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Buying or Renting - Which is Better?

by Melissa Thompson


With interest rates still relatively low but predicted to start rising, buying a house right now is less expensive than renting in many places, including Memphis, TN.  Now is a great time to lock into a rate.

Buying is often considered to be financially better than renting over the long run because your mortgage payments build equity in your home, which you will eventually own, while rent only goes toward the upkeep of your home and the wallet of your landlord.  That is just one reason buying is better than renting. Here are some others:

  • You can do what you want with your property. Making home improvements will be your choice, from the colors to paint the walls, to light fixtures, to types of floors and more. You won’t need permission from a landlord to make changes.
     
  • Tax benefits. Tax deductions are a great perk of home ownership. Homeowner Tax Benefits 2019
     
  • Stable monthly payments. Rents can go up, but with a fixed-rate mortgage, your monthly payments won’t change.
     
  • Forced savings.  Renting might seem less expensive, but would you save the money you don’t spend on rent?  Since your mortgage payments are building equity in your home, which you can later sell for profit, it’s like a forced savings.

Using a Rent vs. Buy Calculator you can see how buying is a better financial option right here in Memphis. For example, after 2 years the cost of homeownership (down payment, mortgage, taxes, etc.) for a $85,800 home in Memphis would be $40,187. The total cost to rent the same house for that period would be $25,683.  Renting would leave you with $14,503 in your pocket (including the money you didn’t spend on a down payment).  So, it would seem that renting would be better financially, right?  But wait…not so fast.  Let’s look at what you gain over the same 2-year period if you buy.  After 2 years, your home will have $28,418 in equity. However, if you instead rent and invest your down payment and other money you save at a 6% return rate, it will earn around $1,743 in 2 years.  So, if you look at your gross costs, equity and investment potential, it’s better for you to buy than rent if you plan to live in your home for more than 1 year and 6 months.

The bottom line is, if you’ve been thinking about buying a home in the Memphis area, don’t wait! Start investing your money in your own home vs that of a landlord today!

If you are in the market to buy or sell a home in the Memphis area, contact professional Realtor, Melissa Thompson, and let her help you with all your real estate needs. Give her a call at 901-729-9526 today!

The Impact Your Interest Rate Makes

by Melissa Thompson

The Impact Your Interest Rate Makes [INFOGRAPHIC] | Keeping Current Matters

Some Highlights:

  • Interest rates have come a long way in the last 30 years.
  • The interest rate you secure directly impacts your monthly payment and the amount of house that you can afford if you plan to stay within a certain budget.
  • Interest rates are at their lowest in years… RIGHT NOW!
  • If buying your first home, or moving up to the home of your dreams is in your future, now may be the time to act!

Thinking about buying or selling a Memphis TN home, Call your local expert’s The Melissa Thompson Team 901-729-9526.

 

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Don’t Let Your Luck Run Out...

by Melissa Thompson

Don’t Let Your Luck Run Out [INFOGRAPHIC] | Keeping Current Matters

Some Highlights:

  • The “Cost of Waiting to Buy” is defined as the additional funds it would take to buy a home if prices and interest rates were to increase over a period of time.
  • Freddie Mac predicts that interest rates will increase to 4.8% by this time next year, while home prices are predicted to appreciate by 4.8% according to CoreLogic.
  • Waiting until next year to buy could cost you thousands of dollars a year for the life of your mortgage!
  •  

Learn more about buying or selling Memphis Real Estate at yourkeytomemphis.com. 901.729.9526 or Melissa@YourKeyToMemphis.com.

 

Is This the Year to Move Up to Your Dream Home? If So, Do it Early

by Melissa Thompson

Is This the Year to Move Up to Your Dream Home? If So, Do it Early | Keeping Current Matters

It appears that Americans are regaining faith in the U.S. economy. The following indexes have each shown a dramatic jump in consumer confidence in their latest surveys:

  1. The University of Michigan Consumer Sentiment Index
  2. National Federation of Independent Businesses' Small Business Optimism Index
  3. CNBC All-America Economic Survey
  4. The Conference Board Consumer Confidence Survey

It usually means good news for the housing market when the country sees an optimistic future. People begin to dream again about the home their family has always wanted, and some make plans to finally make that dream come true.

If you are considering moving up to your dream home, it may be better to do it earlier in the year than later. The two components of your monthly mortgage payment (home prices and interest rates) are both projected to increase as the year moves forward, and interest rates may increase rather dramatically. Here are some predictions on where rates will be by the end of the year:

HSH.com:

“We think that conforming 30-year fixed rates probably make it into the4.625 percent to 4.75 percent range at some point during 2017 as a peak.”

Svenja Gudell, Zillow’s Chief Economist:

“I wouldn’t be surprised if the 30-year fixed mortgage rate hits 4.75 percent.”

Mark Fleming, the Chief Economist at First American:

“[I see] mortgage rates getting much closer to 5 percent at the end of next year.”

Lawrence Yun, NAR Chief Economist:

“By this time next year, expect the 30-year fixed rate to likely be in the 4.5 percent to 5 percent range.”

Bottom Line

If you are feeling good about your family’s economic future and are considering making a move to your dream home, doing it sooner rather than later makes the most sense.

Contact The Melissa Thompson Team for help answering all your home buying questions! 901-729-9526 or Melissa@YourKeyToMemphis.com.

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Will Increasing Mortgage Rates Impact Home Prices?

by Melissa Thompson

Will Increasing Mortgage Rates Impact Home Prices? | Keeping Current Matters

There are some who are calling for a decrease in home prices should mortgage interest rates begin to rise rapidly. Intuitively, this makes sense as the cost of a home is determined by the price of the home, plus the cost of financing that home. If mortgage interest rates increase, fewer people will be able to buy, and logic says prices will fall if demand decreases.

However, history shows us that this has not been the case the last four times mortgage interest rates dramatically increased.

Here is a graph showing what actually happened:

Will Increasing Mortgage Rates Impact Home Prices? | Keeping Current Matters

Last week, in an article titled “Higher Rates Don’t Mean Lower House Prices After All,the Wall Street Journal revealed that a recent study by John Burns Real Estate Consulting Inc. found that:

“[P]rices weren’t especially sensitive to rising rates, particularly in the presence of other positive economic factors, such as strong job growth, rising wages and improving consumer confidence.”

Last week’s jobs report was strong and the Conference Board just reported that the Consumer Confidence Index was back to pre-recession levels.

Bottom Line

If you are debating buying a home, we will have to wait and see what happens as we move forward, but a decrease in home prices should rates go up is anything but guaranteed. Contact The Melissa Thompson Team for help answering all your home buying questions! 901-729-9526 or Melissa@YourKeyToMemphis.com

 

When the Rate Goes Up

by Melissa Thompson

It’s not “if” the rate goes up but “when” the rate goes up; it could make a big difference for some buyers. Freddie Mac predicts that mortgage rates will be at 4.5% a year from now.

If buyers can afford a home with higher interest rates, it means higher payments. 

Higher payments might mean they won’t have the money to spend on other things like furniture or improvements to the home or an unrelated purchase like a new car.

When the rate moves 0.50% on a $250,000 mortgage, the payment goes up by $70.66 a month. If it moves 1.00%, the payment goes up by $143.74 per month, each and every month for the entire term of the mortgage which means paying over $50,000 more for the house.

The question facing every borrower in this situation is “How will you feel about having to pay more to live in the same house because you were not ready to commit?”

Then, there’s the borrower who is absolutely maxed out as to what they can qualify for or sometimes, it is a borrower who just refuses to pay a higher payment. When that’s the case, the buyer has to make a larger down payment. In the same example, a 0.50% increase in rate would require $14,873 more in down payment. That could make the purchase impossible or require the buyer to buy a lesser price home that will not have the same amenities.

Mortgage rates have been low for so long that some people think that is what they should be. There are some economists who believe that the economy will not be strong again until mortgage rates are in the 7% range.

Be sure to contact Melissa Thompson, Your Key to Memphis Team with Crye-Leike for all of your Real Estate needs – 901-729-9526 or melissa@yourkeytomemphis.com.

 

By and photo credit: Sandra Nickel Hat Team

 

2 Myths About Mortgages That May Be Holding Back Buyers

by Melissa Thompson

2 Myths About Mortgages That May Be Holding Back Buyers | Keeping Current Matters

Fannie Mae’s “What do consumers know about the Mortgage Qualification Criteria?” Study revealed that Americans are misinformed about what is required to qualify for a mortgage when purchasing a home.

Myth #1: “I Need a 20% Down Payment”

Fannie Mae’s survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 76% of Americans either don’t know (40%) or are misinformed (36%) about the minimum down payment required.

Many believe that they need at least 20% down to buy their dream home. New programs actually let buyers put down as little as 3%.

Below are the results of a Digital Risk survey of Millennials who recently purchased a home.

2 Myths About Mortgages That May Be Holding Back Buyers | Keeping Current Matters

As you can see, 64.2% were able to purchase their home by putting down less than 20%, with 43.8% putting down less than 10%!

Myth #2: “I need a 780 FICO Score or Higher to Buy”

The survey revealed that 59% of Americans either don’t know (54%) or are misinformed (5%) about what FICO score is necessary to qualify.

Many Americans believe a ‘good’ credit score is 780 or higher.

To help debunk this myth, let’s take a look at the latest Ellie Mae Origination Insight Report, which focuses on recently closed (approved) loans. As you can see below, 54.1% of approved mortgages had a credit score of 600-749.

2 Myths About Mortgages That May Be Holding Back Buyers | Keeping Current Matters

Bottom Line

Whether buying your first home or moving up to your dream home, knowing your options will definitely make the mortgage process easier. Your dream home may already be within your reach.

 

Would You Qualify for a Mortgage Now?

by Melissa Thompson

Would You Qualify for a Mortgage Now? | Keeping Current Matters

The widespread myth that perfect credit and large down payments are necessary to buy a home are holding many potential home buyers on the sidelines. According to Ellie Mae’s latest Origination Report, the average FICO score for all closed loans in May was 724, far lower than the 750 or 800 that many buyers believe to be true.

Below is a graph of the distribution of FICO scores of approved loans in May (the latest available data):

Would You Qualify for a Mortgage Now? | Keeping Current Matters

Looking at the chart above, it becomes obvious that not only do you not need a 750+ credit score, but 54.9% of approved loans actually had a score between 600 and 749.

More and more experts are speaking up about the fact that if potential buyers realized they could be approved for a mortgage with a credit score at, or above, 600, the distribution in the chart above would shift further to the left.

Ellie Mae’s Vice President, Jonas Moe encouraged buyers to know their options before assuming that they do not qualify for a mortgage: 

“The high median credit score is due to many millennials believing they won’t qualify with the score they have - and are therefore waiting to apply for a mortgage until they have the score they think they need.” (emphasis added)

CoreLogic’s latest MarketPulse Report agrees that the median FICO score does not always tell the whole story:

“The observed decline in originations could be a result of potential applicants being either too cautious or discouraged from applying, more so than tight underwriting as the culprit in lower mortgage activity.”

It’s not just millennials who believe high credit scores and large down payments are needed. Many current homeowners are delaying moving on to a home that better fits their current needs due to a belief that they would not qualify for a mortgage today.

So what does this all mean?

Moe put it this way:

“Many potential home buyers are 'disqualifying' themselves. You don't need a 750 FICO Score and a 20% down payment to buy.”

Bottom Line

If you are one of the many Americans who has always thought homeownership was out of their reach, meet with a local real estate professional who can help you start the process of being pre-qualified to see if you are able to buy now!

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Mortgage Rates Again at Historic Lows

by Melissa Thompson

Mortgage Rates Again at Historic Lows | Keeping Current Matters

Just two weeks ago, we posted an article discussing where mortgage interest rates may be heading over the next twelve months. We quoted projections from Fannie Mae,Freddie Mac, the Mortgage Bankers’ Association and the National Association of Realtors. Each predicted that rates would begin to rise slowly and steadily throughout 2016.

However, shaky economic news and a volatile stock market have actually caused rates to drop six out of the last seven weeks, and have remained at 3.65% for the past two weeks.

Mortgage Rates Again at Historic Lows | Keeping Current Matters

Rates have again fallen to historic lows yet many experts still expect them to increase in 2016. The only thing we know for sure is that, according to Freddie Mac, current rates are the best they have been since last April.

Bottom Line

If you are thinking of buying your first home or moving up to your ultimate dream home, now is a great time to get a sensational rate on your mortgage.

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Do You Know The Difference Your Interest Rate Makes?

by Melissa Thompson
 

Do You Know The Difference Your Interest Rate Makes? [INFOGRAPHIC] | Keeping Current Matters

Some Highlights:

  • Interest rates have come a long way in the last 30 years.
  • The interest rate you secure directly impacts your monthly payment and the amount of house that you can afford.
  • Experts predict that rates will increase by 3/4 a percent over the next 12 months.
  • Secure a low rate now to get the most house for your money.

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Displaying blog entries 1-10 of 19

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