Blog - South Florida Residential Team | South Florida Residential Team

Where Are Rates Heading in Q4, 2019?

September 20th, 2019

Mortgage rates are down more than 1% since late last year. If you were looking for a $300K mortgage in late 2018, you would be paying $240 more per month than you would now based upon Freddie Mac data. With current rates at 3.875% for a 30-year fixed mortgage and 3.375-3.5% for a 15-year fixed, September is looking like an optimum time to make a move if you are thinking about a home purchase, refinance or home equity line of credit. Most forecasters for 2019 are projecting rates in the 4.4% range by the end of the year. That’s down from forecasts earlier in the year that called for rates in the 5’s but not as low as current rates.

Many factors are at play which are influencing the lower rate environment:

*Trade Wars: The world’s two largest economies, US and China, are engaged in a trade war which is causing volatility in the markets. Trade wars often lead to slower economies on both sides which typically means lower rates.

*Yield Curve Inversion: The 2-year/10-year yield curve inverted in mid-August. This unusual occurrence has accurately predicted the last seven recessions. Even if a recession doesn’t follow and the Fed does not believe that a recession is on the horizon, markets don’t like uncertainty and are worried.

*Fed Rate Cut: As expected, the Fed cut its rate by a quarter point this past week. This makes the second rate cut this year with the first in July. While the Fed doesn’t control mortgage rates directly, its actions influence rates of all kinds including mortgage rates.

With lower rates, buyers flood the market which causes home prices to rise which is another reason to jump in the market now if you are thinking of making a home purchase or refinance an existing mortgage. To decide if refinancing is the best option for you, start by considering the following:

Why Do You Want to Refinance? The most common reason is to lower your interest rate and payment. If you have a 5% interest rate or higher, it would be worth exploring if you can take advantage of the current lower interest rates less than 4% to reduce your month payment and overall cost of the loan,

Shorten the Term of Your Loan: If you have a 30-year loan, it may be advantageous to change it to a 15 or 20- year loan to pay off your mortgage sooner.

Cash-out Refinance: With home prices increasing, you might have enough equity to cash out and use the money for other means such as a vacation home, college tuition, renovations, etc.

It should be noted that there are fees and closing costs involved in refinancing. If you were to refinance an existing loan into a new loan, total closing costs will run between 2%-4% of the loan amount. It should also be noted that lenders are not properly staffed to deal with the unexpected lower rates. After 2018’s escalating rates, lenders cut back on staffing as refinancing was not a desired option. If you are planning on refinancing, do it now or be prepared to wait as lenders will be challenged to handle the volume of refinancing requests.

Should you have any questions on the above or are thinking about buying or selling residential real estate in South Florida and not currently working with a Realtor, please don’t hesitate to contact me at (954) 547-9483 or via email at jkenney10f@gmail. com. Thanks

Jay

Q2 2019 Broward County Market Update

August 20th, 2019

Thought it would be interesting to take a look at the most recent sales activity for Broward County. For purposes of this update, I am using data compiled for the second quarter (April-June) of 2019. The update will be broken down into Broward County Condo/Townhome Residences and Single Family Detached Residences:

KEY UPDATES FOR CONDO/TOWNHOME RESIDENCES:

*Year To Date 2019 Sales were lower by 5.7% compared to the same period in 2018.

*Median Sales Price was higher at 1.7% to $175K in Q2, 2019 compared to Q2, 2018.

*Days on Market it Took to Sell was higher with a median of 84 days which is up 23.5% above that of Q2, 2018.

*Percent of Sale Price to List Price was lower at a median of 93.5% down by .6% compared to 2Q, 2018.

*67% of all listings were initially overpriced in Q2, 2019. Overpriced listings take longer to sell and require price reductions adversely affecting the Sale to List Price ratio

*Incidence of Price Reductions was higher at 46.4% of total transactions in Q2 which is up 6.7% from Q2, 2018. It should be noted that it took 3.1 times (+3.4 months) longer to sell after a price reduction which underscores the need for proper pricing with initial list price.

*Available inventory of condos/townhomes was 4.8 months of supply in June which is up 9.1% compared to June, 2018.

KEY UPDATES FOR SINGLE FAMILY DETACHED RESIDENCES:

*Year To Date 2019 Sales were lower by 3.2% compared to the same period in 2018.

*Median Sales Price was higher at 1.4% to $365K in Q2, 2019 compared to Q2, 2018.

*Days on Market it Took to Sell was higher with a median of 75 days which is up 13.6% compared to Q2, 2018.

*Percent of Sale Price to List Price was .5% lower at 95.1% in Q2, 2019 compared to same period in 2018.

*67% of all listings were overpriced in Q2, 2019.

*Incidence of Price Reductions was higher at 49.1% of total transactions in Q2, 2019 which is 5.8% higher than in Q2, 2018.

*Available inventory of single family detached residences was 3.5 months of supply in June, 2019 which is up 6.1% compared to June, 2018.

Hope the above information was of interest. If you are looking to buy or sell a new condo/townhome or single detached residence in Broward County and not currently working with a Realtor, please do not hesitate to contact me at (954) 547-9483 or via email at jkenney10f@gmail.com.

Thanks

Should I Refinance?

July 21st, 2019

With recent lower interest rates, many homeowners are wondering if they should refinance. By definition, refinancing a mortgage means paying off your existing mortgage and replacing it with a new one with a lower interest rate or term. Before you start the refinancing process, you should determine whether you will be assessed any prepayment penalty for paying off your existing mortgage early. The fee could be several months’ worth of mortgage payments. Also, most banks and lenders require that lenders maintain their original mortgage for at least 12 months before they are able to refinance.

There are many reasons to refinance, but the more popular ones are as follows:

1.) Lower Your Interest Rate and Repayment: This is the most popular reason. If you have a 5% interest rate or higher, it may be worth seeing if you can take advantage of the lower interest rates, currently below 4%, to reduce your monthly payment and overall cost of the loan. Some even choose to buy points to lower their rate. This means paying an upfront fee in exchange for a lower monthly rate. A lower rate translates to lower payments.

2.) Shorten the Term of Your Loan: If you have a 30-year fixed mortgage, it may be advantageous to change to a 15 or 20 year loan to pay off your mortgage sooner. This means that you’ll own your home free and clear that much sooner. The only downside is that you’ll have to pay more towards your payments each month.

3.) Cash-out Refinance: With home prices increasing, you might have enough equity to cash out and invest in something else such as a vacation home or new business opportunity.

4.) Change the Type of Mortgage That You Have: It may be advisable to switch from an adjustable-rate mortgage (ARM) to a fixed-rate loan. Refinancing to a fixed-rate loan can provide stability in your monthly expenses allowing you to budget more easily.

When you buy a home, you will have to pay certain closing costs to complete the sale. When you’re refinancing, you’re essentially replacing your original mortgage loan with a new one which means you have to pay closing costs again. The closing costs for a refinance cover a wide range of fees and could easily total thousands of dollars. When considering whether refinancing is something that you should do, you need to calculate your break even point which is the total cost to refinance divided by the amount that you expect to save each month by refinancing. For instance, if your cost is $10K and your monthly savings are $244, you will need to continue owning your home for 40 months before seeing any real savings. If you plan to stay in the home for more than 3 years, then refinancing could be a viable option for you. However, if you are planning to move to another home in the near future thereby not being able to benefit from the savings after 3 years, a refinance would not make sense.

So how much is it going to cost to refinance? The rough estimate of closing costs to refinance will run between 2%-4% of the loan amount. Generally, you can expect to pay the following closing costs;

1.) Application Fee: Lenders impose this fee to cover the cost to run security/credit checks of the borrower and to process the loan.

2.) Title Insurance and Title Search: Covers the cost of the policy which is usually issued by the title insurance company and insures the policy holder for a specific amount. It also covers the cost to review the public records to verify ownership of the property.

3.) Settlement Fees: The title company or attorney who conducts the closing will charge fees to the borrower for preparing the documents and conducting the closing.

4.) Points and Fees: Lenders may charge an origination fee for their work in preparing and evaluating a mortgage loan. Points are prepaid financial fees which are imposed by the lender at closing.

You may see lenders offering a “no-cost” refinance loan which is when the lender pays the closing costs for the borrower. However, be aware that the lender generally tries to make up this money from other aspects of the mortgage such as a slightly higher interest rate.

Once you decide to refinance, there are a few steps that you should take as part of your due diligence:

1.) Get your credit score as it will partially determine the rate that you are able to get.

2.) Determine your home’s current value.

3.) Research mortgage rates and start to pull together the documentation that the lender will require such as past bank statement, proof of employment and salary.

In many cases, it makes the most sense to refinance with the original lender. By so doing, lenders may not require a title search, property appraisal thereby saving on costs. Additionally, in most cases, lenders will offer a better rate by staying with the original lender.

Hope you have found this short blog to be of value as you determine whether refinancing is right for you. Should you have any questions or are in the market for residential real estate in South Florida and not currently working with a real estate agent, please do not hesitate to contact me at (954) 547-9483 or email at jkenney10f@gmail.com. Thanks

Where Are Interest Rates Heading for Rest of 2019

June 20th, 2019

One of the most important things to consider when buying a home with financing is the interest rate that you will be charged to borrow the money. The question that currently being asked is “Are Low Interest Rates Here to Stay?” We are currently at a 21-month low in interest rates.

One year ago at this time, the interest rate on a 30-fixed ate mortgage was 4.54%. One year later, we saw that rate drop to 3.82%. Home buyers and refinance candidates are getting mortgages in the low 4% points when most housing agencies predicted that rates would be near 5% at mid-year 2019. However, lower rates in the future may becoming less likely. There is a higher probability that rates will rise again. All major housing authorities are predicting higher rates. If these agencies are correct, rates will start to climb soon to reach the average predicted year-end rate in the range of 4.38%. That is still a very good rate but it is not as low as what is available now.

The Federal Open Market Committee (FOMC) also commonly known as “the Fed” meets eight times a year but four of those meetings hold special significance. At these four meetings, the group releases the potential direction of interest rates. In March, the Fed announced that it would not raise rates 2-3 times in 2019 as predicted. This resulted in lower mortgage rates and generated much refinance activity. Yesterday, the Fed announced that it will leave rates unchanged for the time being which should keep interest rates at current levels.

If you have been sitting on the sidelines, it could very well be a good time to jump in the market either to buy or refinance. A 0.80% lower rate on a $350K mortgage equates to a savings of $170 per month. Annually, this would translate to a savings of $2,040 and over the life of a 30-year mortgage, a savings of more than $60K. To a home buyer, this could mean buying a larger or more updated home or one in a more desirable neighborhood. For those interested in refinancing, it provides more leeway in your monthly budget.

We have already seen how experts who create mortgage rate forecasts can get them wrong. If the Fed sees that the economy is doing well, it may raise the federal funds rate at its July 31st or September 18th meeting. This action would cause higher interest rates for mortgages. The bottom line is that if you are serious about buying a home with financing or refinancing, act now before interest rates start to creep back up.

Should you have any questions or are looking to buy or sell residential real estate in South Florida and not currently working with a Realtor, please call me at (954) 547-9483 or email me at jkenney10f@gmail.com. Thanks

Jay Kenney

How To Make a Great Offer on a Home

May 25th, 2019

You have finally found your dream home and want to ensure that your offer is accepted and the dream of making this home yours comes true. The following will provide a few tips that will make your offer irresistible to sellers:

1.) Work with your real estate agent to understand what similar homes in terms of size and condition recently sold for in the same neighborhood. This will provide you with pricing information on what buyers were actually willing to pay for homes similar to the home that you are interested in making an offer on. Use this information as a basis for formulating your offer.

2.) If you are able to pay cash for the home, this will put you in a stronger position than a buyer who is using financing. Cash offers are less likely to fall apart as the sale is not dependent on receiving loan approval. Also, cash deals tend to close faster due to the time lenders may need to approve the amount of financing that the buyer requires.

3.) If you prefer not to pay cash, you will need a mortgage. If this is the case, be sure that your finances are in order. A few months prior to looking for a new home, check your credit report allowing time to dispute any errors and take the necessary steps such as paying down debts that will improve your credit score. You can get your reports once a year from the three major credit bureaus at www.annualcreditreports.com. Next step is to get a lender’s pre-approval. This won’t guarantee that you’ll get a loan but it will show sellers that a lender has verified your income your income and credit score and has determined that you can afford payments on a mortgage for a designated amount. This will indicate to sellers that you are ready to purchase and have already committed to a lender.

4.) Include a healthy deposit as part of the offer. The deposit will show the seller how serious a buyer you are. You have the option of making an initial deposit either with the offer or three days from the execution of the agreement. Additionally, you have the option to make a second deposit which could further demonstrate your seriousness as a buyer. For any reason allowed by the agreement that your offer does not result in a closed sale, you are entitled to receive 100% of your deposit money back.

5.) Should you opt to have an inspection of the home, do not take the maximum number of days allowable per agreement to have an inspection performed. Instead of upwards of 15 days, opt for 5-7 days. Sellers prefer a shorter time frame as the buyers have the option to walk away from the agreement for any reason during the inspection period. Sellers prefer to work with buyers who can work with shorter inspection periods,

6.) Offer to close in as short a time frame as possible . Many sellers prefer to close within 30 days. If you can offer a shorter time frame that may be very well received by the seller. Cash deals generally allow for a quicker close. With financing, always confer with your lender to determine how many days that they need to approve your mortgage. Be sure that the seller is aware of your willingness to work with their timetable to close. If the sellers want to remain in the house for a short time after closing, offer them a lease back which means that you would be their temporary landlord.

7.) Don’t include demands on your offer that would irritate the seller. If it is customary in your area for the buyer to pay for their own title insurance then don’t ask the seller to assume this cost. Don’t make a lot of unnecessary changes to the agreement which would require approval and initialing by both parties. These agreements have been drafted by real estate attorneys and are designed to protect both buyers and sellers. For any desired changes to the standard agreement, consider using an addendum to the agreement for this purpose.

8.) After conferring with your real estate agent, determine your best offer that you are willing and able to pay. As previously stated, make your offer based on recent closed sales of comparable properties in the neighborhood so there will not an issue if the property is appraised.

9.) Where financing is involved, be sure to secure your real estate agents feedback as to whether you should put forth your best offer. Depending on local market conditions, you may only get one more chance to make an impression on the seller. It may be unwise to make a low offer hoping the seller will give you a counteroffer. If the seller has received multiple offers, the low offers are generally not ever considered. Keep in mind that in addition to the offer price, sellers also look at other costs and expenses, the financial stability of the buyer along with the timeline related to the inspection period and closing date that work best.

Should you have any questions or have an interest in buying or selling residential real estate in South Florida and not currently working with a real estate agent, please call me at (954) 547-9483 or email at jkenney10f@gmail.com. Until Next time…..

Real Estate Disclosure Laws: What Sellers Need to Disclose

April 26th, 2019

Florida law does not provide an exception for a home that is sold “As Is”. That means that the buyer agrees to take the home in its existing condition without the seller having to make any further repairs or improvements. However, the “As Is” clause does not relieve sellers from their responsibility to disclose latent issues that they are aware of that materially affect the value of the home. Florida law requires sellers to disclose these issues even if the buyer does not ask whether the seller knows about any defects. Examples of such issues that could materially affect the value of a home can include:

1.) Environmental hazards such as asbestos, lead and mold

2.) Insect and pest infestations such as termites

3.) Electrical issues such as wiring or other problems with heating or air conditioning

4.) Foundation issues such as cracks

5.) Disputes about property boundaries or problems with the title to the home

It should be noted that sellers are not obligated to disclose any defects that are obvious such as a broken window or hole in the wall. Only latent defects which include those that cannot be seen during a normal inspection must be disclosed. Additionally, the seller must have knowledge of the defect or issue at the time of the sale. To assist sellers in making all relevant disclosures, The Florida Association of Realtors has developed a 4-page standard form that the seller completes detailing their knowledge on the condition of many property characteristics such as:

1.) Claims Against the Property: are there any current or future claims or court proceedings that affect the property?

2.) Homeowners Associations: is the property subject to rules of a condominium or condo association?

3.) Property Boundaries: are there any disputes regarding the property boundary lines?

4.) Sinkholes: does the property contain any past or present sinkholes?

5.) Environmental Hazards: does the property have any asbestos, lead, mold or Chinese drywall issues?

6.) Key Home Components: are there any problems with essential components such as roof, plumbing, electrical wiring, heating and air conditioning systems?

Florida law does not require that sellers make such disclosures in writing. Such disclosures can be made verbally. However, if a seller makes oral disclosures, it may be difficult to prove in the event that the buyer purchases the property and later finds problems with the home. For this very reason, it is recommended that the seller disclosures be provided in writing. If the buyer does claim to have discovered a defect that was not disclosed by the seller; it is the responsibility of the buyer to demonstrate the following:

1.) the seller was aware of the defect and failed to disclose

2.) the defect has a substantial impact on the value of the home

3.) the buyer was not aware of the defect at time of purchase

4.) the defect would not have been easy for the buyer to detect

The purchase of a home is one of the most important financial decisions that one will make. To protect your purchase, it is recommended that buyers opt to have an inspection of the home performed by a licensed home inspection professional prior to closing on the property. The As Is agreement provides a clause that the buyer wishes to have an inspection conducted up to 15 days following the execution of the agreement. During this time, the buyer has the option to walk-away from the agreement should an issue be uncovered by the inspection and the seller fails to remedy.

Should you have any questions on the above or have an interest in buying or selling residential real estate in South Florida and not currently working with a Realtor, please do not hesitate to contact me at (954) 547-9483 or via email at jkenney10f@gmail.com.

Jay Kenney

Rights Related to Service Animals and Emotional Support Animals in Florida

March 20th, 2019

The following will provide general information on assistance animals in what constitutes a service animal and emotional support animal along with the respective rights of the tenant/buyer and landlord/condo association. The American with Disabilities Act (ADA) 2010 Regulations define a service animal as “any dog that is individually trained to work or perform tasks for the benefit of an individual with a disability including a physical, sensory, psychiatric, intellectual or other mental disability. If they meet this definition, dogs are considered service animals under the ADA regardless of whether they have been licensed or certified by a state or local government. It should be noted that in most instances, the service animals are dogs but the law does not mandate that to be the case.

Under the ADA, an individual with a disability is a person who has a physical or mental impairment that substantially limits one or more major life activities of such an individual; a record of impairment; or be regarded as having such an impairment. Examples of tasks that could be performed by service animals include but are not limited to:

*guiding people who are blind or have low vision

*alerting people who are deaf or hard of hearing

*providing non-violent protection or rescue work

*pulling a wheelchair

*assisting an individual during a seizure

*alerting individuals to the presence of allergens

*retrieving items

*providing physical support with balance to individuals with mobility issues

*calming a person with PTSD during an anxiety attack

Under the ADA, landlords are allowed to ask the owner of a service animal two verification questions: “Is this a service animal that is required because of a disability? and “What task has the dog been trained to perform?” By law, the landlord is not able to ask “What’s wrong with you?” They are only allowed to ask about the need for the service animal which is legally considered an assistance device such as a cane or a walker rather than a pet.

The ADA requires that service animals be accommodated in housing. However, the federal Fair Housing Act (FHA) has a broader service animal definition that allows tenants to request a reasonable accommodation for any assistance animal including emotional support animals. Almost anything can be considered an emotional support animal including a dog, cat, hamster, snake or parrot. The requirements you need to meet in Florida to qualify for an emotional support animal are the same as in other states. The specific requirements for owners of emotional support animals include:

*A licensed mental health professional needs to determine that an emotional disability exists

*The mental disability is in the Diagnostic and Statistical Manual of Mental Disorders

*The identified condition substantially limits ability to participate in at least one major life activity

*The professional has to determine that an emotional support animal would help treat the condition or ease the symptoms

*An emotional support animal letter which is a prescription for an emotional support animal

*The letter must come from a licensed mental health professional and be on the mental health professional’s official letterhead

*Must include the therapist’s license details, issue date, and state

In the case where a landlord is severely allergic to dogs, the landlord must consider the renter’s request for reasonable accommodation; and if, granting the request could impose an undue hardship. The determination of undue hardship must be reviewed including the options of alternative accommodations to meet the tenant’s requirement. If an alternative solution cannot be found, it could be treated as a denial and the landlord should be able to show that additional reasonable accommodation were proposed.

If the tenant/buyer has fulfilled the Florida emotional support letter requirements and proof has been provided, the emotional support animal cannot be rejected even with condos that do not accept pets. The Fair Housing Act provides the right to live with an emotional support animal regardless of your condo association’s rules. However, the landlord has the ability to make a claim on the tenant’s security deposit fro any damage the service animal may cause at the end of the tenant’s lease, If anyone challenges the validated emotional support animal requirements, the owner of the support animal can file a complaint with HUD.

Should you have any questions on the above, please do not hesitate to let me know. Also, if you are looking to buy or sell residential real estate in South Florida and not currently working with a Realtor, please call me at (954) 547-9483 or via email at jkenney10F@gmail.com. Many thanks!

Ways Real Estate Can Generate Wealth

February 22nd, 2019

The rising of home prices over time also known as appreciation is how the majority of wealth is created in real estate. While prices fluctuate, over the long run real estate values have always increased, and there is no reason to believe that this is going to change.
One thing to consider as it relates to real estate appreciation affecting your Return on Investment (ROI) is the fact that appreciation combined with leverage offers maximum return. By nature, real estate is one of the easiest assets to leverage. Not only is it easy to leverage the financing of it, but the terms are very favorable compared to any other kind of loan. Interest rates are currently below 5%, down payments can be as low as 5% and loans can be amortized over a 30-year period. If you buy a property for $300,000 and it appreciates to $330,000, you have a 10% return. However, if you have financed putting down a 10% down payment, you actually have doubled your investment with a 100% return.
One of the best benefits of investing in real estate is the fact that not only are you generating revenue but also are paying down your loan with every payment. You often hear that with rental properties, it’s actually the tenant who is paying off the loan. When investing in residential real estate, ensure that any purchase you make generates more income than it costs to own resulting in a positive cash flow and can appreciate over time. Smart investors always purchase property with a positive cash flow providing a consistent revenue stream independent of market whims affecting capital appreciation.
Forced equity is a term used to refer to the profit that is made when an investor makes improvements or enhancements to a property to make it worth more. Unlike appreciation where you are subject to market conditions that you cannot control; forced equity allows investors the ability to pro-actively increase the value of the property.
Historically, in real estate, your risk of loss is minimized by the length of time you own the property. When the market improves, the value of your home increases, and as a result, you build equity, Unlike the stock market, where there is risk and several external factors that can negatively impact your investment, real estate provides more control of your investment.
It is also a fact that the longer you hold onto real estate, the more money that you will make. The housing market has always recovered from past bubbles that caused home appreciation to drop, and from those who held on to their investments during down markets; prices have returned to normal.
It is important to know that the purchase price is the main factor that determines your profit in the future. To buy right, it is best to work with a professional Realtor who knows the local market and can determine the potential value of a property. Once you know the market value, factor in any renovation and other costs to accurately determine your potential profit. There are many ways to generate wealth but investing in real estate is one of the better ways to do so.
Hope that you have found this blog to be of value. Should you have an interest in buying or selling real estate in the South Florida market and not currently working with an agent, please do not hesitate to contact me at (954) 547-09483 or via email at jaykenney@SFPropertyTeam.com.
Jay Kenney

HOW MUCH HOUSE CAN I AFFORD?

January 18th, 2019

Once you have decided to buy a home, you will need to determine how much home you can afford to spend to purchase that home. Unless, you are paying cash for the purchase, you will need to consult with a loan lender on what you can qualify for in terms of a mortgage. It is important to note that the maximum amount that you may qualify to receive does not necessarily mean it is what you can afford. Rather than considering the total dollar amount, look at the monthly-related expense and compare that amount to your monthly net income. This will help determine how much home that you can afford.

Mortgage lenders generally look at the amount involved in paying the mortgage. When assessing your ability to pay, lenders include expenses such as the principal, mortgage interest, real estate taxes, homeowner’s insurance, any mortgage insurance or homeowner’s association fees. However, lenders do not include home-related expenses such as utility expenses as well as general maintenance and repair-related expenses in owning a home. It is difficult to estimate the specific amount that you may need for maintenance and repairs; however, an anticipated annual cost of 1% of the value of the home can be used as a general rule.

Additionally, you should also include your daily living expense items such as gasoline, car maintenance, groceries, restaurants and entertainment, vacations, gym and clothing. Having an idea of the monthly cost of such items will help determine what you can afford. You should include these costs in your monthly debts to give you a realistic picture of how your money is being spent.
However, you should also include the need to save for emergencies and retirement. Financial experts generally believe that you should have up to six months of expenses in savings. This includes your total housing payments and all other monthly expenses. This should protect you from defaulting on a mortgage should your income stop. In addition to saving for emergencies, you should factor in a fixed amount to save for retirement each month.

Your long-term goals should also play a role in how much house you can afford. If you anticipate your income changing in the future, you need to plan for the worst-case scenario. By so doing, you will be in a better position to cover your mortgage payments.

As a general rule, home buyers seeking a mortgage have been well served by the 28/36 rule. This rule states the following:
*Monthly housing costs which include mortgage payments, insurance, property taxes and condo or association fees shouldn’t exceed 28% of your monthly gross income.
*Monthly debt payments including credit card bills and student loans shouldn’t exceed 36% of your monthly gross income.

In addition to considering your housing costs and debt payments, you also need to determine how much you have for a down payment. The more you are able to put down as a down payment, the more home you can afford. A higher down payment will also lower your monthly mortgage payments and even reduce what you may pay for private mortgage insurance (PMI). Paying more upfront is always a good way to ensure your mortgage payments don’t become a financial burden later.

Prior to applying for a home mortgage, you should know your credit score and history, The higher the credit score and better your credit history, the more likely that you will be able to qualify for a lower interest rate and a lower down payment. In addition to checking your credit score, you should ask your lender for a mortgage pre-qualification letter. This essentially is a bank telling you how much money you can qualify for in terms of a mortgage. However, as previously stated, this amount is not necessarily what you can afford.

Hope you have found this to be of value if you are thinking of jumping into the real estate market. If you have an interest in buying and/or selling residential real estate in South Florida and not currently working with a Realtor, please do not hesitate to contact me via email at JayKenney@SFPropertyTeam.com or on cell at (954) 547-9483. Many Thanks
Jay Kenney

Where are Interest Rates Heading in 2019

December 18th, 2018

If you are thinking of buying in 2019 with financing, you will want to know the effects of rising interest rates on your ability to buy a home. As interest rates climb, you may find that you can no longer afford that home you wanted. Even a small increase in the rate will have a negative impact on the amount that you can qualify for in a home mortgage. A buyer who is able to afford a monthly mortgage payment of $1,450 would qualify to buy a $300K home with a 4% interest rate assuming all other variables remain the same. With a 5% interest rate, the price of home that the buyer could afford would drop to $275K. The interest rate that you secure has a direct impact on your monthly payment. The higher the rate, the more the payment will be.

There are things that the buyer can do that will help to qualify for a higher mortgage. The buyer could increase the amount of money being put down as down payment, talk with 3-4 lenders who may be able to offer a better interest rate, reduce their debt to income ratio or improve their credit score.

According to Freddie Mac’s U.S. Economic & Housing Market Outlook, interest rates were projected to increase steadily throughout 2019 with a projected rate of 5.3% by the end of the year. However. a combination of weaker economic data, stock market volatility and increasing softening from the FED may result in these projections to be reduced. It is also likely that the FED will end once-a-quarter rate hikes in 2019 as originally projected.

With rising interest rates, homeowners who have low interest rates will not want to give up this rate by selling their home. These homeowners are increasingly renovating their existing home rather than buying a new home which would come with a higher interest rate. Inventory of homes for sale are already low and buyers will have a smaller inventory of homes as increasing rates and home prices make everything more expensive. If you are thinking of refinancing or buying a new home, do it now as interest rates will only continue to rise. Despite the fact that interest rate will increase, rates are still at historically low levels compared to where rates were 10, 20 and even 40 years ago.

If you are interested in buying or selling real estate in South Florida and not currently working with a Realtor, please do not hesitate to contact me via email at JayKenney@SFPropertyTeam.com or cell at (954) 547-9483. Wishing everyone a wonderful holiday season!