Should I Buy A House During The Holidays?

Close-up of the front of a Colonial style house with a navy blue front door decorated with holiday wreath.Q: I’m in the market for a new home and wondering if I should push off my search until after the holidays. Is it a good idea to buy a new home during Christmas?

A: While spring and summer tend to see the highest volume of home sales, it doesn’t mean they’re the only time to buy a house. Let’s take a closer look at some of the myths and lesser-known facts about timing the purchase of a home and explore the pros and cons of buying during the holidays.

The myth about buying in the spring
Contrary to popular belief, springtime can be the worst season to purchase a home. While the longer daylight hours do make it easier to check out the exterior, shopping for a new house during the hottest real estate season can mean facing all kinds of drawbacks and difficulties.

First, and most importantly, sellers tend to mark up their prices when they see heightened demand for their homes. Also, the flooded market can lead to expensive bidding wars with buyers who are also interested in the same property. Plus, if your search is successful and you find a new home during the spring, the closing process can drag out much longer than necessary as title companies, inspectors and movers may not be able to service you in a timely manner during their busiest season of the year.

Why Christmas can be a better time to buy
Shopping for a home during the winter, and especially during the holidays, offers the following advantages:

  • Homes are priced to sell
    Most of the houses you’ll find on the market during the late fall and early winter will be holdovers from the spring and summer season. At this point, homeowners may be desperate to sell and get their property off their hands. Alternatively, the houses may have just been put on the market because of the owner’s sudden and urgent need to relocate due to unforeseen factors like a job change, divorce or another life-altering event. In either case, the owner is looking to sell quickly, and will likely be more willing to compromise on their original asking price than homeowners selling in the spring and summer. In fact, according to The Wall Street Journal, home prices can drop to a 12-month low in December.
  • Holiday spirit makes people more agreeable
    People tend to be in a more generous frame of mind around the holidays. Let this factor work in your favor by shopping for a home during the holiday season. You can walk away with a dream home at a dream price, and you may even be able to negotiate some extras, like furniture or a fresh coat of paint, into the selling price.
  • Fewer buyers on the market
    With more people looking to relocate during the spring and summer months, you’ll have less competition when house-hunting around Christmas time. This will give you an edge in bidding wars and it will make it easier for you to negotiate to bring down an asking price on a home.
  • Professionals of the field are more available
    December is usually the slowest month of the year for home sales. This can work to your advantage if you choose to buy a home around the holidays. Your real estate agent will likely have plenty of time to show you around since fewer other people are looking to buy during this season. The various professionals you’ll need to hire during the home-buying process-including an attorney, home inspector, underwriter and mover-will likely be able to service you promptly as well.

Before you go house hunting
While buying a house during the holidays can be a great idea, keep these factors in mind before you give your agent a call:

  • Daylight hours are short during the winter, giving you a small window of opportunity to search.
  • You won’t be able to see a home’s property in its full glory during the winter months.
  • Some sellers may not be too keen on throwing their homes open to viewers during the holidays.
  • Unexpected inclement weather may delay some parts of the home-buying process, like the inspection or even the closing.
  • You’ll have fewer homes to choose from when house-hunting during the winter, as a cooler real estate market means slimmer pickings.

Shopping for a new home during the holidays may not be conventional, but it can mean finding your home sweet home quickly, easily and for a far better price.

If you’re in the market for a new home, make sure to stop by Advantage One Credit Union to ask about our home loan options. We’ll help you move into your dream home with the most favorable terms.

Your Turn:
Have you bought a home during the holidays? Tell us about it in the comments.

Learn More:
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loans.usnews.com
blog.nationwide.com
thebalance.com
realestate.usnews.com

Should You Buy a Home if You Still Have Student Loans?

What to consider before adding a mortgage to your educational debt

Becoming a homeowner is a hugeCHomeStudentDebt_Featured life step, especially on the financial front, and it should not be taken lightly.

And if you are one of the 43.3 million Americans still with student loan debt, according to the Federal Reserve Bank of New York, it’s an even bigger decision. There are many factors to take into account before taking the plunge and adding a mortgage to your educational debt.

Here are a few of the main points to consider:

Debt-to-income ratio – The biggest hurdle you may face if you try to buy a home while maintaining a balance on your student loans is what is known as the debt-to-income ratio. The DTI ratio is how lenders judge your likelihood of defaulting on a mortgage. It compares your total household monthly debt payments to your total income. Lenders generally prefer that number to be less than 43 percent, according to the Consumer Financial Protection Bureau.

As Real Estate Columnist Kenneth Harney of the Washington Post reported, new rules from the Federal Housing Administration (FHA) could make it tougher to qualify for a low-down-payment mortgage through the FHA, as well as restrict down payment gifts. Previously, student loan debt was not taken into account in the DTI ratio, but now lenders are required to include 2 percent of student loan debt when computing the number. Considering the average class of 2016 graduate has a student loan debt of $37,172 according to Student Loan Hero, that 2 percent could drastically change the chances of getting approved for the FHA loan.

FHA Spokesman Brian Sullivan explains why the new requirements, though tougher, make more sense.

“Deferred student debt is debt all the same and really must be counted when determining a borrower’s ability to sustain both student debt payments and a mortgage over the long haul,” he says. Sullivan also adds that the agency’s primary goal is to put first-time home buyers “on a path of sustainable homeownership rather than being placed into a financial situation they can no longer afford once their student debt deferment expires.”

Down payment woes – With down payments as low as 3.5 percent, according to an article on CNN Money, whether or not you qualify for the FHA loan will determine how much of your saved money will have to be used up front. This is important because higher down payments lower your monthly payments as well as your interest rate. At the same time, you can’t put all your savings toward the down payment because you have other home-buying needs such as closing costs, moving expenses, homeowners insurance and home furnishings.

Renting vs. buying – Some renters feel as though they are “throwing away money” by paying a landlord each month rather than investing that money in an asset all their own. However, rushing into buying a home for that reason alone is a mistake, especially if you still have student loan debt, as a mortgage would just add to your debt, possibly to the point that it cannot be surmounted.

Furthermore, you have to think about non-monetary aspects as well. For example, are you in a place in your life where you want to put down roots in one particular area?

“Low mortgage rates and high rents make buying an attractive option, but you should be ready to put some roots down,” says CNN Money. “If you’re planning to stay in a home for at least two years, buying is more financially advantageous than renting in 70 percent of housing markets, according to a recent report from Zillow.”

Homeowners’ responsibilities – Another aspect that differentiates buying a home from renting is the fact that with a home all the responsibilities are your own. You’ll likely need a lawn mower, and other landscaping tools. If the dishwasher breaks, you will have to contact a professional and pay for their services. You have to be ready, willing and able to take on those responsibilities — which all come with costs up front. Will you have the funds for that?

If you are set on buying a home despite your student loan debt, you do have some options to make it more manageable financially. Come talk to us today to find out if you can afford purchasing a home.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.

Hidden Costs of Home Buying

The biggest expenses first-time buyers don’t expect

You’ve been savingHiddenHomeCosts_Featured up for years. You found the home of your dreams and negotiated a price that works for you—you even saved enough for a 20 percent down payment! A big weight likely feels lifted from your shoulders. But don’t get too comfortable. First-time home buyers are often vulnerable to surprise costs for which they did not budget. Don’t be caught off guard; familiarize yourself with these five common hidden expenses:

Home inspection: So you submitted an offer on a home and the seller accepted. Now you’re all set to move in, right? Wrong. Would you buy a used car without checking under the hood first? Similarly, hire a certified home inspector to pore over the entire property before you close on the house. If any structural or mechanical issues are uncovered, you can ensure the seller repairs them before closing or negotiate the price down for you to cover the costs of repair. Without a home inspection, you will be solely responsible for anything that should need fixing once you move in.

Even though a reputable inspector charges between $200 and $600 depending on your location, it is money well-spent up front in comparison to a potential home repair that costs you thousands down the road.

Appraisal fee: Your mortgage lender wants to make sure that the home you are about to buy, with his or her help, is worth every penny. That’s why the financial institution will charge you an appraisal fee. This money, charged directly to the borrower by the lender, goes toward an independent certified appraiser, who will assess and document the home and its property value. Be prepared to shell out an additional $250 to $600 for this necessity.

Closing costs: After you seal the deal and sign the papers, you’ll need to fork over an additional 2 to 5 percent of the home purchase price to cover closing costs, which can include everything from a loan origination fee and attorney fees to homeowners association dues and taxes. On average, you’re looking at $6,000 to $17,000 in closing costs, based on the average sale price of a new home in mid-2015, according to the U.S. Census Bureau.

Escrow account: Many first-time home buyers don’t fully know what an escrow account is, despite its being mandatory with some mortgage agreements.

“The money that goes into the account is used by the lender to pay certain ongoing property-related expenses on the homeowner’s behalf, such as homeowner’s insurance premiums, private mortgage insurance (PMI) premiums and property taxes,” explains Andrea Browne of Kiplinger’s Personal Finance magazine.

Escrow accounts are mandatory for buyers who make a down payment of less than 20 percent and for buyers who take out certain types of loans, such as FHA loans. You may be asked to make an initial deposit into escrow at closing, and then you will pay extra to the mortgage lender each month in addition to your house payment. Without escrow, you will be responsible for paying all insurance and taxes on the home and property on your own throughout the year. With it, you and the lender are both protected because these critical home ownership expenses are sure to be paid in full and on time. Escrow is a blessing; you just have to be prepared for its upfront costs.

Home maintenance and repair: Even though you had an inspection done, things do need to be repaired after normal wear and tear. As a homeowner, you are responsible for upkeep of the property, including everything from mowing the grass to fixing the garbage disposal. While these aren’t costs you can expect to pay before you close on the house, they will arise inevitably and can be quite high, so having a nest egg for such purposes is a good idea.

Now you know around how much more in “surprise” costs and fees you will need to foot before moving into your dream home. Even if you weren’t expecting to pay this extra money, hopefully at least being aware ahead of time helps soften the blow.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.