The True Cost of Waiting to Buy a Home

I know shopping for a home today is hard work and very frustrating at times. Inventory is low, and demand is high – It may take many offers, and a few tension-filled bidding sessions, before you land that home. Buyers can quickly get discouraged and say, “I am tired of this. I am just going sign a new rental lease instead and try this again in 6 months to a year”. 

Here’s the thing: you can take some time off, but the market isn’t taking time off, even with COVID. For example, in Sacramento County, the forecasted appreciation is 4.22% in just the next six months; let’s quantify that. A home worth $442,000 today would be worth $18,637 more in 6 months. Being careful with this prediction, even if we cut this estimate of appreciation in half to 2.4%, waiting would require you to get a bigger loan, and pay more every month, or put more money down.

I think the effects of COVID will continue to ripple through our economy in ways we can’t even imagine. If home prices do dip temporarily, the economic value to a person of owning their own home, and taking advantage of today’s super-low 30-year fixed rates, will put them in a much healthier long term financial position than choosing to rent for the next several years. The key is for people to buy homes that they enjoy living in, with a long term outlook. A short term paper loss is nothing compared to the long term economic benefits a homeowner would receive.  

And what about interest rates? Should you wait until rates go down further? No, the monthly savings with a lower rate are nice but small compared to the missed appreciation and amortization. It could take longer for the incremental savings of a lower rate in the future to make up for the money lost by waiting. Should rates drop significantly, you can always refinance in the future. Stick with it, keep shopping, and you will find something! 

 And remember, there’s no guarantee that rates head even lower. It’s essential to weigh the individual options for you, and I’m here to help you do that.

DOES LEASING A CAR AFFECT A BUYER’S ABILITY TO BUY A HOME?

As a mortgage professional for almost 20 years, I know just about every gotcha that can cause an underwriter to deny your loan. We look at monthly minimum obligations you pay on your debts. We take those minimum payments, including your proposed total mortgage payment (principal, interest, taxes, insurance, and private mortgage insurance), and then divide this by your gross income. This debt-to-income ratio is the barometer we use to determine your ability to repay the mortgage.

My wife, a college professor, texted me:

“My friend, who is a business/finance professor and contract attorney is insisting that leasing a car will not affect buying a home because it’s not debt… He says he also teaches Mortgage people this stuff.”

WIFE: “Can I tell him he’s wrong?”

ME: “Yes, he’s wrong. It’s debt!” 

WIFE: “LOL, I knew it! He is generally full of crap, but when he said that’s what he teaches in his classes, it made me pause.”

Imagine you have a $375/month car payment, which is nearly equivalent to $75,000 in spending power when buying a home. Or imagine you are a 2-car family spending $750/month on car loans. This reduces your buying power by $150,000. So instead of affording that charming $500,000 home, you have had your eye on, your max is only $350,000. As my clients know too well, this could hinder getting into that perfect neighborhood with the right schools and the short commute you so desperately want.

And here is the rub – a leased vehicle is even worse. Are you listening, Mr. Professor? Most of us know that when your lease period expires; you either lease again, or keep the leased vehicle with a large buyout (this could be money you need for your down payment or closing costs for a new home). Whereas with a conventional car loan, when you make your last scheduled payment, you own the car free and clear (aka no debt).

Also, in some circumstances, if you are a few months shy of paying off your auto loan, an underwriter will not hit you with the monthly auto debt and will not hold it against your ratios. You can see why the hair on the back of my neck jump to attention hearing this professor tell his many students that a car lease is not debt and will not affect their ability to buy a home. Rubbish!

This one financial decision can be the reason you miss that opportunity to get into your dream home. When something sounds too good to be true, it genuinely is too good to be true. My best advice is to sit down with a trusted mortgage professional before paying off any debt, or restructuring those credit card balances, and work through your debt-to-income ratios with someone who does this every day.

3 ‘Must Know’ Pieces of Advice for First-time Home Buyers

3 'Must Know' Pieces of Advice for First-time Home BuyersWhen delving into the realities of homeownership in Sacramento, there can be many factors involved that make it difficult to determine what you need to know and what can wait until later. If you happen to be a first-time buyer who’s looking for the best tips for purchasing a home, look no further than the following three-pointers to set you on the right path.

Get Familiar With Your Credit Score

If you haven’t looked at your credit report for a long time, it can be a daunting task to request this information. Fortunately, your credit report is free from AnnualCreditReport.com and it will prepare you for what lenders are going to see. By taking this important step, you will be able to determine any delinquent accounts or balances owing that have gone to collections, and hopefully have these cleaned up before they can become a problem for your mortgage.

Determine The Price You Can Pay

While you may have a price in mind for what you’re willing to pay for a home, it’s important to determine your debt-to-income ratio before putting in an offer. Your DTI ratio can be determined by taking your total monthly costs, adding it to what you would be paying for a home and dividing it by your monthly gross income.

Organize Your Housing History

If you have a good history as a tenant, the next step will probably be the easiest of all, but it’s very important in order to prove you’re a responsible candidate for homeownership. Once you’ve acquired a Verification of Rent from any applicable landlord in the previous year, you’ll want to ensure that you have money in the bank. But don’t assume you need 20% down to get into your first home. Unfortunately, many first time homebuyers think they need this large down payment to qualify and that is just not true.

There are a lot of things to know when it comes to buying a home, but if you’re a first-time buyer the most important thing is to ensure that your finances are organized and that you’re not diving into more house than you can afford. By taking the time to determine your debt-to-income ratio and looking into your credit, you can ensure a positive first-time buying experience. If you’re wondering about homes for sale in your area, you may want to contact your trusted real estate professionals for more information.

Buy A New Home Just One Day After A Short Sale or Foreclosure? Yes, You Can!

Flex-Banner_600x315px_mockup5Comstock Mortgage, has been helping buyers into homes for over thirty years. Buyers can qualify for the Flexible Credit Home Loan Program just six months after bankruptcy – and just one day after short sale or foreclosure.

Losing your home to foreclosure or going through a short sale is one of the most disheartening experiences the modern homeowner can endure. Traditionally, a defaulted mortgage has meant years of poor credit and renting rather than buying. Continue reading “Buy A New Home Just One Day After A Short Sale or Foreclosure? Yes, You Can!”

Does Zillow Work?

What is my home worthDoes Zillow work, and will it give you a good approximation of the market value for the home you want to buy, or sell? My simple answer – “Sometimes it’s close and sometimes it’s not even on the same planet.”  While Zillow offers many services, it is primarily known as a free website to help folks obtain a property value, without paying for an actual appraisal. It brings out the Curious George in all of us! Below, I will show you a few Zillow estimates and then compare them with an actual appraisal. Continue reading “Does Zillow Work?”