What costs are associated with buying a home?

 What it Costs to Buy a Home

Do you know what it actually costs to buying a home? You’ve saved for years and you finally have enough for your down payment (Congratulations!). You’ve also identified a great home you’d like to put an offer on – besides the downpayment, what other costs are associated with buying your dream home?

What are closing costs?

In a nutshell, mortgage closing costs typically run from 2% to 5% of the loan cost, and they include property taxes, mortgage insurance, title search fees and more.

 

The mortgage: I can’t stress this enough, and it’s a conversation I have with most of the first-time buyers that I work with. ALWAYS use a local lender. Avoid the big guys, even if thats where you do your banking from! I have half a dozen qualified, local, reputable lenders with years of experience that I am happy to refer you to! I could go on for days with horror stories of clients who didn’t take my advice – but i’ll save that for another day.

  1. Downpayment: Is it 3.5%, 5%, 10%, 20% or more?
  2. Don’t let the monthly payment surprise you: Online mortgage calculators can be a bit misleading. Your monthly mortgage note contains principal and interest payments but often much more than that. Your local lender will be able to give you a good faith loan estimate of what your monthly costs will look like – provide them with the purchase price, taxes and monthly HOA fee (if applicable). Aren’t sure where to find this info – just ask me.
  3. The CD, your Closing Disclosure: Your lender is required to outline your closing costs in the Loan Estimate. The Closing Disclosure is a document you’ll receive before the closing day. Take the time to review them closely and ask questions about things you don’t understand. This used to be called the Settlement Statement, it’s a breakout of all the fees and funds paid/due for your transaction

So what fees will you need to pay?

  • Home Inspection: The cost of a home inspection in Boston varies based on the size of the home and the inspector. You can get an estimate from the home inspector upfront before scheduling. They start around $550 and go up from there. A 2400SF home with an added radon test, can run as high as $1200. I have plenty of inspectors that i’m also happy to refer you to.
  • Attorney Fee: Chances are you probably know a few attorneys personally, but are they real estate attorneys? Often times buyers have a friend of the family who can represent them for a discount – but most real estate attorneys charge a nominal pre-disclosed flat fee ($600-1200). Which is unlike a criminal defense attorney who charges by the call/meeting/email. I have dozens of great attorneys i’m happy to recommend. Before you hire Uncle Joe, find out what he’s going to charge. Does he have real estate law experience? Whose conducting the title search? Can he represent you and handle the paperwork at closing for the bank (unlinkly) but that will save you more money too.
  • Appraisal fee: It’s important to a lender to know if the property is worth as much as the amount being borrowed. This is for two reasons: The bank needs to verify that the amount you need for a loan is justified, and the bank also wants to make sure it can recoup the value of the home if you default on your loan. These can cost between $300-400
  • Application fee: This covers the cost of processing your request for a new loan and includes costs such as credit checks and administrative expenses. The application fee varies depending on the lender and the amount of work it takes to process your loan application.
  • Prepaid interestMost lenders require buyers to pay the interest that accrues on the mortgage between the date of settlement and the first monthly payment due date, so be prepared to pay that amount at closing; it will depend on your loan size.
  • Loan origination fee: This is a big one. It’s also known as an underwriting fee, administrative fee or processing fee. The loan origination fee is a charge by the lender for evaluating and preparing your mortgage loan. This can cover document preparation, notary fees and the lender’s attorney fees. Expect to pay about 1% of the amount you’re borrowing. A $300,000 loan, for example, would result in a loan origination fee of $3,000.
  • Mortgage insurance application fee: If you put less than 20% down, you may have to get private mortgage insurance. (PMI insures the lender in case you default; it doesn’t insure the home.) The application fee varies by lender.
  • Upfront mortgage insurance: Most lenders require borrowers to pay the first year’s mortgage insurance premium upfront. Expect to pay from 0.55% to 2.25% of the purchase price for mortgage insurance, according to the Urban Institute.
  • Homeowners insurance premiumRequired by your lender, one year of homeowner’s insurance is paid in advance before closing.  Some condo associations include insurance in the monthly condo fee – but there are two types of insurance with condos, so we’ll need to determine what kind of policy you’re required to obtain. The amount of insurance varies depending on the type of home and how much coverage you and the insurance agent is adequate for your home. If your home sits in a flood plain, that could also raise your costs significantly – but this is something i’ll always find out for you before you write your offer!
  • Property taxes: Buyers typically pay two months’ worth of city and county property taxes at closing. The taxes are rolled into your monthly loan payment.
  • Title search fee: A title search is conducted to ensure that the person selling the house actually owns it and that there are no outstanding claims or liens against the property.  Title search fees are about $200, but can vary among title companies. The attorney you hire can tell you what these costs will be upfront.
  • Lender’s title insurance: Most lenders require what’s called a loan policy; it protects them in case there’s an error in the title search and someone makes a claim of ownership on the property after it’s sold.
  • Owner’s title insurance: You should also consider purchasing title insurance to protect yourself in case title problems or claims are made on your home after closing.

Who pays my buyers agent?

The seller.

New homeowner expenses

Finally, having some money set aside for unexpected household expenditures will help keep you from tapping into your last-resort emergency savings — or taking on credit card debt.  Most home inspectors will tell you that no home is perfect, and while a hot water tank is working great at the time of inspection and through the closing day – they can let go whenever they want. Having a few thousand set aside just in case is always a good idea.

 

The Cost of Waiting to Buy

Over the course of the last 12 months, home prices have appreciated by 7.0%. Over the same amount of time, interest rates have remained historically low which has allowed many buyers to enter the market.

As a seller, you will likely be most concerned about ‘short-term price’ – where home values are headed over the next six months. As a buyer, however, you must not be concerned about price, but instead about the ‘long-term cost’ of the home.

The Mortgage Bankers Association (MBA), Freddie Mac, and Fannie Mae all project that mortgage interest rates will increase by this time next year. According to CoreLogic’s most recent Home Price Index Report, home prices will appreciate by 4.7% over the next 12 months.

What Does This Mean as a Buyer?

If home prices appreciate by 4.7% over the next twelve months as predicted by CoreLogic, here is a simple demonstration of the impact that an increase in interest rate would have on the mortgage payment of a home selling for approximately $250,000 today:

What is the Cost of Waiting Until Next Year to Buy? | Samantha Jason

Bottom Line

If buying a home is in your plan for 2018, doing it sooner rather than later could save you thousands of dollars over the terms of your loan. Lets get started on your home search today! Samantha@ResidentialGroup.com

5 Things to Do and See in Boston this holiday season!

#1 Boston Season on City Hall Plaza  is Open to the public seven days a week and features a mix of winter activities including a unique outdoor skating path and an expanded Holiday Shopping Market, with an array of hospitality experiences and attractions. The main shopping area is made up of individual “Chalet” shops that are staffed by local vendors selling clothing and other goods.  For more information, vendor lists and coupons visit: cityhallplazaboston.com/ 

 

 

#2 BLINK at Faneuil Hall. Back for another Holiday season Blink! will light up the Faneuil Hall Marketplace daily, running now through January 1, 2018. Faneuil Hall Marketplace continues the annual tradition of having the largest tree in the northeast, an 85-foot fir tree adorned with decorations and sparkling lights synchronized to music to provide entertainment for visitors who want an authentic New England holiday experience. This year’s show is all-new with more lights, more music, more color, more sound and more fun! Visit BLINK!

 

 

 

 

 3. Frog Pond Skating and the holiday lights on the Common – open to the public for the season nominal rates and skate rentals on site.  Walk through the common to see the tree and all of the lights.  Stop by Frog Pond and rent a pair of skates. Skating Info

 

4. Liberty Hotel Trees – Located in the former Charles Street Jail, and now the Liberty Hotel, is one of the most interesting upside-down tree displays! Stop by Alibi or Clink for dinner or a cocktail in the spectacular 90-foot lobby rotunda of the hotel and take in the sights. Liberty Hotel.

 

 

 

5. Boston Symphony Orchestra – Holiday Pops Conductor Keith Lockhart and the Boston Pops perform holiday music favorites, the traditional Pops sing-along, and a visit from Santa Claus himself! Started in 1973 by Boston Pops Conductor Arthur Fiedler, these concerts take place in the special atmosphere of world-famous Symphony Hall-specially decorated to evoke all the magic and charm of the season-where Pops patrons sit at cabaret-style tables and order food and drink with family and friends, all while taking in the music and entertainment presented by the one and only Boston Pops. Visit ArtBoston for discounted tickets

 

Boston housing market 2018 outlook

 

If you’ve been looking to buy a home over the past year in Boston, you have likely become familiar with mobbed open houses, bidding wars, cash transactions and homes that sell in a weekend – or even before the first open house. In truth, the Greater Boston market has been this competitive for a few years now. So will it continue to grow in 2018?

 

 

Inventory. According to Zillow“Inventory shortages will drive the housing market: Inventory will remain a major concern in 2018, continuing to play a significant role in pushing up prices. It will create particularly strong headwinds for first-time home buyers, who don’t have the benefit of profits from a prior home sale to boost their down payments and make them more competitive.”

Thankfully, realtor.com® projects that in the U.S. year-over-year inventory growth to tick up into positive territory by fall 2018, for the first time since 2015. They also predict that Boston will be one of the first major cities to see an increase in inventory next fall, especially in the higher price points

Rates and Tax Reform could have some impact on buyers looking to jump into the market. Despite these challenges, Lawrence Yun, National Association of Realtors (NAR) Chief Economist, says 2018 is measuring up to be a better year than 2017: “An overwhelming majority of renters want to own a home in the future and believe it is part of their American dream,” he said. “Assuming there are no changes to the tax code that hurt homeownership, the gradually expanding economy and continued job creation should set the stage for a more meaningful increase in home sales in 2018.”

Mortgage Rates. Top economists at the Mortgage Bankers Association, predict mortgage rates will rise in the next few years, past 4% and even past 5% as we head into 2019. Lynn Fisher, vice president of research and economics for MBA, said that their forecast shows that house prices can’t continue to rise at this rate forever.  MBA expects a stabilization in house prices, not a decrease, but a calming of the recent increases in the coming years.

Another facet of the housing ecosystem that is affected by rising housing prices is Affordability.  With rising home values it’s becoming more and more difficult for buyers, particularly new buyers, to become homeowners in Boston.  Such as neighborhoods like South Boston, Midtown and The Seaport have seen a jump in luxury housing and new construction.  HSH just released it’s report on how much a buyer needs to make in order to purchase in major metropolitan cities.  Key takeaways:  Amid tight markets with little new supply, housing affordability continues to be a spreading problem.  In Boston you’ll need to  “make six figures if you want to buy a home:”

Using second-quarter 2017 data from the National Association of Realtors — and taking into account the principal, interest, tax, and insurance payments required — the site determined that it would require a salary of $98,518.71 to afford a house here.

If you’re thinking about purchasing a home in the Boston area, the first thing you should do is have a conversation with a local lender, they can go through the loan process with you.  Everyone’s financial picture is different and this article is not a full representation of whether or not you can afford to own a home.  I’m happy to connect you with a few different local lenders who would happily take the time to help you weigh all your options.

The REALTORS® Confidence Index, a key indicator of housing market strength based on a monthly survey sent to over 50,000 real estate practitioners, showed that in October, 89% percent of respondents reported that home prices remained constant or rose in October 2017 compared to levels one year ago (85 percent in October 2016).

A very mild fall (weather wise), low interest rates and a slow trickle of inventory has pushed our fall market well into December. All signs point to a very busy few months ahead in the Boston market.  For the buyers looking to jump into the housing market, now is the time to start the search.

 

Why are Boston home prices still rising?

The Real Reason Home Prices are Increasing | MyKCM

There are many unsubstantiated theories as to why home values are continuing to increase. From those who are worried that lending standards are again becoming too lenient (data shows this is untrue), to those who are concerned that prices are again approaching boom peaks because of “irrational exuberance” (this is also untrue as prices are not at peak levels when they are adjusted for inflation), there seems to be no shortage of opinion.

However, the increase in prices is easily explained by the theory of supply & demand. Whenever there is a limited supply of an item that is in high demand, prices increase.

It is that simple. In real estate, it takes a six-month supply of existing salable inventory to maintain pricing stability. In most housing markets, anything less than six months will cause home values to appreciate and anything more than seven months will cause prices to depreciate (see chart 1).

The Real Reason Home Prices are Increasing | MyKCM

According to the Existing Home Sales Report from the National Association of Realtors (NAR), the monthly inventory of homes has been below six months for the last four years (see chart 2).

The Real Reason Home Prices are Increasing | MyKCM

Bottom Line

If buyer demand outpaces the current supply of existing homes for sale, prices will continue to appreciate. Nothing nefarious is taking place. It is simply the theory of supply & demand working as it should.

Bubble Alert? Is it Getting Too Easy to Get a Mortgage?

There is little doubt that it is easier to get a home mortgage today than it was last year. The Mortgage Credit Availability Index (MCAI), published by the Mortgage Bankers Association, shows that mortgage credit has become more available in each of the last several years.

In fact, in just the last year:

  • More buyers are putting less than 20% down to purchase a home
  • The average credit score on closed mortgages is lower
  • More low-down-payment programs have been introduced

This has some people worrying that we are returning to the lax lending standards which led to the boom and bust that real estate experienced ten years ago. Let’s alleviate some of that concern.

The graph below shows the MCAI going back to the boom years of 2004-2005. The higher the graph line, the easier it was to get a mortgage.

Bubble Alert! Is it Getting Too Easy to Get a Mortgage? | MyKCM

As you can see, lending standards were much more lenient from 2004 to 2007. Though it has gradually become easier to get a mortgage since 2011, we are nowhere near the lenient standards during the boom.

The Urban Institute also publishes a Home Credit Availability Index (HCAI). According to the Institute, the HCAI:

“Measures the percentage of home purchase loans that are likely to default—that is, go unpaid for more than 90 days past their due date. A lower HCAI indicates that lenders are unwilling to tolerate defaults and are imposing tighter lending standards, making it harder to get a loan. A higher HCAI indicates … it is easier to get a loan.”

Here is a graph showing their findings:

Bubble Alert! Is it Getting Too Easy to Get a Mortgage? | MyKCM

Again, today’s lending standards are nowhere near the levels of the boom years. As a matter of fact, they are more stringent than they were even before the boom.

Bottom Line

It is getting easier to gain financing for a home purchase. However, we are not seeing the irresponsible lending that caused the housing crisis.  We’re also seeing less new construction and new homes entering the market, which is keeping inventory levels extremely low. While the demand for homes and new buyers entering the marketing continues to grow. With new companies moving into the Boston market, it’s predicted that 2018 will continue to be another busy year for Boston real estate.

5 Reasons Homeownership Makes ‘Cents’

The American Dream of homeownership is alive and well. Recent reports show that the US homeownership rate has rebounded from recent lows and is headed in the right direction. The personal reasons to own differ for each buyer, but there are many basic similarities.

Today we want to talk about the top 5 financial reasons you should own your own home.

  1. Homeownership is a form of forced savings – Paying your mortgage each month allows you to build equity in your home that you can tap into later in life for renovations, to pay off high-interest credit card debt, or even send a child to college. As a renter, you guarantee that your landlord is the person with that equity.
  2. Homeownership provides tax savings – One way to save on taxes is to own your own home. You may be able to deduct your mortgage interest, property taxes, and profits from selling your home, but make sure to always check with your accountant first to find out which tax advantages apply to you in your area.
  3. Homeownership allows you to lock in your monthly housing cost – When you purchase your home with a fixed-rate mortgage, you lock in your monthly housing cost for the next 5, 15, or 30 years. Interest rates have remained around 4% all year, marking some of the lowest rates in history. The value of your home will continue to rise with inflation, but your monthly costs will not.
  4. Buying a home is cheaper than renting – According to the latest report from Trulia, it is now 37.4% less expensive to buy a home of your own than to rent in the US. That number varies throughout the country but ranges from 6% cheaper in San Jose, CA to 57% cheaper in Detroit, MI.
  5. No other investment lets you live inside of it – You can choose to invest your money in gold or the stock market, but you will still need somewhere to live. In a home that you own, you can wake up every morning knowing that your investment is gaining value while providing you a safe place to live.

Bottom Line

Before you sign another lease, let’s get together to help you better understand all your options.

Low Interest Rates Have a High Impact on Your Purchasing Power

According to Freddie Mac’s latest Primary Mortgage Market Survey, interest rates for a 30-year fixed rate mortgage are currently at 3.92%, which is still near record lows in comparison to recent history!

The interest rate you secure when buying a home not only greatly impacts your monthly housing costs, but also impacts your purchasing power.

Purchasing power, simply put, is the amount of home you can afford to buy for the budget you have available to spend. As rates increase, the price of the house you can afford will decrease if you plan to stay within a certain monthly housing budget.

The chart below shows what impact rising interest rates would have if you planned to purchase a home within the national median price range, and planned to keep your principal and interest payments between $1,850-$1,900 a month.

Low Interest Rates Have a High Impact on Your Purchasing Power | Simplifying The Market

With each quarter of a percent increase in interest rate, the value of the home you can afford decreases by 2.5% (in this example, $10,000). Experts predict that mortgage rates will be closer to 5% by this time next year. The values of homes in the Boston area, particularly in Downtown Boston continue to rise month over month – supply is at an all time low. Act now to get the most house for your hard-earned money.

Rent or Buy in Boston?

In the latest Rent vs. Buy Report from Trulia, they explained 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 show that

it is on average of 23% less expensive in Boston to rent and 33.1% nationwide! Home values in Boston have increased 7% since 2016.

A study by GoBankingRates looked at the cost of renting vs. owning a home at the state level and concluded that in 39 states, it is actually ‘a little’ or ‘a lot’ cheaper to own (represented by the two shades of blue in the map below).

 

Nationally, home prices have been tracking steadily higher over the past four years.  One of the main reasons owning a home has remained significantly cheaper than renting is the fact that interest rates have remained at or near historic lows. Freddie Mac reports that the current interest rate on a 30-year fixed rate mortgage is 3.91%.

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 who would like to evaluate your ability to buy this year, let’s get together and find you your dream home.

Samantha Jason, Realtor

William Raveis Boston

16 Clarendon Street, South End

Pre-Construction sales underway at 65 Green Street

The Residential Group at William Raveis Real Estate has been selected as the exclusive sales and marketing team for 65 Green Street in Jamaica Plain.

Developed by Watermark Development, this new construction 8 unit development combines the quality craftsmanship that Watermark is known for with open floorplans, exceptional outdoor living spaces and garage parking, all in one of JP’s most coveted locations.

“Reservations are coming in before we even officially hit the market” said Mark Hand, Associate Partner from The Residential Group.  “Buyers love the location and layouts, and the developer has not cut one corner in selecting high-end designer finishes.  The end product is sure to be among JP’s finest.”

Occupancy is slated for Winter 2017.  For more information, visit www.liveat65green.com