First Time Home Buyers: Your Six Month Plan

First Time Home Buyers: Your Six Month Plan

Presented as a public service by Joe Peters of Coldwell Banker

 

First time home buyers who dip their newbie toes in the mortgage waters might soon find out there’s a lot more to know than originally thought. It is a brand new world with lots of new terms, people and businesses and it can be a bit overwhelming at first. Heck, even seasoned buyers can find the mortgage process quite a bit to handle sometimes. But for first timers, knowing ahead of time what to expect and when to expect it will make the process a smooth one.

Here’s what to do financially when you’ve decided to stop renting and start owning.

Month 1:

You’re still sort of in the exploratory phase but you’re still committed on buying your first home. Yet buying a home isn’t something you should do on your own, especially as it relates to financing. Know this, though- most every traditional mortgage company offers the same suite of home loan options. Mortgage lenders spend a lot of time and effort on marketing and loan officers live and die from referrals but both will try and differentiate themselves from everyone else. Typically the primary differences are experience in the industry and stellar customer service.

Month 2:

Now it’s time to get some referrals for financing. You can get them from your selected real estate agent, friends and family or your financial planner or CPA if you have one. Once you make your choice about where you’re going to get your first mortgage, you’ll then speak with your loan officer over the phone or at the place of business. This is the prequalification stage. After a relatively brief conversation about your income, current debt and employment, the loan officer will research current mortgage rates and provide you with an amount you can comfortably qualify for as well as a list of loans that meet your needs.

Month 3:

It’s getting closer. But now it’s time to submit a loan application to your loan officer. Most often this is done online but your loan officer might offer to come to your home or place of business and take the loan application face to face. You’ll sign a list of documents, most importantly your loan application and authorization forms allowing the lender to inquire about your employment and credit history. Your loan officer will electronically submit your application to an automated underwriting system which will, within a matter of moments, provide a list of items needed to get your loan to the full approval state. You will then have a preapproval letter in hand. It’s time to submit copies of your pay check stubs, bank statements and tax returns if needed.

Month 4:

Your loan officer told you not to make any sudden changes about your work, employment or make any relatively large purchases. Don’t go buy a car while your loan is in process, for example. You have your preapproval letter in hand so it’s time to get serious about finding your first home. This, of course, is done with your real estate agent. And I can’t stress this enough- do NOT try and look for a home and negotiate with the sellers about the price. Professional real estate agents are pros at negotiations and you’re already out of your league. Let your agent do the heavy lifting by finding some housing options in the areas you’d like to live. And, surprise, a buyer’s agent doesn’t cost you a dime.

Month 5:

By now you’ve likely looked at your fair share of homes and you may very well be in a position to make an offer. You should always keep in close contact with your loan officer as well. Interest rates move over time and it’s possible that rates have gone up which effectively lowers the amount you can qualify for. Conversely, rates may have gone down and your buying power received a boost.

Month 6:

You’ve found a home. Wheels begin to spin rather quickly after the contract has been signed. Your lender will need an appraisal and many lenders ask for money to pay for an appraisal upfront. Your loan will be reviewed one more time and any expired documentation will need to be updated. Credit documents such as a credit report, pay stubs and bank statements need to be no more than 30 days old when it’s time to fund the mortgage. Once your loan has received full approval and you’ve met all your loan conditions, loan papers are orders. At your closing, you will sign a host of closing documents and have your down payment (if needed) and closing cost money wired to the settlement agent. After signing, the lender does one more review of your file, making sure all the documents have been properly signed. You’re now a first time home owner.


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Reeling from new rent control laws, N.Y.C. investors set their sights on New Jersey

Reeling from new rent control laws, N.Y.C. investors set their sights on New Jersey

Presented as a public service by Joe Peters of Coldwell Banker

Reposted from re-NJ.com

A landmark package of new rent control laws passed by the New York State government in mid-June appears to have kick-started a new kind of boom for the New Jersey real estate market.

The laws, which dramatically strengthened tenant protections in New York City, took key steps such as repealing what was known as the vacancy bonus provision, which had allowed a property owner to raise rents as much as 20 percent each time a unit became vacant.

The new regulations have already started a major migration by New York real estate investors to properties in New Jersey, according to Brian Hosey, a vice president with Marcus & Millichap and the firm’s regional manager for New Jersey.

Brian Hosey

“One-third of our investors are now coming from New York City,” Hosey said. He noted that there has been additional interest by investors in communities in northern New Jersey, including Irvington, Paterson, the Oranges, Hackensack, Cliffside Park, Westfield and Summit.

“All of these communities are fair game for investors,” he said.

Most of the data on this movement is anecdotal at this point, yet seasoned investors in the Garden State are feeling it firsthand. So says Nate Kline, chief investment officer and principal with One Wall Partners. He said the Newark-based firm, which focuses on “multifamily, workforce housing,” has been investing in New Jersey properties since 2013, but noted that competition from New York-based investors has in fact ramped up recently.

“In my conversations with brokers, I’ve been told on frequent occasions that investors are entering the New Jersey market for the first time,” Kline said. He added that “the buyer universe of New York investors bidding on projects has clearly expanded because we know more people (from New York City) are bidding on assets in New Jersey.”

In another conversation, this one with a member of Freddie Mac’s production team, Kline learned that “this year, northern New Jersey became the most active loan origination market for the agency’s Small Balance Loan Program in the nation, overtaking Brooklyn.”

Michael Lefkowitz

Michael Lefkowitz, an attorney and real estate transaction specialist with Manhattan-based Rosenberg & Estis PC, noted that many of his developer and real estate investor clients are ready — and eager — to cross the Hudson River.

“My clients rent regulated multifamily dwellings and office buildings in New York, but for them that game is over” due to the new regulations, Lefkowitz said. “My clients are now focused on other asset classes, and you see more competition and interest in office buildings and also outside of the five boroughs.”

To Hosey, this new rush of New York real estate investors is all a matter of the economics of rent control. In particular, he considers the elimination of the vacancy bonus “shortsighted.”

“I understand that there is a major issue in that rents in cities are skyrocketing, but I think New York has gone too far,” he said. The new rules “have created a rent stabilization market (in New York City) in which rents are lower and a non-stabilized market in which rents are much higher.”

And both Hosey and Lefkowitz argued that, with the removal of the vacancy bonus, New York landlords will be reluctant to renovate vacant apartments if they cannot cover the costs through rent increases.

“Now that the rules have changed, these dollars are no longer being spent on property improvements in New York City,” Lefkowitz said. “The new regulations have taken away any incentive to better the housing stock.”

In another key development, the New York State regulations were made permanent. In the past, rent control rules were tweaked every four to eight years.

Nate Kline

“I think people were accustomed to relatively incremental minor changes every few years,” Kline said. “The regulations would go back and forth favoring first tenants and then landlords.”

With the new rules, this has become a thing of the past — barring changes in the future by new lawmakers or a new administration in New York State government.

Hence many New York-based investors are looking to the Garden State for what they anticipate will be better returns on their investments.

“What they’re not going to do is buy more rent-regulated properties in New York City,” Lefkowitz said. “They’re going to go elsewhere such as garden apartment properties in New Jersey. They tell me they’ll be able to get better returns from these properties.”

The New Jersey markets that stand to benefit from these investments are those that have transit-oriented housing.

“We as a company have always focused on markets with the transit infrastructure for getting into New York City,” Kline said. “We operate in the counties closest to New York — Bergen, Hudson, Essex and Union. These are the four counties that have the most transportation infrastructure, and they are the most densely populated.”

In addition, this new interest from New York City investors isn’t confined to the residential market. Many of Lefkowitz’s clients are looking to pour money into more traditional commercial properties in New Jersey.

“Real estate investors are chasing yield,” he said. “If they feel they can bring their expertise to a different asset class, they’ll look outside their comfort zone at other asset classes such as industrial developments and office buildings.”

The regulatory climate in New Jersey is far different from what has taken hold in New York State, Hosey said.

“To be sure, there is rent control in New Jersey,” he said. “But investors can put money in multiple-family buildings in New Jersey without too much worry about rent controls.

He noted that New Jersey rent control laws are administered locally rather than by the state, “and New Jersey cities have a more free-market approach.” In fact, some New Jersey communities, such as Montclair, have no rent control regulations

“Montclair has a lot of new projects going on, lots of high-quality rental units going up right now,” Hosey said.

The influx that is fast approaching New Jersey’s real estate investment market, stemming from New York’s new rent control regulations, could be long lasting. Hosey said it’s also a great opportunity for firms such as Marcus & Millichap.

“How much extra business will come from these investors is hard to tell,” he said. “We will need to educate these investors so that they understand a town’s rent control laws, learn what these properties are trading for, sales comps, rental comps and how to manage a property in a different market.”


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Why Pre-Approval Should Be Your First Step

Why Pre-Approval Should Be Your First Step

Presented as a public service by Joe Peters of Coldwell Banker

 

Houses are selling quickly, and sometimes competition is driving multiple offers. If you’re looking for your dream home, let’s get together to discuss how pre-approval gives you a competitive edge when you get to the offer stage.


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What Is the Cost of Waiting Until Next Year to Buy? [INFOGRAPHIC]

What Is the Cost of Waiting Until Next Year to Buy? [INFOGRAPHIC]

Presented as a public service by Joe Peters of Coldwell Banker

Some Highlights:

  • The “cost of waiting to buy” is defined as the additional funds necessary to buy a home if prices and interest rates were to increase over a period of time.
  • Freddie Mac forecasts interest rates will rise to 3.8% by Q4 2020.
  • CoreLogic predicts home prices will appreciate by 5.4% over the next 12 months.
  • If you’re ready and willing to buy your dream home, now is a great time to buy.

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Homeowners Are Happy! Renters? Not So Much.

Homeowners Are Happy! Renters? Not So Much

Presented as a public service by Joe Peters of Coldwell Banker

When people talk about homeownership and the American Dream, much of the conversation revolves around the financial benefits of owning a home. However, two recent studies show that the non-financial benefits might be even more valuable.

In a recent survey, Bank of America asked homeowners: “Does owning a home make you happier than renting?” 93% of the respondents answered yes, while only 7% said no. The survey also revealed:

  • More than 80% said they wouldn’t go back to renting
  • 88% agreed that buying a home is the “best decision they have ever made
  • 79% believed owning a home has changed them for the better

Those surveyed talked about the “emotional equity” that is built through homeownership. The study says more than half of current homeowners define a home as a place to make memories, compared to 42% who view a home as a financial investment. Besides building wealth, the survey also showed that homeownership enhances quality of life:

  • 67% of current homeowners believed their relationships with family and loved ones have changed for the better since they bought a home
  • 78% are satisfied with the quality of their social life
  • 82% of homeowners said they were satisfied with the amount of time they spend on their hobbies and passions since purchasing a home
  • 75% of homeowners pursued new hobbies after buying a home

Homeowners seem to be very happy.

Renters Tell a Different Story…

According to the latest Zillow Housing Aspirations Report45% of renters regret renting rather than buying — more than five times the share of homeowners (8%) who regret buying instead of renting. Here are the four major reasons people regret renting, according to the report:

  • 52% regret not being able to build equity
  • 52% regret not being able to customize or improve their rentals
  • 50% regret that the rent is so high
  • 49% regret that they lack private outdoor space

These two studies prove that renting is just not the same as owning.

Bottom Line

There are both financial and non-financial benefits to homeownership. As good as the “financial equity” is, it doesn’t compare to the “emotional equity” gained through owning your own home.


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