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      Michael Lyons

      Homeownership is the Top Contributor to Your Net Worth

      Homeownership is the Top Contributor to Your Net Worth | MyKCM

      Many people plan to build their net worth by buying CDs or stocks or just having a savings account. Recently, however, Economist Jonathan Eggleston and Survey Statistician Donald Hays, both of the U.S. Census Bureau, shared the biggest determinants of wealth,

      “The biggest determinants of household wealth [are] owning a home and having a retirement account.” (Shown in the graph below):

      Homeownership is the Top Contributor to Your Net Worth | MyKCM

      This does not come as a surprise, as we often mention that homeownership can help you to increase your family’s wealth. This study reinforces that idea,

       “Net worth is an important indicator of economic well-being and provides insights into a household’s economic health.”

      Having equity in your home can help your family move in that direction, building toward substantial financial growth. According to the report noted above, people are not only creating net worth in the homes they live in, but many are also earning equity in rental property investments. (see below):

      :Homeownership is the Top Contributor to Your Net Worth | MyKCM

      John Paulson said it well,

      If you don’t own a home, buy one. If you own one home, buy another one, and if you own two homes buy a third and lend your relatives the money to buy a home.”

      Bottom Line

      There are financial and non-financial benefits of owning a home. If you would like to increase your net worth, let’s get together so you can learn all the benefits of becoming a homeowner.

      What FICO® Score Do You Need to Qualify for a Mortgage?

      While a recent announcement from CNBC shares that the average national FICO® score has reached an all-time high of 706, the good news for potential buyers is that you don’t need a score that high to qualify for a mortgage. Let’s unpack the credit score myth so you can to become a homeowner sooner than you may think.

      With today’s low-interest rates, many believe now is a great time to buy – and rightfully so! Fannie Mae recently noted that 58% of Americans surveyed say it is a good time to buy. Similarly, the Q3 2019 HOME Survey by the National Association of Realtors said 63% of people believe now is a good time to buy a home. Unfortunately, fear and misinformation often hold qualified and motivated buyers back from taking the leap into homeownership.

      According to the same CNBC article,

      “For the first time, the average national credit score has reached 706, according to FICO®, the developer of one of the most commonly used scores by lenders.”

      This is great news, as it means Americans are improving their credit scores and building toward a stronger financial future, especially after the market tumbled during the previous decade. With today’s strong economy and increasing wages, many Americans have had the opportunity to improve their credit over the past few years, driving this national average up.

      Since Americans with stronger credit are now entering the housing market, we are seeing an increase in the FICO® Score Distribution of Closed Loans (see graph below):

       

      :What FICO� Score Do You Need to Qualify for a Mortgage? | MyKCM

      But hang on – don’t forget that this does not mean you need a FICO® score over 700 to qualify for a mortgage. Here’s what Experian, the global leader in consumer and business credit reporting, says:

      FHA Loan: “FHA loans are ideal for those who have less-than-perfect credit and may not be able to qualify for a conventional mortgage loan. The size of your required down payment for an FHA loan depends on the state of your credit score: If your credit score is between 500 and 579, you must put 10% down. If your credit score is 580 or above, you can put as little as 3.5% down (but you can put down more if you want to).”

      Conventional Loan: “It’s possible to get approved for a conforming conventional loan with a credit score as low as 620, although some lenders may look for a score of 660 or better.”

      USDA Loan“While the USDA doesn’t have a set credit score requirementmost lenders offering USDA-guaranteed mortgages require a score of at least 640.”

      VA Loan: “As with income levels, lenders set their own minimum credit requirements for VA loan borrowers. Lenders are likely to check credit scores as part of their screening process, and most will set a minimum score, or cutoff, that loan applicants must exceed to be considered.”

      Bottom Line

      As you can see, plenty of loans are granted to buyers with a FICO® score that is lower than the national average. If you’d like to understand the next steps to take when determining your credit score, let’s get together so you can learn more.

       

       

      What Is the Cost of Waiting Until Next Year to Buy? [INFOGRAPHIC]

      What Is the Cost of Waiting Until Next Year to Buy? [INFOGRAPHIC] | MyKCM

      Some Highlights:

      • The “cost of waiting to buy” is defined as the additional funds necessary to buy a home if prices and interest rates were to increase over a period of time.
      • Freddie Mac forecasts interest rates will rise to 3.8% by Q4 2020.
      • CoreLogic predicts home prices will appreciate by 5.4% over the next 12 months.
      • If you’re ready and willing to buy your dream home, now is a great time to buy.

      4 Reasons to Sell This Fall

      4 Reasons to Sell This Fall [INFOGRAPHIC] | MyKCM

      Some Highlights:

      • Buyers are active in the market and often competing with one another for available listings.
      • Housing inventory is still under the 6-month supply found in a normal housing market.
      • Homes are still selling relatively quickly, averaging 31 days on the market.

      Everybody Calm Down! This Is NOT 2008

      Everybody Calm Down! This Is NOT 2008 | MyKCM

      Last week realtor.com released the results of a survey that produced three major revelations:

      1. 53% of home purchasers (first-time and repeat buyers) currently in the market believe a recession will occur this year or next.
      2. 57% believe the next recession will be as bad or worse than 2008.
      3. 55% said they would cancel plans to move if a recession occurred.

      Since we are currently experiencing the longest-ever economic expansion in American history, there is reason to believe a recession could occur in the not-too-distant future. And, it does make sense that buyers and sellers remember the horrors of 2008 when they hear the word “recession.”

      Ali Wolf, Director of Economic Research at the real estate consulting firm Meyers Research, addressed this point in a recent interview:

      “With people having PTSD from the last time, they’re still afraid of buying at the wrong time.”

      Most experts, however, believe if there is a recession, it will not resemble 2008. This housing market is in no way the same as it was just over a decade ago.

      Zillow Economist, Jeff Tucker, explained the difference in a recent article, Recessions Typically Have Limited Effect on the Housing Market:

      “As we look ahead to the next recession, it’s important to recognize how unusual the conditions were that caused the last one, and what’s different about the housing market today. Rather than abundant homes, we have a shortage of new home supply. Rather than risky borrowers taking on adjustable-rate mortgages, we have buyers with sterling credit scores taking out predictable 30-year fixed-rate mortgages. The housing market is simply much less risky than it was 15 years ago.”

      George Ratiu, Senior Economist at realtor.com, also weighed in on the subject:

      “This is going to be a much shorter recession than the last one, I don’t think the next recession will be a repeat of 2008…The housing market is in a better position.”

      In the past 23 years, there have been two national recessions – the dot-com crash in 2001 and the Great Recession in 2008. It is true that home values fell 19.7% during the 2008 recession, which was caused by a mortgage meltdown that heavily impacted the housing market. However, while stock prices fell almost 25% in 2001, home values appreciated 6.6%. The triggers of the next recession will more closely mirror those from 2001 – not those from 2008.

      Bottom Line

      No one can accurately predict when the next recession will occur, but expecting one could possibly take place in the next 18-24 months is understandable. It is, however, important to realize that the impact of a recession on the housing market will in no way resemble 2008.

       

       

      5 Reasons to Sell This Fall

      5 Reasons to Sell This Fall | MyKCM

      Below are 5 compelling reasons listing your home for sale this fall makes sense.

      1. Demand Is Strong

      The latest Buyer Traffic Report from the National Association of Realtors (NAR) shows that buyer demand remains strong throughout the vast majority of the country. These buyers are ready, willing, and able to purchase…and are in the market right now. More often than not, in many areas of the country, multiple buyers are competing with each other to buy the same home.

      Take advantage of the buyer activity currently in the market.

      2. There Is Less Competition Now

      Housing inventory is still under the 6-month supply that is needed for a normal market. This means that in the majority of the country, there are not enough homes for sale to satisfy the number of buyers.

      Historically, a homeowner would stay an average of six years in his or her home. Since 2011, that number has hovered between nine and ten years. There is a pent-up desire for many homeowners to move as they were unable to sell over the last few years due to a negative equity situation. As home values continue to appreciate, more and more homeowners will be given the freedom to move.

      Many homeowners were reluctant to list their homes over the last couple years, for fear that they would not find a home to move to. That is all changing now as more homes come to market at the higher end. The choices buyers have will continue to increase. Don’t wait until additional inventory comes to market before you decide to sell.

      3. The Process Will Be Quicker

      Today’s competitive environment has forced buyers to do all they can to stand out from the crowd, including getting pre-approved for their mortgage financing. This makes the entire selling process much faster and simpler, as buyers know exactly what they can afford before shopping for a home. According to Ellie Mae’s latest Origination Insights Report, the time needed to close a loan is 43 days.

      4. There Will Never Be a Better Time to Move Up

      If your next move will be into a premium or luxury home, now is the time to move up. There is currently ample inventory for sale at higher price ranges. This means if you’re planning on selling a starter or trade-up home and moving into your dream home, you’ll be able to do that in the luxury or premium market.

      According to CoreLogic, prices are projected to appreciate by 5.2% over the next year. If you’re moving to a higher-priced home, it will wind up costing you more in raw dollars (both in down payment and mortgage) if you wait.

      5. It’s Time to Move on with Your Life

      Look at the reason you decided to sell in the first place and determine whether it is worth waiting. Is money more important than being with family? Is money more important than having the freedom to go on with your life the way you think you should?

      Only you know the answers to these questions. You have the power to take control of the situation by putting your home on the market. Perhaps the time has come for you and your family to move on and start living the life you desire.

      That is what is truly important.

       

      Top Priorities When Moving with Kids

      Top Priorities When Moving with Kids | MyKCM

      According to the Pew Research Center, around 37% of U.S students will be going back to school soon and the rest have already started the new academic year. With school-aged children in your home, buying or selling a house can take on a whole different approach when it comes to finding the right size, location, school district, and more.

      Recently, the 2019 Moving with Kids Report from the National Association of Realtors®(NAR) studied “the different purchasing habits as well as seller preferences during the home buying and selling process.” This is what they found:

      When Purchasing a Home

      The major difference between the homebuyers who have children and those who do not is the importance of the neighborhood. In fact, 53% said the quality of the school district is an important factor when purchasing a home, and 50% select neighborhoods by the convenience to the schools.

      Buyers with children also purchase larger, detached single-family homes with 4 bedrooms and 2 full bathrooms at approximately 2,110 square feet.

      Furthermore, 26% noted how childcare expenses delayed the home-buying process and forced additional compromises: 31% in the size of the home, 24% in the price, and 18% in the distance from work.

      When Selling a Home

      Of those polled, 23% of buyers with children sold their home “very urgently,” and 46% indicated “somewhat urgently, within a reasonable time frame.” Selling with urgency can pressure sellers to accept offers that are not in their favor. Lawrence Yun, Chief Economist at NAR explains,

      “When buying or selling a home, exercising patience is beneficial, but in some cases – such as facing an upcoming school year or the outgrowing of a home – sellers find themselves rushed and forced to accept a less than ideal offer.”

      For sellers with children, 21% want a real estate professional to help them sell the home within a specific time frame, 20% at a competitive price, and 19% to market their home to potential buyers.

      Bottom Line

      Buying or selling a home can be driven by different priorities when you are also raising a family. If you’re a seller with children and looking to relocate, let’s get together to navigate the process in the most reasonable time frame for you and your family.

       

       

      The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Keeping Current Matters, Inc. does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Keeping Current Matters, Inc. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.

      Rent Vs. Own [INFOGRAPHIC]

      Rent Vs. Own [INFOGRAPHIC] | MyKCM

      Some Highlights:

      • Owning your own home vs. renting may lead to some great options, such as locking in your monthly payments and having the freedom to customize your living space.
      • Whether you rent or own, you have to cover someone’s mortgage costs. You may as well be doing so to build your own wealth, rather than that of your landlord.
      • Renting and owning both have up-front fees when you sign your lease or close, respectively. Think about putting that money to work for you!

      Why Now Is the Perfect Time to Sell Your House

      Why Now Is the Perfect Time to Sell Your House | MyKCM

      As a homeowner, it’s always tempting to dream about the next big project you’re going to tackle. The possibilities are endless. Should I renovate? Should I refinance? Should I stay? Should I move? The list goes on and on.

      In today’s housing market, it’s actually a great time to shift your thoughts toward selling your house and moving up into the home of your dreams. Here’s why:

      Inventory is on the rise, but there’s still an overall shortage of houses for sale (less than a 6-month supply found in a more normal market), so homes are going under contract quickly. In fact, the National Association of Realtors (NAR) Realtors® Confidence Index Survey reports that right now homes are only staying on the market for an average of 27 days. That’s less than one month, an even more accelerated pace from the 36-day trend we saw last spring.

      Why Now Is the Perfect Time to Sell Your House | MyKCM

      The same report also indicates there are more interested buyers than active sellers today, which is one of the big factors driving home prices higher.

      .Why Now Is the Perfect Time to Sell Your House | MyKCM

      Why Now Is the Perfect Time to Sell Your House | MyKCM

      This power combination provides an ideal environment for sellers aiming to close a quick sale and earn a big return as we wrap up the summer season.

      Bottom Line

      There’s still time to make a move before the school year starts and the fall weather sets in. Maybe it’s time to make a change. Let’s get together to determine if selling now is the right decision for your family.

       

      Is Renting Right for Me?

      Is Renting Right for Me? | MyKCM

      If you’re currently renting and have dreams of owning your own home, it may be a good time to think about your next move. With rent costs rising annually and many helpful down payment assistance programs available, homeownership may be closer than you realize.

      According to the 2018 Bank of America Homebuyer Insights Report, 74% of renters plan on buying within the next 5 years, and 38% are planning to buy within the next 2 years.

      When those same renters were asked why they disliked renting, 52% said rising rental costs were their top reason. The results of the survey can be seen here:

      Is Renting Right for Me? | MyKCM

      It’s no wonder rising rental costs came in as the top answer. The median asking rent price has risen steadily over the last 30 years, as you can see below:

      Is Renting Right for Me? | MyKCM

      There is a long-standing rule that a household should not spend more than 28% of its income on housing expenses. With nearly half of renters (48%) surveyed already spending more than that, and with their rents likely to rise again, it’s never a bad idea to reconsider your family’s plan and ask yourself if renting is your best angle going forward. When asked why they haven’t purchased a home yet, not having enough saved for a down payment (44%) came in as the top response. The report went on to reveal that nearly half of all respondents believe that “a 20% down payment is required to buy a home.”

      The reality is, the need to produce a 20% down payment is one of the biggest misconceptions of homeownership, especially for first-time buyers. That means a large number of renters may be able to buy now, and they don’t even know it.

      Bottom Line

      If you’re one of the many renters who are tired of rising rents but may be confused about what is required to buy in today’s market, let’s get together to determine your path to homeownership.

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