300,000 in equity right now.

As you weigh your options, especially in the face of inflation and talk of a recession, it’s important to understand your assets and how you can leverage them. A real estate professional is the best resource to help you understand how much home equity you have and advise you on some of the ways you can use it.  Here are a few examples.

1. Buy a Home That Fits Your Needs

If you no longer have the space you need, it might be time to move into a larger home. Or it’s possible you have too much space and need something smaller. No matter the situation, consider using your equity to power a move into a home that fits your changing lifestyle. 

If you want to upgrade your house, you can put your equity toward a down payment on the home of your dreams. And if you’re planning to downsize, you may be surprised that your equity may cover some, if not all, of the cost of your next home. A real estate advisor can help you figure out how much equity you have and how you can use it toward the purchase of your next home.

2. Reinvest in Your Current House

According to a recent survey from Point, 39% of homeowners would invest in home improvement projects if they chose to access their equity. This is a great option if you want to change some things about your living space but you aren’t ready to make a move just yet.

Home improvement projects allow you to customize your home to suit your needs and sense of style. Just remember to think ahead with any updates you make, as some renovations add more value to your home and are more likely to appeal to future buyers than others. For example, a report from the National Association of Realtors (NAR) shows refinishing or replacing wood flooring has a high cost recovery. Lean on a local professional for the best advice on which projects to invest in to get the greatest return on your investment when you sell.

3. Pursue Your Personal Goals

In addition to making a move or updating your house, home equity can also help you achieve the life goals you’ve dreamed of. That could mean investing in a new business venture, retiring or downsizing, or funding an education. While you shouldn’t use your equity for unnecessary spending, leveraging it to start a business or putting it toward education costs can help you achieve other lifelong goals.

Bottom Line

Your equity can be a game changer. If you’re unsure how much equity you have in your home, let’s connect so you can start planning your next move.