Are You Getting the Best Mortgage for You?

Are you getting the best mortgage for you?  Mortgage lenders have minimum qualifying guidelines for getting a mortgage. Most of these guidelines are dictated by the government entities like Fannie Mae, Freddie Mac and FHA. The individual lender may also add its own layer of qualifying guidelines.  These guidelines include such qualifying factors such as work history, down payment, minimum credit score, and debt to income ratio.  The guidelines differ based on the type of mortgage.

Meeting the minimum guidelines will ensure that you qualify for the loan and determine how much you can receive for a mortgage.  Most borrowers will check to see if they qualify and then proceed with shopping for the home.  However, is it possible that you can get a better mortgage? Maybe.

Credit Score

One of the biggest determinants of your interest rate is your credit score.  Lenders will typically view a lower credit score as a riskier borrower. If you can improve your credit score, you may be able to get a lower interest rate on a conventional loan.  Typically, credit scores that exceed 740 will get the best rates.  So, if you have an excellent credit score, ask your lender if you can lower the rate.  FHA loans do not have this risk-based adjustment so a higher credit score is not as helpful.

Debt to Income Ratio

Your debt to income ratio is also one of the strongest determinants of whether you qualify and how much you can receive. An improvement in your debt to income ratio (lower than the maximum required by the guidelines) can actually increase your purchasing power.  You will, however, want to consult with a lender before proceeding with just paying everything off.  A good lender will advise you as to which debts will give you the biggest “bang” if you pay them off or whether it will make a difference.

An additional note about debt – unlike in the past, FHA and conventional underwriting guidelines require lenders to factor in student loans that have been deferred. However, the rules differ based on the type of loan so you want to talk to your lender about how your student loan will affect your mortgage qualification. It’s possible a different loan may make a difference.

Down Payment

Down payments also differ based on the different loans. Many potential home owners automatically think of FHA for a low down payment (the FHA down payment is minimum 3.5%).  However, you piggy bavs down paymentnk can get a conventional loan for as little as 3%.  VA loans actually have zero down payments. Keep in mind that a lower down payment will increase the amount that you are borrowing so your monthly payment will be higher.  For many buyers, though, that is an acceptable trade-off.  You can use an on-line mortgage calculator to determine the difference in your principal payment if you decide to lower your down payment.

Mortgage Insurance

If you decide to make a down payment which is lower than 20%, you will be charged a monthly mortgage insurance payment that will be part of your mortgage.  The mortgage insurance protects the mortgage lender against defaults. Mortgage Insurance is called Private Mortgage Insurance (PMI) for conventional loans and Mortgage Insurance Premium (MIP) for FHA loans. FHA loans will require an upfront 1.75% MIP payment in addition to the on-going monthly payment.  This can be paid upfront at closing or folded into the loan.  Conventional loans do not have an upfront payment.

The monthly insurance premium can be cancelled on conventional loans once you get to 80% LTV (20% equity position). FHA’s mortgage insurance payment does not cancel but you can refinance when you get to 22% equity (78% LTV).  If you qualify for either conventional or FHA, you may want to see if it makes sense to change loan products based on the impact of mortgage insurance payments.

Length of Term

Some borrowers consider a 15-year term vs 30-year as a way of saving on their overall payment.  This can be a great option. However, you will be locked into a higher required monthly payment. For some, a better option may be additional principal payments on a 30-year loan.  You can pay a little more each month or even use your annual tax refund as an additional principal payment.  If you start consistently applying these additional principal payments early in your mortgage, you can significantly reduce the number of years for your mortgage payment. This way also gives you more flexibility in making those payments. Only you can decide what makes sense for you.

Bottom line, stronger qualifying factors on your part gives you more options in terms of your mortgage. Discuss with your lender the different loans available and any options you have for getting a better mortgage. This is a big purchase and you should make sure any questions you have are satisfied. You want to make sure you are getting the best mortgage for you.

One last note – I would definitely recommend talking to your lender before actively visiting homes.  For one thing, you cannot submit an offer for most homes without showing ability to pay (either cash in the bank or pre-approval from a lender).  Secondly, our current market has a tight amount of homes available in many neighborhoods.  You don’t want to lose out on your chosen home because you are not prepared to submit an offer. Finally, you want to make sure that you consider your mortgage options and find out if there are any issues to be addressed before qualifying.

 

Millie C Lumpkin
Broker
Stages Real Estate
Phone: (312) 217-5644
Email:     millie.lumpkin@gmail.com
Website: ChicagoSouthHomes.com
Blog:       ChicagoSouthRealEstateBlog.com

 

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Sellers – Tips for Successful Short Sale

short sale

The number of homeowners defaulting on their mortgage has declined compared to a few years ago.  However, a recent article states that the Chicago area has the lowest amount of home equity and the highest number of households that are underwater for big cities.  This points to short sales continuing to be an issue in our area for the foreseeable future. Note though that these trends vary by community with many communities not affected as much.

Short sales can be frustrating for both sellers and buyers.  For the homeowner, there are some tips for a successful short sale:

  • First, sales prices in the Chicago area have improved in the last 3-4 years. You may be pleasantly surprised to find out that your mortgage is no longer upside down.  Speak to a real estate agent to get an opinion of the current market value for your home.
  • A short sale will not be approved unless there is a legitimate hardship. Make sure that you understand your bank’s criteria for a hardship and the bank’s process and documentation needed to consider a short sale. Most banks will have a section on their website highlighting short sales. Contact your bank’s loan modification area for more information.
  • In determining approval for a short sale offer price, the bank is primarily looking at market value not the amount of mortgage owed. Don’t hamper the marketing of your home by insisting on a higher price than the indicated market value.
  • A low ball list price may get a quicker offer but the bank is likely to either reject the offer or ask the buyer to raise their offer. Make sure that your agent does a market analysis of your home upfront to support the list price because the bank will be doing their own valuation of the contracted sales price.
  • Make sure that you understand where you are in terms of the foreclosure timeline. This may determine how aggressive you need to be as far as pricing and in your communication with the bank. The timeline is different for each state. The normal timeline for Illinois is 210 days from the date of initial filing by the bank (usually after 3 months of default on the mortgage).  In recent years, Cook County has taken much longer in the foreclosure process but processing time appears to be shortening.
  • Make sure that you provide all the financial documentation requested on a timely basis. Most banks have established fairly systemized processes for the short sale process.  The systems have hard deadlines and a delay in providing requested information can cause the short sale process to be discontinued.
  • If you are selling a home with a homeowner association fee, try to stay current. Associations have the authority to foreclose on your home independently of the bank holding the loan. Also, the bank may not be willing to pay delinquent fees.
  • A preliminary title search will help to eliminate some surprises later. If there are multiple liens, e.g., two mortgages, each lienholder will be negotiated with separately. Federal liens such as IRS tax liens will need to be satisfied prior to the short sale.
  • Make sure that your agent is negotiating to have the mortgage deficiency waived (if applicable in your state). One of the primary benefits of doing a short sale is the ability to negotiate the handling of the deficiency. You want the resolution in writing. Be aware that there may be some residual deficiency remaining depending upon the negotiation.  However, without a short sale you don’t have a seat at the table when the decisions are made.
  • Finally, you are selling your home so the normal things still matter. Curb appeal, presentation of your home and marketing still need to be in place.

These are a few tips that should help sell your home.  Keep in mind the benefits of the short sale as you patiently wait through the bank’s approval process.  If you are in the Chicago area, I would love to work with you in selling or buying your home.

Good luck.

Millie C Lumpkin
Broker
Stages Real Estate
Phone: (312) 217-5644
Email:     millie.lumpkin@gmail.com
Website: ChicagoSouthHomes.com
Blog:       ChicagoSouthRealEstateBlog.com

 

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Tips to Buying Your Chicago Condo

Are you thinking of buying a condo in Chicago? The condo market in chicago lakefront condoChicago remains hot as companies continue to move from the suburbs to the city.  There is also the draw of all the amenities and things to do in the Loop area.  In addition, for those not wanting to deal with exterior maintenance, condos are a great option.

The condo market in Chicago continues to  experiencing a seller’s market in terms of tight inventory levels.  The supply of condos / townhomes is 8.8% lower in Chicago than August  2016 levels.  However, despite the tight supply of condos available, the number of homes sold in the last 12 months is slightly higher than prior year levels.   The median sales price is also moderately higher.

Outside of Chicago, the south suburbs are overall showing decent price growth.  The supply of homes differ by community and activity is still heavily influenced by the amount of foreclosure activity.  For many south suburban communities, the condo market still has not rebounded so it’s a good time to buy.

For those considering buying a condo, there are a few things to keep in mind:

Financing

Financing for condos can be more difficult than a single family home.  Credit score requirements are higher and the condo association has to meet its own set of requirements in addition to the borrower. The biggest condo association qualifications that tend to be problematic are:

  • No more than 15% of association fees delinquent for 60 days
  • Less than 50% investor/renters
  • 50% or less concentration of FHA loans
  • Adequate reserves in association budget (10% of budget)
  • Functional condo association – with no association it will be very difficult to get financing

Also, in order to use FHA financing, the condo community must be FHA approved.  Many are not, so you will have more choices with conventional financing.  Discuss this with your lender.

Condo Specific Costs / Concerns
    • Association Fees: The association fees cover the costs of the property taxes and insurance on the building, utilities for the common areas, exterior maintenance, etc.  You want to be certain what amenities are included in the association fee.  With condos, the monthly association fees can sometimes be fairly pricy.  This is especially true near the lake and near downtown. You want to factor in the amount of the monthly association fees in addition to the purchase price.  Often, the loan amount that you qualify for can be impacted by high association fees (it affects the amount of your monthly housing payment).
    • Special Assessments: Condo associations will levy special assessments for projects such as roof replacement and other capital improvements.  In addition, a building in great shape may need to shore up its capital reserves with a special assessment if needed.  Ask about any planned special assessments and the history of them in recent years.  You can request this information from the seller or association during your attorney review period.
    • Restrictions in the Bylaw: The condo’s bylaws set up rules and restrictions for the condo owners in the building.  Review the bylaws as part of your due diligence.  Some associations restrict the renting of units so if your future plans are to rent your unit for income, this may be an issue.  There may also be other restrictions that impact remodeling, etc.  Do your homework as part of the purchase process so you don’t face any unpleasant surprises down the road.
  • Other Concerns:    Is parking included (a real issue in some Chicago neighborhoods)?  Also, is there pending or existing legal action against the association?
 IL Condo Act:

This act in Illinois applies to the purchase of foreclosed condos only.  It basically holds the buyers of foreclosed condos responsible for paying up to 6 months of past due condominium assessments and all the legal fees associated with the association’s attempts to collect those assessments. You will want to confirm whether there are delinquent fees prior to the offer or definitely during the attorney review period.  Again, this is only an issue for foreclosed condos.

Although there are concerns that need to be kept in mind, a condo can be a great option for many people.  These are just items to routinely check off to minimize unexpected and unwelcome surprises.  If you have questions or are looking to buy and sell in the Chicagoland market, please give me a call.

 

Millie C Lumpkin
Broker
Stages Real Estate
Phone: (312) 217-5644
Email:     millie.lumpkin@gmail.com
Website: ChicagoSouthHomes.com
Blog:       ChicagoSouthRealEstateBlog.com

 

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Avoid These Two Big Home Mortgage Mistakes

home mortgage process

We all know that searching for and viewing potential homes is the fun part of the home-buying process. The not-so-fun part?  The home mortgage process.

However,  if you don’t pay attention to the details, your mortgage can end up dragging down the enjoyment of your new home and cause some major regrets. Here are a few mistakes to avoid to ensure that you love your home mortgage terms as much as your new home.

Don’t Find Your Home First:

Shopping around for the best mortgage rate should be the first step in the home buying process. You may even want to talk to a lender a full year before you plan to buy. It’ll give you time to get your affairs in order to qualify for the best rate, could save you thousands of dollars in the long run, and you won’t feel rushed to accept an unattractive loan because you’re worried you’ll miss out on your dream home.

Buyers should also know that you generally can’t submit an offer  without evidence of ability to finance.  Prioritizing the home mortgage can allow you to act quicker when you do find the home of your dreams.

Don’t Forget Your Real Budget:

There’s often a big difference between what a lender says you can afford and what you can actually afford. Your debt-to-income ratio doesn’t include the money you spend on daycare and college tuition, savings for retirement,  the cost of commuting to work, or maintenance and utility costs. Really sit down and examine your spending before committing to the loan amount the lender is offering. You won’t enjoy your home nearly as much if you end up being “house poor” and eating bologna sandwiches for lunch every day.

If you are unfamiliar with creating a household budget, here is a link to a template that you can download.  Remember to look over your spending over the last few months to make sure you are reflecting your actual expense levels.  You can also use tools like mint.com and Quicken software to make it easier to track your spending going forward. Based on your budget, you may decide to lower the amount you had planned to spend on your home.

The lender can also educate you on other the costs of buying your home that you may not have anticipated. For instance, you will need a down payment and closing costs (including the  escrow needed for property taxes and insurance).   Use the months before you purchase to make sure you are financially prepared to buy your new home.

Millie C Lumpkin
Broker
Stages Real Estate
Phone: (312) 217-5644
Email:     millie.lumpkin@gmail.com
Website: ChicagoSouthHomes.com
Blog:       ChicagoSouthRealEstateBlog.com

 

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What to Expect in Your 2017 Home Search?

Are you searching for a new home in 2017?  What should you expect?

Prices Have Risen

The median sales price in the metropolitan Chicago area has risen 22% since July 2014 levels.  However, despite concerns at the end of 2016, interest rates remain historically low.  Many buyers this summer have purchased with rates under 4%.

Home values have bounced back significantly since the crash.  However, the average median price compared to 10 years ago is still lower for the overall Chicago metropolitan area. For areas hit hardest by the foreclosure crisis, many remain significantly lower than price levels 10 years ago.

Foreclosures

The number of foreclosure sales for the Chicago area are significantly lower overall compared to a few years ago.  However, there are still some Chicago neighborhoods and suburbs where foreclosures remain a major presence in the market.

There are often misperceptions about foreclosures.  Foreclosed properties are not necessarily in bad condition or “lowball” opportunities by banks desperate for an offer.  The condition of the property is completely dependent on how well the previous homeowner took care of the home. Many are in great condition.

The process for buying a foreclosure is similar to buying any home. The seller just happens to be a corporation versus an individual. Sometimes the submission process to the bank is different.  However, the offer includes an offer contract and then negotiation between a buyer and seller to determine an accepted price and terms.  The timeline to close is the same.

Multiple Offers Are the Norm

Expect your offer to not to be the only one being considered by the seller.  The supply of homes in the Chicagoland area overall is tight and considered a seller’s market.  However, supply levels may vary for different neighborhoods or suburbs.  Your realtor should prepare you for the realities of the current market while making sure you create the best opportunity of getting your offer accepted.

Mortgage Guidelines Continue to Change

The one thing constant in mortgage guidelines is change.

Mortgage guidelines seem to tighten year after year since the housing market fell.  As a matter of fact, FHA passed a number of guideline changes in 2015 including how student loans are factored, employment history guidelines and rules for down payment gifts.  I have heard many buyers assume that a higher credit score and great income will be a “slam dunk” for the home loan approval process.  However, that is not necessarily true.  Consult a lender early in the process.  You want to make sure how much of a loan you qualify for and if there are any issues to address.  Also, expect a 2nd and 3rd verification of the information given.  As a matter of fact, the lender is likely to make sure that nothing has changed in your information up to the date of the close.  This will be a third party verification so if you have a bankruptcy, past foreclosure or judgement not disclosed, it is likely to be discovered.

 

It is a great time to buy and sell.  For buyers, interest rates have been held at low levels for the past eight years.  This is likely to change after this year.  Prices will continue to rise.  For sellers, the current supply levels in the market favor sellers.  And if you are buying a new home in conjunction with your sale, you will want to take advantage of conditions that maximize your combined net effort.

Millie C Lumpkin
Broker
Stages Real Estate
Phone: (312) 217-5644
Email:     millie.lumpkin@gmail.com
Website: ChicagoSouthHomes.com
Blog:       ChicagoSouthRealEstateBlog.com

 

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Have You Checked Your Property Tax Bill?

 

Cook County property taxes were due August 1 this year.  home financingUnfortunately, homeowners will notice an increase in their property tax bill.  The average tax bill in the city of Chicago is expected to increase 10%. This is largely due to increases for police, fire and teacher pensions.  However, suburban Cook County tax bills will also increase on average between 3.9% to 6.5% depending upon location.  The south suburbs are expected to be on the lower range of that increase at 3.9%.

Are You Receiving Your Home Exemption?

Since tax bills have recently been issued,  this is a good time to review your bill.  One thing you will want to verify is that you are receiving any homeowner exemption that you are entitled to.  If not, you are missing an opportunity to take advantage of this valuable reduction to your property tax bill.

If you have purchased your home in the last couple of years, make sure that you have applied for your homeowner exemption.  Cook County pays taxes a year in arrears so the previous homeowner’s exemption is still reflected in the first year after you own the home.

If you are not sure of the property tax exemption process, visit the Cook County Tax Assessor website. In addition, if you have received the magical age of 65, don’t forget to apply for your Senior Exemption.

Are Your Taxes Paid to Date?

It is also a good time to verify that your property taxes are paid to date.  Thousands of Cook County homeowners every year find out that their delinquent property taxes have been sold to outside parties.  If your taxes have been sold, you will need to redeem your “forfeited” taxes and this can be costly.  In order to redeem your taxes if they are sold, you’ll have to pay the original taxes plus any accrued interest, penalties, fees and costs that the purchaser incurred.  After a couple of years, the purchaser would be able to take deed to your home.

I like to suggest that family members may want to check the status for older or disabled family members that might fail to pay.  Click here for a Delinquent Property Tax search. This page will also direct you to a search to get the PIN by property address if you don’t have it.  Each year, Cook County holds a Tax Sale where taxes are offered for purchase.  Don’t put your home at risk by not being aware of the status of your tax payments.  It’s just too easy to check.

 

Millie C Lumpkin
Broker
Stages Real Estate
Phone: (312) 217-5644
Email:     millie.lumpkin@gmail.com
Website: ChicagoSouthHomes.com
Blog:       ChicagoSouthRealEstateBlog.com

 

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Chicago South Side Market Activity – April 2017

Home Prices in Chicago South Real Estate for April 2017

Real estate market data for Chicago south side neighborhoods real estate provided by Millie Lumpkin of Stages Real Estate.

Overall, the Chicago metropolitan area as a whole (as well as the city of Chicago) continues to experience a seller’s market in the 12 months ending April 2017.  The seller’s market in the Chicago area is a trend that started in 2013.  A seller’s market indicates that the supply of homes on the market is tighter compared to buyer demand. The supply of homes in Chicago is 6.0% lower than April 2016 levels.

In the most recent 12 months, the median sales price in Chicago was $220,000 which is an increase of 9.5% over prior April levels. The median days for a listing to get to contract is 23 days overall which is 8% quicker than prior year.  A number of south side neighborhoods are still impacted by high foreclosure activity.

Although the overall market for Chicago remains fairly strong, there are some neighborhoods which experienced a decline in the number of closed sales.   There are also some that have significantly longer time to get to contract. This is often indicative of homes being overpriced.  Just note that market activity may differ across neighborhoods.

Listed below is market activity for detached single family homes in several neighborhoods on the Chicago south side. For other Chicago neighborhoods and suburban areas, click here for full list of market activity by community.

Chicago South Real Estate Market Statistics

Detached Single Family – April 2017 (12 months ending)

chicago south side market activity

Find Homes in Chicago South Real Estate Market

Visit my website to search for homes in the Chicago South real estate market or to be notified when homes come on the market.

To find out what your home is worth in the current market, email me or call/text at (312) 217-5644.

Millie C Lumpkin
Broker
Stages Real Estate
Phone: (312) 217-5644
Email:     millie.lumpkin@gmail.com
Website: ChicagoSouthHomes.com
Blog:       ChicagoSouthRealEstateBlog.com

 

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Are You Planning to Sell in 2017?

 

Are you considering selling your home in the next few months?  The Chicago area continues to experience a seller’s market which makes this a great time to weigh a move.  A seller’s market means that the supply of homes is limited in some Chicago neighborhoods and suburbs in relation to buyer demand. The median sales price for the Chicago metropolitan area is showing solid growth yet again and days on market is declining. Now may be the time for you to either move up or downsize.

If you plan on selling your home, there are some things you can do now to prepare.

Find Out How Much Your Home Is Worth

Finding out how much your home is worth in the current market really should be your first step when selling your home. It’s a good idea to have an experienced realtor work with you to give you an estimate of your home’s value. There is a lot of information available online in terms of real estate activity. However, a realtor will make sure you are basing your opinion of value on comparable homes and will adjust for differences in the comps that affect the value of your home. This can make a difference if the homes include ones that have been rehabbed or upgraded.  Comparable means similar condition, square footage, style within a certain distance and sold within a certain time frame.

It may be tempting to set your price higher than market value to see if you can get more for your home. However, overpricing your home is not a good idea. Overpriced homes sit on the market longer and often end up selling for less than they could have if initially priced right. Buyers have access to a lot of information about real estate activity. If you have not been in the real estate market even in the last five years, a lot has changed.

Once you know your estimated sales price, you can calculate the expected net proceeds from the sale. The net proceeds reflect the sales price minus the mortgage balance owed, real estate commission, mortgage escrow payments for property taxes and insurance and other closing costs. Your realtor should be able to provide a net sheet with these figures. These net proceeds are what will be available to you for a down payment on your new home or whichever other use you have in mind for the funds.

Determine if Repairs Are Needed

Now is a good time to go through your home and make a list of any repairs are needed. Check for needed plumbing repairs, unfinished DIY projects, holes in the walls, minor mold issues in the laundry room, seeping water in the basement, etc. It might also be a good idea to have the furnace serviced, remove old wallpaper, clean the carpet, buff up the hardwood floors or paint. Even if you are not doing major upgrades, it makes a difference if your home can present as well-maintained.

Do You Need to Declutter?

Clutter can be a real turn off for buyers. You want them to visualize themselves living in your home and clutter is a major obstacle in that picture.  Too much clutter may make your home feel confined.  I’m not necessarily talking messy. Think about the kitchen counter that has canisters, a toaster, dish rack, blender, etc.  You want buyers to see how much counter space and closet space you have.

Also, maximize floor space. Think about the living room that has several over-sized pieces that overwhelm the room — great for living in but not for selling. This is also the time to address the clutter in the basement and garage.  Do it before buyers come through with negative feedback and that clutter causes your home to sit on the market longer.

Curb Appeal Is Important Too

Most buyers today begin their search on-line.  Not only do they start on-line but many buyers will drive by the home before scheduling the showing appointment with their agent. If the exterior of your home is not appealing, many buyers won’t bother making the appointment to see the inside. Early spring is a good time to pull the weeds, add mulch, paint the trim or add some flowers. In the fall, add some colorful autumn flowers like chrysanthemums or asters for added appeal. Another good reason for paying attention to the exterior is to make sure that there is no peeling paint.

In addition, are there exterior maintenance projects? Consider a power wash or refinishing the deck to improve the view .  Also, note that buyers with FHA financing may get a flag if there is peeling paint on the exterior (including window and door trims).  FHA also considers the garage as part of the home when assessing condition. If the garage roof or gutters are in bad condition, FHA buyers may find it difficult to get financing approved.

How Is Your Exit Plan?

Before you put your home on the market, you may want to check out the market of the new neighborhoods that you are considering for your new home. Are you finding homes that fit your price range? How are the schools? You should also speak to a lender early to make sure of the amount of loan you would be pre-qualified for and whether there are any issues that need to be addressed. Make sure of your exit plan for when your home is sold.

Depending upon your reasons for moving, selling your home can be exciting if it means moving on to a new phase in your life. For some, a growing family is the reason or the financial means to move into a bigger home. However, whether the move is welcome or just a necessary evil, being prepared can make selling your home easier.

 

 

Millie C Lumpkin
Broker
Stages Real Estate
Phone: (312) 217-5644
Email:     millie.lumpkin@gmail.com
Website: ChicagoSouthHomes.com
Blog:       ChicagoSouthRealEstateBlog.com

 

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Are You Planning to Buy in Spring 2017?

 

home for sale

Many potential home buyers still use spring as their target to “start looking” for their new home.  If you are planning to buy your home this spring, there are some things you can do now to be ready to GO in the spring.

Speak to A Mortgage Lender

Speak to a mortgage lender now to see if there are any issues with your credit, debt levels or income. A good loan officer will outline any “tweaks” needed and give you a loan amount you should qualify for if everything is in order.  Qualifying for a mortgage involves more than a good credit score and decent income.  An early start in making sure your finances are in order will make for a less stressful home search later.

In your conversation with your loan officer, you should also have a discussion about the different loan products available. Many people will automatically go for an FHA loan (which is great for a lower down payment) but you should also consider whether the other loan alternatives may be a better option.   Also, are you getting the best interest rate?  Note that there are other loans other than FHA which have lower down payments.  Conventional loans are now available as low as 3% down.  Conventional loans also don’t have many of the property condition requirements that FHA loans have.  Finally, conventional loans definitely make buying a condo or townhome easier.

Loan Down Payment

Regarding the down payment, most loans will require a down payment.  Down payments generally range from 3.5% for FHA up to 20%.  If you don’t already have the money saved, you will need a plan for getting it or closing the gap of what’s needed.  Your loan officer should also let you know about closing costs for your home purchase.  Typical closing costs are mortgage origination fees, attorney costs, escrow of property taxes, etc.  Expect about 3% of the purchase price.  Often, these can be negotiated as part of the offer but not always.  Again, you should have a plan for taking care of this cost.  You may also want to talk to your lender about available public funds (such as the IHDA down payment assistance program).

Interest Rates

Interest rates rose in the last weeks of 2016. In addition, the Federal Reserve announced that it expects to increase rates further in 2017. However, forecasts don’t expect rates to rise past 5% by year end 2017.  The importance for buyers is that an increase in mortgage increase rates may affect the selection of homes that are available to you.

Property Taxes

Property taxes may make a significant difference in how much home you can afford so you want to pay attention to this figure when you are looking at homes. In Chicago, taxes are fairly affordable (especially for homes valued under $250,000).  However, in some of the suburban communities, property taxes can be pretty significant for even modestly priced homes.

Selling Before Buying

If you will need to sell your home before buying, there are some things that make sense to do now. If needed, now may be a good time to do those small repairs around the house that might be issues for potential buyers.  Are there rooms that would show better with a little de-cluttering and fresh paint?  Is your furnace more than 20 years old? Are the harvest gold kitchen appliances screaming from the 80’s?  Is the carpeting soiled or worn?  You may not be in a position to make major investments in the home you are selling but are there affordable investments that will counter the impression of your home being dated or lacking proper maintenance?  The investments made toward improvement or repairs should increase either the marketability or market value of your home.  Talk with a realtor so that you get a feel for the impact of these changes on the marketing of your home.

List of Wants and Needs

Now for the fun part …. Determine your wants and needs for your new home. It will help maximize your home search time if you already have a good idea of what’s important to you.  Think about location, schools, your lifestyle and which architectural styles appeal to you most. Do you want a family room, attached garage, big backyard, updated kitchen, etc?  What are your deal breakers?  The clearer you are in what you want, the easier it is for your real estate agent to help you find your dream home.

Exit Plan from Current Home

Finally, what’s your exit plan for your current residence? If you rent, how will you handle it if you close earlier or later than your lease expiration date?  Do you need to discuss this with your landlord?  If you own your current home, do you need to sell it first? If you are selling your current home, call a trusted realtor to determine the value of your current home and get an idea of what you can expect to net from sales proceeds.

Buying a home requires some planning.  If you’d like a consultation to discuss buying your new home, please contact me.

Millie C Lumpkin
Broker
Stages Real Estate
Phone: (312) 217-5644
Email:     millie.lumpkin@gmail.com
Website: ChicagoSouthHomes.com
Blog:       ChicagoSouthRealEstateBlog.com

 

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Is it a good idea to remodel before selling?

couple-remodeling-home
Is it a good idea to remodel before you put your home on the market?  The answer …. “It depends.”

The goals with remodeling your home before selling it are to increase the value of your home and to attract more buyers.  Generally, upgrades to your home should achieve both goals.  However, before starting a major remodeling project, start with a walk through of your home.  Are there repair projects or other deferred maintenance that need to be addressed?  Are there cheaper updates that can increase value without a major outlay of cash.  You may want to start with the lower cost projects rather than an extensive kitchen or basement remodel.

Deferred Maintenance / Repair Projects:

There are three primary issues created from deferred maintenance or repair issues in the sale of your home. First, deferred maintenance and needed repairs can reduce the value of your home.  Secondly, buyers may either pass over your home or discount their offer price based on condition. Finally, these property condition issues might present a flag for the buyer’s appraisal or home inspection.  For an FHA appraisal, property conditions can prevent the sale if they fail FHA property standards. In addition, in many suburban Chicago areas, villages perform an inspection prior to sale. A poor village inspection can also block the sale.

Some deferred maintenance/repair projects to consider include:

  • Check the roof, gutter and downspouts (for both the house and garage)
  • Service the furnace
  • Fix any plumbing issues
  • Removal of mold or mildew
  • Repair any holes in the walls, windows or screens
  • Peeling paint around exterior windows or doors (FHA flag)
  • Check the deck and porch
  • Unfinished projects
Cheaper Updates

There are also some cheaper “updates” or projects that can result in a higher value for your home or at least increase the pool of buyers.  remodel homeThese projects can include:

  • DEEP CLEAN if needed
  • PURGE the excess and clutter to create the feeling of more space
  • Paint – fresh paint can go a long way to make your home feel less dated. This includes painting over that old wood paneling in the basement.
  • Remove old wallpaper and wallpaper borders
  • Replace the carpeting or get a good commercial cleaning (if there are hardwood floors under the carpeting, consider pulling it up)
  • New kitchen appliances
  • Sand and refinish the hardwood floors if stained or damaged
  • Change or add kitchen backsplash
  • Replace old vinyl tile flooring in kitchen or bath
  • Replace older faucets in the kitchen and bath
  • Replace kitchen cabinet door handles or pulls
Remodeling

There is no question that a quality remodel will generally increase the value of your home and attractiveness to buyers. However, before embarking, check out other homes in your area to see how much updating is expected in your neighborhood. If granite is not the norm or expected, then save your money and go with laminate counters.  This is a guard against “over-improvement”.

You also want to know upfront how much of an increase in value can be expected from your remodel. Consult with a real estate agent to pull comps of improved homes.  You don’t want to spend too much on improvements that are not justified by an increase in market value.   Again, guard against “over-improvement.

One last word on the decision about remodeling. There are many investors with the resources to do a complete “gut rehab” for the homes they “fix and flip”.  When you are comparing to sold properties in your neighborhood, choose those with similar condition and quality of remodeling. Don’t expect a “high end” price unless your improvements merit the comparison.  This frontend market research can aid you in directing your sweat and funds to projects that make the most sense.

Millie C Lumpkin
Broker
Stages Real Estate
Phone: (312) 217-5644
Email:     millie.lumpkin@gmail.com
Website: ChicagoSouthHomes.com
Blog:       ChicagoSouthRealEstateBlog.com

 

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Real Estate Advice for Chicago Home Buyers and Sellers