How To Prep Your Bank Account To Buy A Home In 2017

This is it: 2017 is the year you will finally buy a home! But even once you’ve made the ultimate decision to make the leap into homeownership, your hard work is far from complete. Buying a home is a big commitment and costs a lot of money — and getting the mortgage you want at the best interest rate possible is enough to stress anyone out. Organizing your financial house, so to speak, can help reduce that stress and set you up for home-buying success.

Whether you’re eyeballing a home for sale in Jacksonville, FL, or a humble abode in Phoenix, AZ, you can take action to prep your bank account and savings to be ready to buy a home in 2017. So, if your goal is to nab the keys to a brand-new place, these six steps will help you get organized, stay on track, and fund your dreams.

1. Set a specific goal

It’s hard to make a plan of action if you don’t know where you want to go. Look at how much it will cost you to buy a home in 2017. What amount of money do you need to save for that down payment? Your best option is to save at least 20% of a home’s purchase price. This allows you to get better options when it comes to mortgages and interest rates, and it means you avoid the extra cost of PMI (private mortgage insurance).

Once you have the specific target number in mind, you can break it down by month. If you want to save a total of $20,000 before you buy, for example, you need to put away about $1,667 per month to meet your goal at year’s end.

2. Designate a savings account just for your down payment fund

You can stay organized by putting the money you save for this specific purpose into its own savings account. Online banks like Ally or CapitalOne360 offer great options, because they allow you to have multiple accounts that you can designate for specific goals. (CapitalOne360 allows up to 30 accounts without a fee!)

Online banks also tend to offer higher interest rates in the current low-rate environment than traditional, brick-and-mortar banks. But that’s not a hard-and-fast rule. Shop around and look for a bank (or credit union) that offers the best savings account option, with the best interest rate — and don’t settle for an account that charges you fees. There are too many no-fee options available.

3. Create an automatic transfer

You have your specific goal and now you know where you’ll put that money while you save. The next step: Set up an automatic transfer from your checking to that designated savings account. Setting up an automatic transfer is a great way of “paying yourself first.” You prioritize your savings by moving it into the designated account first. This means you won’t be tempted to spend that money like you might if it sat in your checking account for a while before you made the conscious decision, month after month, to transfer it to savings.

It also means you’ll make progress toward your savings goal even if you forget about it one month (or two). An automatic transfer means you won’t fall short of your goal at the end of the year simply because you forgot to move the money to the right savings account.

4. Revise your budget to cut costs

Depending on how much you want to save for a down payment, you may need to move a lot of money from checking to savings each month. This can severely limit your cash flow and leave you short in other areas of your budget. To prevent this, review your budget with your monthly savings goal in mind. Where can you cut costs so you can afford to save this much per month? Start by looking at your discretionary income. You don’t need to eliminate everything, but could you cut back on how much you spend to eat meals out, for example?

Don’t forget to evaluate your bills and living expenses too. While you may not be able to cut these costs entirely, you can take action to reduce them. Call providers and ask about discounts or lower-priced options. Every little bit of expense you can eliminate makes it that much easier to add to your savings so you can stay on target.

5. Allocate extra funds to your home-buying goal

In addition to freeing up money from current costs in your budget, you can allocate any extra money you make to your down payment fund. This can accelerate your progress toward your ultimate savings goal — and even help you exceed it. Put any kind of windfall toward your designated savings account. This could include overtime pay, quarterly or annual bonuses from work, or extra money you make on the side (but be sure to set aside funds to cover taxes on your added income). Allocate at least half of cash gifts to savings too.

6. Resist making massive transfers before you apply for a mortgage

You’ve worked hard to save up the money you need to buy a home in 2017. You know your home-buying budget, you’ve identified a lender, and you’re ready to apply for a mortgage. Now is not the time to do anything drastic with any of your bank accounts. Remember, when you apply for a home loan, the lender will carefully scrutinize all of your financial activity. You’ll need to explain the source of any large transfers and provide documentation for proof.

Talk to your lender about what kind of funds they’ll approve and what cash they won’t allow you to use toward a down payment. Ask what documentation or proof you need for different kinds of transfers. Doing so now will help you prepare to buy a home in 2017 and secure the mortgage you need to help you reach your goal.

Canadians Buy Palm Springs Real Estate

If you ask most U.S. residents where they’re planning on moving when they retire, a large percentage of them will respond with “California”. This state is known to attract retirees due to the beautiful weather, beautiful homes and easy living. While many Americans might set their dreams to retire in California, they aren’t the only ones! An increasing number of Canadians, especially people living in Calgary are also looking to purchase real estate in Palm Springs, California because of all that it has to offer for the golden years of retirement.

If you’re wondering how so many Canadians are affording to retire so far away, it’s because of the rising gas and oil business in Calgary. In fact, many REALTORS in Palm Springs are saying that out of all their sales, 30% were due to buyers from Calgary, which is an increase from 10% three years ago. This is a trend that is expected to grow in the future because of the increased wealth in Calgary. Many Canadians living in Palms Springs help to spread the reputation of the area by sharing rave reviews with everyone that they know! Many people who end up visiting their friends in Palm Springs who had retired there, often end up moving themselves because they enjoy the beautiful homes, the pleasant communities and the year-round warm weather.

According to this report, Jon and Julie Clark from Cochrane recently purchased a property in Palm Springs, and they say they enjoy spending days and months without cold weather and snow that they were so used to. Jon also enjoys the many different golf courses, as he was an avid golfer before they purchased the property. They both agree the area is absolutely beautiful and that it’s the perfect place for retirement for them. Many more Calgarians just like this couple may be moving to California in the future, especially if they are able to experience the Palm Springs area first hand.

Canadians Buy Palm Springs Real Estate

Understanding Mortgage Credit Scores

Your credit report is separate from your credit score, though the score is developed from the report. In addition to viewing credit reports from the three major reporting bureaus, you also should obtain your FICO score. Your score is like a report card. Fair Isaac & Co. (the FICO score keeper) assigns you a number based on the information in your credit report. Since there are three credit-reporting bureaus, you have three FICO scores. Here are the scoring factors:

Credit Checklist

  • Payment history — Have you paid your bills on time?
  • Amounts owed — What is your overall debt?
  • Length of credit history — How long have you been borrowing money? Mortgage lenders like to see a long credit history.
  • New credit — Have you applied for new credit?
  • Types of credit used — Lenders like to see all kinds of credit types: bank cards, car loans, student loans, and more.

What’s an A+?

The FICO scores range from 350 to 850; an 850 is the Holy Grail of credit scores and 723 is the median score in the U.S., but you can expect good mortgage interest rates at the 720 to 760 level and up.

For anecdotal evidence of your good credit standing, if you notice you are receiving a lot of zero percent credit card or lines of credit offers, you are probably in pretty good shape.

Homebuyers who pursue an FHA loan, one of the most common loan types for first-time purchasers, can usually secure a loan if their credit is 580 or over.

Most mortgage lenders use FICO as their means of determining your interest rate and the types of loan you qualify for; as interest rates creep up, this difference can be significant.

Staging Your Home Helps It Sell 73% Faster, On Average

With current mortgage rates low and rent on the rise, the math has shifted for the nation’s renters. It’s more affordable to be first-time home buyer than to rent in many U.S. cities.

As a result, demand for homes has been high. Home prices are up more than five percent since last year, and values have recovered from last decade’s downturn in-full.

More than 6 million homes sold in 2016, and the 2017 housing market may shape up even better.

For home sellers, this is excellent news — it’s easier to command high prices when the housing market expands.  However, there’s another way to increase your home’s value as well.

Through a process known as “home staging”, sellers can invest a little bit of money into their sale and earn themselves a huge, huge return.

Furthermore, according to the Real Estate Staging Association, homes which are staged before going on the marketWhat Is Home Staging?

The real estate market is competitive and sellers should always be looking for ways to gain an edge over the competition.

One way to “beat the competition” is to sell your home on the cheap.

A lower sale price versus comparable homes will attract offers from buyers, no doubt, but you’ll net less cash than if you had priced your home at its actual market value.

Another way to make your home stand out is to make expensive home improvements prior to listing for sale.

Replacing your home’s kitchen or bathrooms can add to the property’s value, but making renovations can cost tens of thousands of dollars. There’s also no guarantee your improvements will attract buyers.

A third, and often better, approach is to “stage” your home for sale.

Housing Demand Cooled in October, Dropping to a Three-Year Average

The Redfin Housing Demand Index, based on thousands of Redfin customers requesting home tours and writing offers, declined 3.5 percent from September to a seasonally-adjusted level of 100 in October.


A level of 100 represents the historical average for the three-year period from January 2013 to December 2015, meaning that demand in October was at recent historical norms.

In October, the number of Redfin customers requesting home tours fell 3.7 percent from September, and the number of customers writing offers on homes fell 5.9 percent. Both of these measures had posted double-digit increases in September.

One likely culprit is a shortage of homes to choose from, something that has put a damper on homebuyer enthusiasm month after month. Across the 15 metro areas tracked by the Demand Index, the number of homes listed in October was 9.5 percent lower than a year earlier. Those numbers dovetail with the shortages of homes reported in the most recent Redfin Real-Time Housing Market Tracker.


Rates Rising Ahead Of 2017: What Home Buyers and Owners Need To Know

On December 14, 2016, the Fed raised a key overnight bank-to-bank lending rate by .25 percent. Even though this is a short-term rate, it also impacts longer-term home loan rates.

Rates on 30-year fixed mortgages rose about .5 percent between the election and this Fed meeting — causing monthly payments on a $300,000 loan to rise $85 per month and payments on a $600,000 loan to rise $172 per month. The Fed cited inflationary concerns, and rising inflation causes rising mortgage rates. Accordingly, rates rose following the Fed decision and could continue higher to start 2017, albeit at a slower pace than from the election to present.

What does this mean for homeowners?

If you have a home equity line of credit (HELOC), your rate will rise by .25 percent on your next payment as a result of this Fed decision. On top of this, HELOC rates will rise three more times in 2017, according to the Fed’s guidance on December 14.

HELOCs are tied to a margin plus the prime rate, which is now at 3.75 percent. If you have a normal HELOC margin of about 2 percent, that means your HELOC rate will be 5.75 percent on your next payment, and will keep rising as the Fed hikes rates in 2017.

How much will it rise? Over the past 20 years, the prime rate has averaged 5.39 percent, and the high was 9.5 percent. It’s easy to forget prime was this high because it’s been 3.25 percent for seven of the last eight years, but if you add a 2 percent HELOC margin to a prime average of 5.39 percent, a HELOC rate would be 7.39 percent. On a $100,000 HELOC, this increases monthly interest cost by $137 per month versus today.

Compared to a 20-year fixed rate second mortgage rate, the projected HELOC rate is about 1 percent higher. On a $100,000 loan, this means a fixed rate second mortgage has about $85 less interest cost per month.


What does this mean for home buyers?

Lenders use a debt-to-income (DTI) ratio to qualify you for a home purchase, which is calculated by dividing your housing and non-housing debt by your income.

On loans up to $424,100 (or $636,150 in high-priced areas), this DTI ratio can’t exceed 43 percent, and rising rates push this ratio higher. But not as much as you might think.

Rates have risen .5 percent since the election, which sounds like a lot, but it only adds about 1 percent to your qualifying DTI. Often you can make up for this 1 percent by paying down non-housing debt like credit cards instead of compromising on your home search by reducing your purchase price.

If you were previously qualified for a loan up to $424,100 (or $636,150 in high-priced areas) with a DTI well below 43 percent, you’re fine. If you were close to that threshold, it’s time to renew your pre-approval to make sure you still qualify for your target home price.

On loans greater than $424,100 (or $636,150 in high-priced areas), there are many options where you can get a loan with a DTI higher than 43 percent.

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Using technology to see inside real estate before it’s even built

Urbanist Architecture is the first architectural firm in London to employ the latest Virtual Reality (VR) technology for their clients. The firm uses VR gadgets to create awesome simulations showing home owners and property developers how their development will look like when it has been completed.

By using this technology, you can see the quality of design, space planning, materials, furniture, all internal and external fixtures and fittings, small details and more! This way, you can easily view the “finished” look of the design presented by the architects before it is even built! This immersive experience gives you more control over your project than ever before.

Urbanist 4D Reality will not only show you what your final design will look like – it will put you right in the middle of it. The technology exports you to the finished state of the design where you can completely visualize the house you want to build. This approach enables you to go through the nooks and crannies of the property right from the office of Urbanist Architecture.


You can now imagine a future where you can walk around your house before it has actually been built. You can imagine going into each room and seeing exactly how your home will look like when it has been completed. With this technology, you can review tiny details like the turning of a tap or even opening and closing a door. The process will also enable mitigation of uncertainties in details at an earlier stage and help Urbanist Architecture tailor the property exactly to the client’s requirements.

Luxury Buyers Impacted By Wall Street Performance Rather Than Interest Rates

What really impacts these buyers’ bottom line, and their financial capacity and ability to buy property, is how Wall Street is performing. “Increasing mortgage rates are offset by the current strength of the stock market, which is at an all-time high,” Mr. Yun said. “This is really helping out people at upper tier income brackets.”

U.S. dollar and other global currencies. While an increased interest rate might lead to a devaluation of the dollar, as compared to the pound or the Euro, for instance, that’s not a sure thing, experts say, and isn’t likely to be significant enough to really impact sales.

Foreign buyers often come to the U.S. for stability, Mr. Parker said. “I don’t think  they’re standing by the sidelines waiting for their currency to go up or the dollar to fall,” he continued. “They’re making decisions based on where their money is going to be safe.”


Factors Homeowners Should Consider Over Interest Rates

Here are six factors that may be more important than interest rates when deciding whether to buy a home this year.

Length of time you’ll stay in that home. How long you have to live in a home to make it more economical than renting varies by locality and, in fact, by the individual home a person is considering buying or renting. “On average, it takes four to seven years to break even on a home, where you’ve got enough appreciation where it can pay you back for the cost of the transaction and cost of ownership,” Fleming says. “If you’re thinking about buying a home, selling it in two years and think it’s going to be cheaper than renting, it’s very unlikely to be.”

Job security. You don’t want to buy a home and then discover you’ll need to relocate to get a new job in six months or, even worse, end up unemployed and unable to make payments. Lenders typically like to see two years of job history, though that isn’t always necessary if you have changed jobs within the same field.

Down payment. Fannie Mae and Freddie Mac have announced plans to back loans with down payments as low as 3 percent, while the Federal Housing Administration offers loans with down payments of as little as 3.5 percent. But if you put less than 20 percent down, you have to pay private mortgage insurance every month, which could cost you more than a slightly higher interest rate. “If they’re looking at an FHA mortgage, paying PMI is a lifetime proposition,” Humphries says. With a conventional mortgage, you can ask to have the PMI removed once you have 20 percent equity in your home. That’s not possible with an FHA mortgage.

Emotional readiness. Not everyone is ready to own a home. If your dream is to travel the world, you should do that first. Or, you might not be sure you want to stay in your current city. Plus, homeownership brings additional responsibilities. “Your life changes a great deal when you go from being a renter to an owner,” Fleming says. “When things break, it’s your responsibility to fix them, not the landlord’s.”

Financial readiness. Before you buy a home, you want to make sure you have good credit, a steady income and some money in the bank beyond what you’ll need for a down payment. You likely will have to pay a year’s worth of homeowners insurance and property taxes up front. All homes, even new homes, require maintenance. And you don’t want to be stuck with no reserves if the air conditioner or furnace dies shortly after you move in.

Your local housing market. In some cities, buying a home is significantly cheaper than renting. In others, the calculation is less clear. Macro math aside, you might also discover that you can’t afford a home in a neighborhood you want or the type of home you want is in short supply this year.

Do You Get an FHA loan or conventional mortgage?

Federal Housing Administration loans and conventional loans remain the most popular financing types for today’s mortgage borrowers. But which program makes the most financial sense for you? Here’s how to decide.

The nuts & bolts of FHA loans

FHA loans are insured by the Federal Housing Administration. The program contains two forms of mortgage insurance; an upfront mortgage insurance premium calculated at 1.75% of the loan amount, and a monthly premium based on 0.8% of the loan amount. These forms of mortgage insurance make the FHA loan pricey, however the program is very flexible. Contact us to learn more.