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Moving Up

Feeling a Little Cramped? Moving Up

If your home is giving you "the squeeze" because your family has grown or you're seriously thinking about buying a home in a more upscale neighborhood, then you may be ready to move up to your next home. But how do you get started?

Begin with a "reality check."

Take some time to really look at what the next step may be. Visit the neighborhoods you may be interested in. Tour open houses or homes for sale to see what kind of home is available in your price range. I can show you neighborhoods and homes that you might not have considered, but that will meet your needs. Trust your instincts and focus on what you know fits your lifestyle. Then I can help advise you on the value and investment quality of the homes on the market.

Next, talk to your lender to see what kinds of mortgage programs and rates are available, as well as how much you will qualify for. More important, take a hard look at your household budget to realistically determine how much of a mortgage payment you can afford each month. If you don't already have a good relationship with a lender, I'd be happy to refer you to lenders who offer mortgage programs that meet your needs.

In the meantime, I can perform a Comparative Market Analysis (CMA) for your current home to see how it compares to other homes sold in your neighborhood. Then we can determine a realistic asking price. I can also recommend ways to prepare your home for sale. Once you have made a realistic assessment of what you're getting into, then we can put your house on the market and begin to seriously look for your next home.

What if you find a home before yours sells…or vice versa

One of the biggest concerns of move-up buyers is what happens if they find their dream home before their current one sells, or if their home sells before they find a new one. Here's a brief look at several options (please call me for greater detail or help with your particular situation):

If you have an acceptable offer for your home on the table but haven't yet found a new house to move to, you can:

Go for it with the understanding that you may have to move twice - once to a short-time rental unit, the second time to your new home.

Accept the offer with the stipulation that you want a long closing and the right to rent back from the new owner for 60, 90 or 120 days. Assure the buyer that you will do everything possible to move things along so they may be able to take possession of the home sooner than the specified terms.

Inform the buyer you'll sell the home only if you can find a house you like and it will take 30 to 60 days to determine if, indeed, you will sell. This may seem a bit risky but this approach can be successful if you allow the buyer to do their inspection (not appraisal) and get their financing in order while you shop for a new home. You also allow them to continue looking at other homes on the market. If the buyer finds something they like better, then you agree to let them out of the deal and refund their inspection cost (typically it's only $200-$300). This a good way to avoid having to take your home off the market while you're looking, only to have the buyer then do an inspection after you've found a new home, giving them an opportunity to renegotiate the deal when they know you're over a barrel. To prevent surprises at the outset, we can include in your listing description a phrase such as "...the sale of this house is contingent on the seller finding a suitable home..."

Think about the future

When looking for your new home, try to think more about your future needs than your current needs. Generally, I recommend buying as much home as you can afford without overextending yourself, especially if you're buying a new home with few maintenance issues. By stretching a bit within your personal budget, the home will better meet your current and future lifestyle, you will likely hang on to it longer, and it will be a better-performing investment in the long run.

With all that said, remember that you will likely not live in your new home forever. According to U-Haul, the average American relocates 11 times over the course of his or her life (Ladies Home Journal, July 1998). If your new home meets many of your needs, then go for it. You likely will be moving up again in the future.

 

FHA News

Jan. 14, 2015 On Friday, FHA announced they would reduce their Mortgage Insurance Premium (MIP) rates for most new single-family mortgages by 50 basis points (0.50%). This is significant. For example: A buyer purchasing a $290,000 single-family house with the minimum 3.5% down payment would, under the current format, pay $314.44 in MIP each month for the entire life of their 30-year loan. Under the new rules, that amount will be reduced to $197.98. That’s a difference of 116.46 per month – perhaps slightly lower than your cable bill, but over the life of the loan it adds up to $41,925 in savings – enough (hopefully) to put someone through a year of college come 2045. The background: The FHA news was first announced by President Obama on Thursday at a speech in Phoenix that was reported on by the New York Times as one of a handful of strategic spoilers leading up to next week’s State of the Union address. The administration has been under pressure to lower MIP for some time, as the high monthly expense has discouraged creditworthy borrowers from choosing the product, and incentivized millions of others to refinance out of their FHA mortgage as soon as their situation allows. So what does this mean for buyers?  The full and detailed FHA announcement can be read in letter form here, but the high points are: The reduction will only apply to FHA case numbers assigned on or after January 26, 2015.  If you’re already under contract with an FHA case number assigned, you have a short window starting this Thursday, Jan. 15 to request that your number be canceled so you can get a new number (and a lower monthly payment) on or after the 26th – assuming that’s something your purchase contract and timeline will allow.  MIP rates vary based on the type of property being purchased and down payment amount. Keep in mind... ...that even with the changes, FHA will still not prevail as the most affordable product for a lot of home buyers. Right now, conventional rates are low (we’ve been locking buyers in at 3.625% for 30-year terms and 2.875 for 15-years), and we now offer a 3% down conventional product. Still, it can be the best option for anyone who needs their credit to be looked at more flexibly (they’ll accept credit scores of 600 or better) or who will be receiving down payment funds as a gift, and this latest adjustment widens that niche. If you have any questions or would like me to run some numbers for you or a client on the new FHA or any other mortgage product, contact me. I’d love to help. Best, Ed Edmond Gosselin Vice President of Mortgage Lending etg@guaranteedrate.com vCard / A+ BBB Rating o: 207.331.4705 / m: 207.650.0215 / f: 872.206.4091 63 Marginal Way, 1st floor , Portland, ME 04101NMLS ID: 471749