Those who know me know that I don't generally encourage purchasing a home before you're financially ready.
That still holds true.
Recently, some clients looking for a home decided to wait a year until they had $10,000 for a bigger down payment. Is this really a good decision in today’s market?
Not so much.
In the KC Metro area the average sales price for an existing home a year ago was $170,000. On average, that home has appreciated 10% over the last year, meaing that home now costs $187,000, a $17,000 increase.
A year ago, a 30-year fixed-rate mortgage was 3.79% nationally. Now, that rate is 4.19%, still very low, but moving up. So the payment difference (assuming 10% down) based on interest alone would be over $40/month or another $500/year.
So to purchase the same home you'd lose $7,500 in buying power in spite of the extra cash.
In Johnson County, it's even more pronounced: the average home costs $49,000 more this year, and your interest payment difference (assuming 10% down) would be $67, or about $800/yr. That means in that year you were saving, you'd have lost nearly $40,000.
There's very little inventory right now, which will probably continue to push prices up. The Feds meet this month probably to raise the prime lending rate, so next year could very well repeat or even outdo this year.
Obviously each person’s situation is different. There are ways to deal with this, and a good Realtor can help you find the best strategy. If you'd like help getting your next home (or selling your present home), I'd be honored to help.
How can you set the right price for your home? Here are some steps you can take.
Title insurance protects the holder from any losses sustained from defects in the title. It’s required by most mortgage lenders. What else do you need to know?
1. It protects your ownership right to your home, both from fraudulent claims against your ownership and from mistakes made in earlier sales, such as mistake in the spelling of a person’s name or an inaccurate description of the property.
2. It’s a one-time cost usually based on the price of the property.
3. It’s usually paid for by the sellers, although this can vary depending on your state and local customs.
4. There are both lender title policies, which protect the lender, and owner title policies, which protect you. The lender will probably require a lender policy.
5. Discounts on premiums are sometimes available if the home has been bought within only a few years since not as much work is required to check the title. Ask the title company if this discount is available.
6. Your mortgage lender is going to require it. Title insurance protects the lender and the secondary markets to which they sell the loans from defects in the title to your home and property. It ensures the validity and enforceability of the mortgage document. Title defects could include mistakes made in the local property office, forged documents and claims from unknown parties. The amount of the policy is equal to the amount of your mortgage at its inception. You pay a one-time fee as part of your closing costs. If you are purchasing a home, you should also purchase an owner’s policy which provides coverage up to the purchase price of the home you are buying. In some states it is customary for the seller to purchase the owner’s policy on your behalf.
7. You have the right to choose! And it’s now it’s easier than ever. You can shop around for a lower insurance premium rate on line at sites including Closing.com, EasyTitleQuote.com and FreeTitleQuote.com. You can also ask your lender or real estate professional for help in getting quotes.
8. Check the companies out before you select one. Make sure the title insurance company you choose has a favorable Financial Stability Rating® with Demotech, Inc., the leading title insurance rating company (www.demotech.com).
9. It’s easy to save money on title insurance. Request quotes from a few companies and then reach out and speak to them. Ask about hidden fees and charges which could make one quote seem more attractive than another. Ask about discounts. There are often discounts available if you are refinancing and sometimes even when you are purchasing if the current policy issued to the seller on the property isn’t too old.
10. Even new construction needs coverage. Even though the home is new, the land isn’t. There may be claims to the land or liens placed during the construction which could negatively impact your home.
Source: ENTITLE DIRECT, Direct-to-Consumer Title Insurance, www.EntitleDirect.com.
Reprinted from REALTOR® Magazine (RealtorMag.Realtor.org) with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright 2008. All rights reserved.