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4 Reasons You Shouldn’t Buy a Home at the Top of Your Budget

On July 13, 2023

In Finance, Investing, Real Estate, W Darrow Fiedler

Buying a home is a significant investment. Ensuring that you’re making a wise financial decision is critical. The hardest decision is when the temptation arises to stretch your funds to purchase your dream home. You shouldn’t buy a home at the top of your budget for several reasons.

Unforeseen Expenses

When you buy a home, you’ll likely have a mortgage payment, property taxes, and homeowner’s insurance. However, you may not have considered several other expenses that come with homeownership. For example, you may need to repair or upgrade your home, pay for lawn care or snow removal, or replace existing appliances. If you buy a home at the top of your allotment, you may not have enough money to cover these unexpected expenses. This can lead to financial stress and may even put you in debt. Instead, leave some wiggle room so that you can handle any unforeseen expenses that come your way.

Limited Flexibility

Buying a home beyond your means may also limit your flexibility in the future. If you want to switch careers or take a lower-paying job to pursue a passion, you may not be able to afford your mortgage payment. Additionally, if you want to travel or take a sabbatical, you may not have the financial flexibility to do so. Consider your long-term goals and ensure that buying a home at the top of your budget aligns with those goals. If it doesn’t, consider purchasing a more affordable home with more financial flexibility.

Risk of Foreclosure

You may risk foreclosure if you experience a financial setback, such as a job loss or unexpected medical expenses. Foreclosure can be a devastating experience and can have long-term consequences on your credit score and financial well-being. To avoid this risk, have a financial safety net and ensure you’re not overextending yourself when purchasing a home.

Missed Opportunities

Finally, buying a home at the top of your budget may cause you to miss out on other opportunities. If you’re spending all of your income on mortgage payments, you may not be able to save for retirement or invest in your future. You may also miss opportunities to travel, pursue a hobby, or take on new challenges.

While owning a home is a significant accomplishment, ensure that you’re not sacrificing your future goals and dreams in the process. Buying a home at the top of your budget may not always be the best decision. By taking a more conservative approach and purchasing a more affordable home, you can ensure that you’re making a wise financial decision that aligns with your long-term goals.

Alternate Loan Programs for First-Time Home Buyers

By W Darrow Fiedler

On June 12, 2023

In Finance, Investing, News, Real Estate, W Darrow Fiedler

Purchasing a home is a significant milestone in one’s life, and for first-time home buyers, it can be both an exciting and daunting experience. Due to strict lending requirements, many aspiring homeowners need help securing traditional financing options. However, alternate loan programs are specifically designed to assist first-time home buyers in achieving their homeownership dreams.

FHA Loans

One popular alternative loan program for first-time buyers is the Federal Housing Administration loan. Backed by the government, FHA loans offer more lenient credit requirements, lower down payment options, and competitive interest rates. With an FHA loan, first-time buyers can qualify with a credit score as low as 580 and a down payment as low as 3.5% of the purchase price. These loans are an excellent option for those with limited savings or lower credit scores.

VA Loans

VA loans provide an attractive alternative for financing a home purchase for eligible military personnel, veterans, and their spouses. Backed by the Department of Veterans Affairs, they have several advantages, such as no down payment needed, low closing fees, and reasonable interest rates. VA loans don’t require private mortgage insurance, making them a cost-effective option for first-time home buyers who have served in the military.

USDA Loans

The United States Department of Agriculture (USDA) offers loan programs to assist first-time home buyers in rural areas. USDA loans promote homeownership in rural communities by providing 100% financing options and low-interest rates. To qualify, the property must be in eligible rural locations, and borrowers must meet income limits established by the USDA. This program is an excellent opportunity for first-time buyers seeking affordable housing outside urban areas.

State and Local Housing Programs

In addition to federal loan programs, many state and local governments offer loan programs to support first-time home buyers. These programs often provide down payment assistance, closing cost assistance, and competitive interest rates. Eligibility requirements and loan terms depend on the location and specific program, so aspiring homeowners must research and explore the options available in their area. State and local housing programs can provide valuable resources to make homeownership more accessible for first-time buyers.

Nonprofit and Community-Based Organizations

Nonprofit organizations and community-based initiatives are another valuable resource for first-time home buyers. These organizations often offer financial assistance, counseling, and education programs to help individuals navigate the home-buying process successfully. Some nonprofits even provide grants or loans with favorable terms to assist low-income individuals or families in achieving homeownership. Partnering with these organizations can provide valuable support and guidance throughout home-buying.

HomePath and HomeSteps Programs

Fannie Mae’s HomePath and Freddie Mac’s HomeSteps programs offer attractive financing options for those purchasing a foreclosed property. These programs provide special financing and incentives for buyers purchasing a foreclosed property owned by Fannie Mae or Freddie Mac. With these programs, first-time home buyers may access flexible down payment requirements, competitive interest rates, and potential renovation financing.

Alternate loan programs offer valuable opportunities for first-time home buyers who may face challenges securing traditional financing. The FHA, VA, USDA, state and local housing programs, nonprofit organizations, and specialized foreclosure programs provide avenues to make homeownership more accessible and affordable.

What to Expect for the Real Estate Market in 2023

By W Darrow Fiedler

On January 9, 2023

In Investing, Real Estate

The real estate market has changed drastically over the last few years. The pandemic brought a surge in demand for houses, followed by a freeze in the market as inflation and interest rates rose. That begs the question, what should we expect from the following year?

Most experts believe 2023 will bring a new semblance of normalcy. That means the market will settle down and return to more normal levels. Inflation should reduce or at least balance out, while interest rates will slow down. Let’s take a closer look at what to expect this year.

Housing Prices

Experts are quick to weigh in with their opinion on housing prices and values. Unfortunately, not all experts agree on this. For example, Realtor.com believes that housing prices will increase by another 5.4%, while Zelman believes the value will decrease by 5.1%. Ideally, these two extreme estimates will land in the middle, providing us with a stable market.

In other words, if we balance out the expert opinions on prices, it indicates little change. This means we’ll see a flat or neutral appreciation in 2023. This is good for sellers and buyers, as the market will not change drastically.

Rate Lock-In Phenomenon

Mortgage rates hit a record low a couple of years ago, countering the current higher rates we’re seeing. This results in homeowners with a low rate (below 6% in most cases and below 4% in exceptional circumstances). That’s great for those homeowners, but they will unlikely consider selling their homes with an average mortgage above 6%.

Homeowners are unwilling to give up their low mortgage rate in exchange for a higher interest rate. Some homeowners will sell regardless, either because of need or desire. But a large percentage will stay at their current home to wait out this shift.

Ironically, this is going to affect another market. Homeowners that wait out this shift may choose to work on home improvement projects. This will ultimately encourage a stronger contract market and increase home values – if done carefully.

Reduction in Building

There will likely be a reduction in the number of homes built over the next year or two. Specifically, experts believe that builders will cut back on the number of new single-family homes they are constructing. Likewise, building permits will likely decline as homeowners settle in and wait for rates to change.

What to Know Before Renting to College Students

By W Darrow Fiedler

On December 15, 2022

In Investing, Real Estate

Landlords, as a rule, rent their properties to many different subsets of people, including students. However, there are certain things that landlords and property owners must know before renting to students.

Renting to a student is a great way to quickly fill a vacancy, give a young person a chance, and potentially make a difference in the community. The downside is the higher risks associated with this sort of rental. Here is what you need to know before you get started.

The Risks

As mentioned above, there are certain risks associated with renting to students. For example, most students will only need to rent a space seasonally, so renting to them may create vacancies in the summer. Likewise, most students will not have an extended credit history, putting them at higher risk financially.

There are other risks to consider, such as their lack of experience (including a lack of experience paying bills) and potential noise concerns (consider the stereotypical student behavior, and this one is clear).

Students may also not understand basic tenant responsibilities, such as how to file a maintenance request. This may result in a little problem growing in scale when it otherwise could have been prevented.

The Positives

Don’t worry; there are positives to help balance these additional risks. There is a generally higher demand for student housing, especially near school towns and properties. So filling vacancies shouldn’t be an issue. This has a secondary benefit as it reduces the need for expensive advertising. Word of mouth will do that for you.

Since students have little experience renting properties, they will not go into this process with inflated expectations. In other words, they’ll be happy to get an apartment and won’t demand all the latest bells and whistles. They will happily accept a simple property with no upgrades.

Finally, the possibility of multiple roommates in a property can help to mitigate any financial risk. The more people on the lease, the easier it will be for them to make their monthly payments. As this is a common social expectation for students, frequent arrangements are already in place for this sort of thing.

Lowering Risk

There are additional steps a landlord or property owner can take when renting to students. These steps will help reduce the overall risk. For example, requesting a cosigner or guarantor will minimize the risk of property damage and ensure that the rent gets paid. Likewise, periodic inspections can help spot damage or other repair needs before they become a more significant problem.

Finally, it is critical to set expectations in the lease. This means laying out any rules, regulations, or rules to follow. Doing so in writing will protect you and make it easier for the students to find information as they need it.

Ways to Get Organic Leads as a Realtor

By W Darrow Fiedler

On November 9, 2022

In Investing, Real Estate

Every industry has unique tactics and requirements for getting things done. This is especially true for realtors, who must handle several elements of their own business. One such concern is generating organic leads as a realtor.

It can be challenging to create these leads, especially at first. It takes time and practice for them to feel more comfortable and organic. However, once you get the swing of things and establish a pipeline of leads, you’ll have no problem succeeding in the industry.

Networking

One of the most important things for any realtor to consider is networking. Networking can easily generate the most leads and should never be overlooked. Neighbors, coworkers, friends, etc., can all help generate word-of-mouth advertising. Each new professional connection you create introduces new opportunities.

In other words, to create a base for organic leads, you have to network. There’s no way around it, so get it done. If networking is intimidating for you, take some time to research tips & tricks. This will help you understand your strengths and weaknesses.

Branding

You’ve likely heard the term branding regarding a company’s image – but personal branding is something to consider. A strong personal brand can generate leads while you sleep if done right. How? Your name will be out there, traveling out (by word of mouth, advertising, and other branding techniques), even without your active participation.

Put another way, the better your personal branding strategy, the more consistent your work can be. People will approach you with work, creating more organic opportunities to follow through.

Referrals

Never underestimate the value of a good referral. They’re like gold, showcasing your talent and reliability to potential clients. Referrals come in many forms. For example, it may be a comment from a past client on your website. Or it may be an associate forging a connection between you and a prospective client.

Don’t forget always to show appreciation for these referrals. Especially the ones that have gone above and beyond for you. Encourage this behavior by sending them a thank you note or showing appreciation.

Social Media

Finally, don’t forget about social media. Social media is a powerful tool, with varying effectiveness depending on your goals and utilization. When using social media to generate leads, be sure you’re picking the right platform for your goals. For example, you don’t want to be on TikTok if you’re looking for leads in older generations.

Finding your stride with social media marketing may take a minute, but once you’ve nailed it, the leads will come in. Just keep working on it and be willing to adapt your strategies.