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      2 Myths Holding Back Home Buyers

      2 Myths Holding Back Home Buyers | MyKCM

      In Realtor.com’s recent article, “Home Buyers’ Top Mortgage Fears: Which One Scares You?” they mention that “46% of potential home buyers fear they won’t qualify for a mortgage to the point that they don’t even try.”

      Myth #1: “I Need a 20% Down Payment”

      Buyers overestimate the down payment funds needed to qualify for a home loan. According to the First Quarter 2017 Homeownership Program Index (HPI) from Down Payment Resource, saving for a down payment was the barrier that kept 70% of renters from buying.

      Rob Chrane, CEO of Down Payment Resource had this to say,

      There are many mortgage-ready renters today, but they don’t know it. Often, homebuyers remain sidelined for years due to the down payment.

      Many believe that they need at least 20% down to buy their dream home, but programs are available that allow buyers put down as little as 3%. Many renters may actually be able to enter the housing market sooner than they ever imagined with new programs that have emerged allowing less cash out of pocket.

      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 Ellie Mae’s latest Origination Insight Report, which focuses on recently closed (approved) loans.

      2 Myths Holding Back Home Buyers | MyKCM

      As you can see in the chart above, 53.2% of approved mortgages had a credit score of 600-749.

      Bottom Line

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

      The Importance of Home Equity in Retirement Planning

      The Importance of Home Equity in Retirement Planning | MyKCM

      We often discuss the difference in family wealth between homeowner households and renter households. Much of that difference is the result of the equity buildup that homeowners experience over the time that they own their home. In a report recently released by the nonpartisan Employee Benefit Research Institute (EBRI), they reveal how valuable equity can be in retirement planning.

      Craig Copeland, Senior Research Associate at EBRI, recently authored a report, Importance of Individual Account Retirement Plans and Home Equity in Family Total Wealth, in which he reveals:

      “Individual account retirement plan assets, plus home equity, represent almost all of what families have to use for retirement expenses outside of Social Security and traditional pensions. Those families without individual account assets typically have very low overall assets, so they have almost nothing to draw from for retirement expenses.”

      The report echoed the findings of a working paper, Home Equity Patterns Among Older American Households, authored by Barbara Butrica and Stipica Mudrazija of Urban Institute. Fannie Mae highlighted these findings for their blog The Home Story this past winter, quoting Butrica and Mudrazija:

       “For most adults near traditional retirement age, a home is their most valuable asset — dwarfing retirement accounts, other financial assets, and other nonfinancial assets. Although relatively few retirees tap into their home equity, having it provides financial security… In fact, many retirement security experts argue that the conventional three-legged stool of retirement resources — Social Security, pensions, and savings — is incomplete because it ignores the home.”

      USAToday interviewed two area experts to comment on the EBRI report. Randy Bruns, a private wealth adviser with HighPoint Planning Partners, agreed with the findings:

      “Social Security and home equity are major pieces of the retirement puzzle.”

      Wade Pfau, Professor of Retirement Income at The American College of Financial Services and author of Reverse Mortgages: How to use Reverse Mortgages to Secure Your Retirement, said having the equity without a plan to use it won’t help:

      “Home equity is a very important asset for American retirees, and so it is important to think about how to make best use of home equity in retirement planning.”

      Do You Know How Much Equity You Have in Your Home?

      Do You Know How Much Equity You Have in Your Home? | MyKCM

      CoreLogic’s latest Equity Report revealed that 91,000 properties regained equity in the first quarter of 2017. This is great news for the country, as 48.2 million of all mortgaged properties are now in a positive equity situation.

      Price Appreciation = Good News for Homeowners

      Frank Nothaft, CoreLogic’s Chief Economist, explains:

      “One million borrowers achieved positive equity over the last year, which means risk continues to steadily decline as a result of increasing home prices.”

      Frank Martell, President and CEO of CoreLogic, believes this is a great sign for the market in 2017 as well, as he had this to say:

      “Homeowner equity increased by $766 billion over the last year, the largest increase since Q2 2014. The rising cushion of home equity is one of the main drivers of improved mortgage performance. Since home equity is the largest source of homeowner wealth, the increase in home equity also supports consumer balance sheets, spending and the broader economy.”

      This is great news for homeowners! But, do they realize that their equity position has changed?

      According to the Fannie Mae’s Home Purchase Sentiment Index (HPSI), more homeowners are beginning to realize that they may have more equity than they first thought.

      This is only the second time in the survey’s history that the net share of those saying it’s a good time to sell surpassed the net share of those saying it’s a good time to buy.

      78.8% of homeowners have significant equity (more than 20%) in their homes today!

      This means that many Americans with a mortgage have an opportunity to take advantage of today’s seller’s market. With a sizeable equity position, many homeowners could easily move into a housing situation that better meets their current needs (moving to a larger home or downsizing).

      Doug Duncan, Senior Vice President and Chief Economist at Fannie Mae spoke out on this issue:

      “High home prices have led many consumers to give us the first clear indication we’ve seen in the National Housing Survey’s seven-year history that they think it’s now a seller’s market. However, we continue to see a lack of housing supply as many potential sellers are unwilling or unable to put their homes on the market…” 

      Bottom Line

      If you are one of the many Americans who is unsure of how much equity you have built in your home, don’t let that be the reason you fail to move on to your dream home in 2017! Let’s get together to evaluate your situation!

      Buying Is Now 33.1% Cheaper Than Renting in the US

      Buying Is Now 33.1% Cheaper Than Renting in the US | MyKCM

      The results of the latest Rent VS Buy Report from Trulia show that Homeownership remains cheaper than renting with a traditional 30-year fixed rate mortgage in the 100 largest metro areas in the United States.

      The updated numbers actually show that the range is an average of 3.5% less expensive in San Jose (CA), all the way up to 50.1% less expensive in Baton Rouge (LA), and 33.1% nationwide!

      Other interesting findings in the report include:

      • Interest rates have remained low and, even though home prices have appreciated around the country, they haven’t greatly outpaced rental appreciation.
      • With rents & home values moving in tandem, shifts in the ‘rent vs. buy’ decision are largely driven by changes in mortgage interest rates.
      • Nationally, rates would have to reach 9.1%, a 128% increase over today’s average of 4.0%, for renting to be cheaper than buying. Rates haven’t been that high since January of 1995, according to Freddie Mac.

      Bottom Line

      Buying a home makes sense socially and financially. If you are one of the many renters out there who would like to evaluate your ability to buy this year, let's get together to find your dream home.

       

      Are Home Prices Approaching Bubble Territory?

      Are Home Prices Approaching Bubble Territory? | MyKCM

      As home values continue to rise, some are questioning whether we are approaching another housing bubble. Zillow just reported that:

      “National home values have surpassed the peak hit during the housing bubble and are at their highest value in more than a decade.”

      Though that statement is correct, we must realize that just catching prices of a decade ago does not mean we are at bubble numbers. Here is a graph of median prices as reported by the National Association of Realtors (NAR).

      Are Home Prices Approaching Bubble Territory? | MyKCM

      We can see that prices rose during the early 2000s, fell during the crash and have risen since 2013.

      However, let’s assume there was no housing bubble and crash and that home prices appreciated at normal historic levels (3.6% annually) over the last ten years.

      Here is a graph comparing actual price appreciation (tan bars) with what prices would have been with normal appreciation (blue bars).

      Are Home Prices Approaching Bubble Territory? | MyKCM

      Bottom Line

      As we can see, had there not been a boom and bust, home values would essentially be where they are right now.

      Homeownership Is a Good Financial Investment!

      Homeownership Is a Good Financial Investment! | MyKCM

      According to a recent report by Trulia“buying is cheaper than renting in 100 of the largest metro areas by an average of 33.1%.” The report may have some people thinking about buying a home instead of signing another lease extension, but does that make sense from a financial perspective?

      Ralph McLaughlin, Trulia’s Chief Economist explains:

      “Owning a home is one of the most common ways households build long-term wealth, as it acts like a forced savings account. Instead of paying your landlord, you can pay yourself in the long run through paying down a mortgage on a house.”

      The article listed five reasons why owning a home makes financial sense:

      1. Mortgage payments can be fixed while rents go up.
      2. Equity in your home can be a financial resource later.
      3. You can build wealth without paying capital gains.
      4. A mortgage can act as a forced savings account.
      5. Overall, homeowners can enjoy greater wealth growth than renters.

      Bottom Line

      Before you sign another lease, let’s get together and discuss all your options.

      69% of Buyers are Wrong About Down Payment Needs

      69% of Buyers are Wrong About Down Payment Needs | MyKCM

      According to a recent survey conducted by Genworth Financial Inc. at the Annual Mortgage Bankers’ Association Secondary Market Conference, 69% of mortgage professionals say that first-time buyers still believe a 20% down payment is necessary to buy in today’s market.

      Nearly 40% of mortgage industry professionals surveyed believe that a lack of knowledge about the home-buying process is keeping potential buyers on the sidelines. Saving for a down payment is often cited as a huge barrier for first-time homebuyers to make the leap into homeownership.

      If homeowners believe that they need a 20% down payment to enter the market, they also believe that they will have to wait years (in some markets) to come up with the necessary funds to buy their dream homes.

      The greatest source of confusion cited in the survey results centered around down payments. The results are broken down in the chart below:

      69% of Buyers are Wrong About Down Payment Needs | MyKCM

      Rohit Gupta, CEO of Genworth Mortgage Insurance had this to say,

      "While first-time homebuyers continue to drive the purchase market, we believe many are staying on the sidelines due to the misconception that a 20 percent down payment is required to secure a mortgage.

      There are various low down payment options available today that allow prospective homebuyers to reach their dreams of homeownership sooner. It is crucial that, as an industry, we proactively educate eligible borrowers about solutions that will enable them to buy a home when they're ready."

      Bottom Line

      Don’t let a lack of understanding of the home-buying process keep you and your family out of the housing market. Let’s get together to discuss your options!

      If Your Home Hasn't Sold Yet? Definitely, Check the Price!

      If Your Home Hasn’t Sold Yet… Definitely Check the Price! | MyKCM

      The residential housing market has been hot. Home sales have bounced back solidly and are now at their fourth highest pace over the past year. Demand has remained strong ­throughout spring as many real estate professionals are reporting bidding wars with many homes selling above listing price. What about your house?

      If your house hasn’t sold, it could be the price.

      If your home is on the market and you are not receiving any offers, look at your price. Pricing your home just 10% above market value dramatically cuts the number of prosp­­ective buyers that will even see your house. See chart below.

      If Your Home Hasn’t Sold Yet… Definitely Check the Price! | MyKCM

      Bottom Line

      The housing market is hot. If you are not seeing the results you want, sit down with your agent and revisit the pricing conversation.

      More Americans Chose to Own a Home Than Rent in Q1

       

      More Americans Chose to Own a Home Than Rent in Q1 | MyKCM

      According to the latest report from the US Census Bureau, more Americans chose purchasing a home over signing a lease to rent in the first quarter of 2017. This marks the first time since 2006 that the number of new homeowner households outpaced the number of new renter households.

      Of the 1.22 million new households that were formed in the first quarter, 854,000 were new-owner households making the jump straight to homeownership rather than renting first.

      That means that the homeownership rate amongst new households was 70%!

      This is huge news as the national homeownership rate is currently 63.6% and has only ever come close to this figure in the second quarter of 2004 when the homeownership rate reached an all-time high of 69.2%.

      A recent Wall Street Journal article pointed to the uptick in first-time homebuyers coming to market as a reason for the jump:

      “The return of first-time buyers is accelerating. In all they have accounted for 42% of buyers this year, up from 38% in 2015 and 31% at the lowest point during the recent housing cycle in 2011, according to Fannie Mae, which defines first-time buyers as anyone who hasn’t owned a home in the past three years.”

      Ralph McLaughlin, Trulia’s Chief Economist, had this to say about what a bump in new homeowner households could mean for the housing market:

      “Strong renter household formation is one of the reasons why the homeownership rate has continued to drop since the onset of the housing crisis, so any sign this trend is reversing is something to take note of. We look forward to future releases of these data to determine whether this is a statistical blip or a trend.”

      Bottom Line

      As more and more potential first-time buyers realize their ability to buy a home without having to rent first, not only will the homeownership rate benefit, but so will the overall economy.

      Do You Know the Cost of NOT Owning Your Home?

      Do You Know the Cost of NOT Owning Your Home? | MyKCM

      Owning a home has great financial benefits, yet many continue renting! Today, let’s look at the financial reasons why owning a home of your own has been a part of the American Dream for as long as America has existed.

      Zillow recently reported that:

      “With Rents continuing to climb and interest rates staying low, many renters find themselves gazing over the homeownership fence and wondering if the grass really is greener. Leaving aside, for the moment, the difficulties of saving for a down payment, let’s focus on the monthly expenses of owning a home: it turns out that renters currently paying the median rent in many markets could afford to buy a higher-quality property than the typical (read: median-valued) home without increasing their monthly expenses.”

      What proof exists that owning is financially better than renting?

      1. The latest Rent Vs. Buy Report from Trulia pointed out the top 5 financial benefits of homeownership:

      • Mortgage payments can be fixed while rents go up.
      • Equity in your home can be a financial resource later.
      • You can build wealth without paying capital gain.
      • A mortgage can act as a forced savings account
      • Overall, homeowners can enjoy greater wealth growth than renters.

      2. Studies have shown that a homeowner’s net worth is 45x greater than that of a renter.

      3. Just a few months ago, we explained that a family buying an average priced home at the beginning of 2017 could build more than $42,000 in family wealth over the next five years.

      4. Some argue that renting eliminates the cost of taxes and home repairs, but every potential renter must realize that all the expenses the landlord incurs are already baked into the rent payment –along with a profit margin!!

      Bottom Line

      Owning a home has always been, and will always be, better from a financial standpoint than renting.

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