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What Is a Starter Home?

What Is a Starter Home

Prospective first-time buyers face some tough decisions. Should you buy a starter home now or save to purchase your forever home?

Key Takeaways:

    • Starter homes are smaller, more affordable homes designed to get first-time buyers into the housing market.
    • In the current real estate market, starter homes are more expensive than they were a few years ago and more difficult to find.
    • The definition of a starter home is beginning to change as priorities shift.

Most homeowners begin with a starter home, a smaller home that needs a little TLC in a more affordable price range. But these days, starter homes are hard to come by.

Starter homes are much more expensive than they were a few years ago, and the ones that do go on the market face fierce competition. This has left many first-time buyers wondering if a starter home is worth it, and whether they should wait to purchase their forever home instead.

A starter home is the first home someone can typically afford to buy. Starter homes are smaller, lower priced homes that help first-time buyers get their foot in the door of homeownership.

According to Michaela Cancel, senior vice president of Neighborhood Development Company, a starter home can be a condo, townhouse or stand-alone structure with limited bedrooms and is often under 1,500 square feet. Homeowners usually live in these dwellings for three to five years or until they see a return on their investment.

“(Starter homes) typically are either new middle market construction grade units or are much older housing stock that come with substantial maintenance costs,” Cancel says. “Either way, they don’t have a lot of bells and whistles as older housing stock doesn’t reflect today’s preferences and middle market construction grade units are budget-conscious/friendly for first-time homebuyers.”

Because of the low supply in the current housing market, starter homes are challenging to find and much more expensive than they were a few years ago.

“The definition of a starter home hasn’t necessarily changed; it just isn’t available in the traditional sense,” says Kurt Carlton, co-founder and president at New Western, a real estate investment marketplace. “With roughly 4 out of 5 homeowners holding onto a mortgage under 5%, no one is moving or putting their home on the market.”

Thanks to higher home prices, starter homes aren’t necessarily starter homes anymore. According to Redfin, buyers need to earn about $80,000 to afford a median-priced starter home.

In December 2019, the national median existing-home price for all housing types was $274,500, according to National Association of Realtors data. Since then, home prices have skyrocketed. In August 2024, NAR reported that the median existing-home sales price was $416,700 – a 52% increase since 2019.

In 2023, there were only 352,500 affordable listings, down 40.9% from 596,135 in 2022, according to Redfin. “That means that what we used to call the starter home has become an endangered species,” Carlton says.

A listing is considered affordable if the estimated monthly mortgage payment is no more than 30% of the local county’s median household income. The national share was calculated by taking the sum of affordable listings in the metros Redfin analyzed and dividing it by the sum of all listings in those metros.

New housing starts have always been significantly behind demand, Cancel says, but the U.S. fell even further behind in housing supply during the financial crisis of 2008, when homebuilders saw demand drop as consumers began to fear overpaying for a crashing real estate market. “The last decade saw marginal improvements in the supply-demand imbalance, but the shortage took another major hit from the pandemic,” Cancel adds.

Carlton says affordable housing is also harder to come by because there are currently about 15 million vacant homes in the U.S. that need renovating to become habitable. “The good news for housing supply is that independent investors are finding these homes, fixing and flipping them in the middle-income range and getting them back on the market,” Carlton says.

Interest rates are another affordability challenge, Cancel says, and homeowners locked into a mortgage rate under 5% cannot afford to trade up. “And, to add insult to injury, the shortage of these resale homes on the market has caused entry-level homes to surge in value, where new homebuyers are already competing with developers paying all cash for teardowns,” Cancel says.

Is It Cheaper to Build a Starter Home?

Prospective buyers can always build a starter home, but it can be difficult finding a company that builds more affordable homes. Data from the Census Bureau shows that 40% of homes constructed in 1980 were considered entry-level homes. In 2019, only 7% of homes were entry-level, according to a 2021 report from Freddie Mac, and almost every state is building fewer starter homes.

Clint Jordan, realtor at The Jordan Group and founder of Mil-Estate Network, says builders have focused on higher-end homes due to the increased profitability. “Building material costs have risen dramatically in recent years, labor shortages are rampant and zoning laws in some areas make it tough to develop smaller, more affordable homes,” he says.

Most of these costs are being passed along to buyers.

According to Jordan, prospective buyers may have better luck in the existing-home market. “Existing homes, on the other hand, often come at a more affordable price point because they don’t carry the same upfront costs that new builds do,” he says. “Plus, you can move in much faster and start building equity right away.”

While some builders have recognized the demand for starter homes and are trying to meet it, Jordan says it’s not happening quickly enough. “Even if the supply is increased, it doesn’t necessarily mean those homes will be as affordable as buyers are hoping,” Jordan explains.

Unlike a starter home, which focuses on the basics, a forever home is a larger single-family home where you can see yourself living for at least 10 years, according to Zillow. Forever homes are roughly double the price of starter homes, with about 2,000 square feet of living space, three bedrooms and two bathrooms. Forever homes have more space to accommodate life-changing events like a growing family.

Homeowners in forever homes have stable jobs and like the area where they live. Forever homes don’t necessarily have to be forever, but homeowners usually don’t have any plans to move in the near future.

“A forever home is one you intend to stay in for decades, whereas a starter home is often viewed as a stepping stone on your real estate journey,” Jordan says.

Prospective first-time buyers face some tough decisions. Should you buy a starter home now or save to purchase your forever home?

“I am a huge fan of buying now if you are ready. Waiting costs and loses you money,” Jordan says. “Every month you pay rent, you are throwing away money, losing equity and not gaining from the home’s appreciation.”

Buying a home instead of renting gives you the chance to build valuable equity. However, buying a home is only good if you’re in the financial position to do so. This means you need a realistic understanding of how much it costs to purchase a home, including the down payment, closing costs and ongoing costs associated with homeownership.

You can also take steps to make yourself a more creditworthy borrower, which increases your chances of securing a lower interest rate on your mortgage. Saving for a larger down payment can also reduce your monthly mortgage payment, often the biggest challenge for first-time buyers.

Carlton says first-time buyers still want a starter home they can afford, but instead of sitting on the sidelines, they’re shifting their priorities as far as what they want in their first home.

“They are living with aging parents or with adult siblings or friends to get more house for their money and adding a mother-in-law unit to accommodate more people,” Carlton says. “The definition of a starter home is evolving and expanding to satisfy the middle-income buyer rather than changing altogether.”

Source: realestate.usnews.com ~ By: Josephine Nesbit ~ Image: Canva Pro

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SOLD – 15355 Yosemite Blvd. Waterford

SOLD - 15355 Yosemite Blvd. Waterford

The Waterford Farm House!! This Cute 1820sf home has 3 Bedrooms bathrooms, a Home with Charm, Touch, and Views. This Property sits on a Knoll, overlooking a Panoramic View from its Front Porch. Big 60×50 Wood Barn and Separate two two-car garage with Storage Room, Bathroom, and a Possible Studio/Workshop Room. Over 36 Acres of Freshly Planted Nonpareils and Monterey’s (Viking Root Stock), Planted in January 2024, 2 Sources of Irrigation; an Ag Well that irrigates in 2 sets and MID 30hp Booster Pump Water from the Canal that irrigates in One Set. Big Wooden Barn in Great Shape with Cement Floors, and 4 Roll Up Doors that Setup for Work or Play. On the North side of the property, behind the Wooden Barn, there’s an RV/Mobile Building Pad Water, Power, and Trees to shade/privacy. This property Has the making of Your Long Term Homestead! This property backs up to the MID Main Canal. 

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Can You Get a Mortgage If You’re Self-Employed?

Can You Get a Mortgage If You're Self-Employed?

If you’re self-employed and want to buy a home, you’ll likely face a bit more scrutiny than borrowers with traditional wages. That’s because mortgage lenders routinely require proof of consistent income for mortgage approval, which can be tricky when you can’t show a W-2 or recent paycheck. Self-employed borrowers should be prepared to provide evidence of active income – simply put, the money you earn for your work.

Determine If You’re Self-Employed

First, you should understand what it means to be classified as self-employed. In general, lenders will consider you self-employed if a significant portion of your income comes from being a gig worker, freelancer or independent contractor.

If you receive 1099 tax forms rather than a W-2 from an employer, that will also indicate self-employment. Lastly, if you own 25% or more in a business, then you’re self-employed as far as the lender is concerned.

While self-employed borrowers are held to the same lending standards as W-2 workers, the mortgage process itself can be more challenging.

Why Are Self-Employed Home Loans More Complex?

In general, lenders are concerned whether all applicants, including self-employed workers, can consistently repay their loans. They’ll need to see that your income is high enough to pay for your mortgage, that it’s likely to remain high, and that you have a good track record of repaying your debts. This is easier to do when income is steady and predictable, which isn’t always the case for self-employed people.

Proving the stability of your business requires documentation, including evidence of work, payments and activity supporting business operations, such as a business website. “Every customer is so uniquely qualified and their businesses are so different, so each one needs to be looked at differently,” says Ashley Moore, community lending manager at JPMorgan Chase.

How Self-Employment Income Is Calculated

Lenders typically look at your income for the past two years – and for the self-employed, it will be your net profit, not your gross income. That is, they will look at the total income you have left after your deducted expenses.

If you earned more in Year 2, they will take an average of the two years. If you made less in Year 2, they will go by the lower-earning year. Lenders might be wary if your income drops significantly, so expect to provide an explanation if that’s the case.

General Requirements for Self-Employed Mortgages

Generally, borrowers need at least two years of self-employment income to qualify for a mortgage, as per Fannie Mae and Freddie Mac guidelines. In some cases, borrowers who are self-employed for just one year may still qualify if they meet other criteria, like working in the years prior in the same occupation with comparable or higher income.

Without two years of business records, you can expect a higher level of scrutiny, and any prior employment will have to be verified, as well.

How to Get Approved for a Mortgage If You’re Self-Employed

Qualifying for a mortgage when you’re self-employed means showing the lender that you can make payments for the entire length of the loan.

Here’s what lenders want to see from self-employed mortgage applicants:

  • Stable or increasing income. Some fluctuation is acceptable, but that’s why lenders like to see two full years of tax returns. Lenders are looking for the worst-case scenario, so they will probably consider the lower of the two years when crunching their numbers. Be mindful that significant decreases in income from year to year might raise additional questions during underwriting because the lender may see that as a sign that your business is declining. Self-employed mortgage applicants may also be asked to provide a year-to-date profit-and-loss statement as well as business deposit account statements for the most recent months.
  • Consistent work. Ideally, you should have at least two years of self-employment income in the same industry. If you’re newly self-employed, some lenders will make an exception if you have one year of self-employment tax returns plus W-2s from an employer in the same field. Still, a short history of self-employment may make it more difficult to assure lenders that your income will remain consistent.
  • Good credit. You’ll need a track record of repaying your debts. Foreclosures, delinquencies, collections, repossessions and bankruptcies increase risk for the lender. Lenders will review the type, age, use, status and limits of your revolving credit accounts as well as how often you applied for credit in the last year. “There are a lot of different loan programs and products that require different credit criteria, and that’s going to look the same for a borrower whether they are self-employed or have a W-2,” says Moore.
  • Low debt-to-income ratio. Lenders typically look for a debt-to-income ratio – the percentage of your monthly income you put toward paying your debt – to be 43% or lower. If your debt payments are perceived as unmanageable for your income, you might not qualify for the amount you need to purchase a home or receive an offer at all.You’ll also want to be careful if you’re self-employed and tend to deduct a fair amount of business expenses. This can hamper qualification since mortgage underwriters typically look at income after expenses. “The problem that we run into is a self-employed borrower can write a lot of things off,” says Sean Cahan, president of Cornerstone First Mortgage in San Diego. So those savvy deduction moves that help at tax time could end up reducing your bottom line, which can then impact the DTI.

    However, Cahan notes that loan officers who have experience working with this type of borrower should know how to interpret a tax return and run the proper calculations in these cases. He recommends that self-employed people simply ask the loan officer to show them the actual worksheet the officer used to come up with the effective income amount. “If they don’t know how to break it down for you, move on to the next lender,” he says.

  • Cash reserves. Your mortgage payment is due every month, even when work has dried up or if your business goes through a seasonal slump. Lenders may want to see that you have an emergency fund to get through months when you’re not earning as much. But again, that doesn’t mean self-employed borrowers are held to a higher threshold. “Compensating factors are going to help any borrower,” says Moore.
  • Significant down payment. A hefty down payment of 20% or more can offer more assurance to lenders, but down payment requirements for self-employed workers with good credit and enough income are usually no different from other borrowers. However, a larger down payment can be helpful. “Putting more money down will help your DTI ratio,” says Cahan. But if the loan is not likely to be approved because of other challenges, a larger down payment probably won’t tip the scales to an approval.

Document Requirements for a Mortgage When You’re Self-Employed

Lenders require complete financial documentation for a mortgage application. When you’re self-employed, you’ll need to provide both business and personal financial documents. Many lenders will require income verification early in the mortgage timeline and then again just before closing. Although requirements will vary by lender, be prepared to submit:

  • Government-issued identification.
  • Complete personal tax returns for two years.
  • Business tax returns for two years.
  • IRS Form 4506-T, which gives third parties permission to access your tax records.
  • Earnings statements.
  • Business and personal bank statements.
  • Asset account statements, such as retirement or investment accounts.
  • Business name verification.
  • Business license.
  • List of your debts and expenses, both business and personal.
  • Canceled checks for your rent or mortgage.
  • Any additional income, such as Social Security or disability.

Some lenders may require further documentation, such as statements from your accountant and clients. Be sure your documents are up to date and organized before you submit.

Mortgages backed by government-sponsored enterprises Fannie Mae and Freddie Mac require verification of business operations, so you may need to provide evidence of work, such as invoices, business payments or active websites. These measures are normally required 120 days before closing on a mortgage, but self-employed borrowers may have to offer proof of steady income again as the closing date approaches.

How to Plan for a Mortgage When You’re Self-Employed

If you’re self-employed and considering a home purchase in the next few years, take these steps to make yourself a more attractive borrower:

  • Establish a track record of self-employment work. Maintain consistent work as much as possible. Try to time your mortgage application after two to three years of consistently strong earnings. At that point, lenders are less likely to be concerned about income instability, and you may qualify for a higher loan amount.
  • Improve your credit. Check your credit report to identify any problems you may need to fix before a mortgage lender pulls your credit. Lenders may reject your application or charge you a higher interest rate if you have a low credit score, so contact the credit bureau to correct any errors you find. Look for other concerns, such as high credit limit use, and work to improve those areas.
  • Pause other credit activity. Do not apply for other loans or credit cards in the months leading up to your mortgage application, as this will harm your credit rating.
  • Pay down debt. You can boost your credit score by paying off some or all of your debt. This will also lower your DTI, which will make getting a mortgage easier.
  • Save as much as possible. Don’t drain your savings on the down payment. A healthy emergency fund can put lenders at ease; they like knowing that you can still make payments during work droughts or that you can afford surprise home repairs.
  • Maintain clean business records. Make it easier for lenders to understand your business income. Separate your business and personal finances by using business checking and savings accounts as well as credit cards. Keep track of invoices and monthly expenses, and create an updated earnings statement at least quarterly. Be sure to retain your records when you file taxes each year.
  • Don’t believe the misconceptions. Though there may be more paperwork, lenders are open to working with self-employed borrowers. “We look at each individual based on their entire financial picture,” says Moore.

Types of Self-Employed Home Loans

If you’re self-employed, you can explore the same mortgage programs as others – including conventional loans, Federal Housing Administration loans, Veterans Affairs loans and U.S. Department of Agriculture loans. You’ll still need to meet each program’s criteria in order to qualify, as well as provide any additional documentation related to your self-employed status.

What If You Don’t Qualify?

If you’ve only been in business a short while or have a past line of work that doesn’t qualify as related to your current business, you might consider an alternative loan program called a nonqualified mortgage. Because these loans do not follow government guidelines as a qualified mortgage does, a non-QM offers more leeway when it comes to underwriting them for business owners.

In order to make a non-QM mortgage work, you’ll likely need a large down payment and may have higher interest rates or fees than standard home loans. Because you don’t have two years of business tax returns, lenders will look at your bank statements instead to get a sense of your cash flow. Using those documents, they can determine how much income you have coming in on a regular basis. Once you eventually have enough business history to qualify for a regular mortgage, you might try refinancing your non-QM loan.

However, be sure to work with a reputable lender if you decide to pursue a non-QM loan, since these aren’t as regulated as traditional home loans.

Source: money.usnews.com ~ By: Dawn Papandrea ~ Image: Canva Pro

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SOLD – 4448 S Gratton Rd. Denair, 3bd/2bth/2,176sf/16.7ac lot

SOLD 4448 S Gratton Rd Denair

16.7 Acres of Country Home in the Gratton School District! Young Trees were planted in 2017. This Large Ranch Home is 2176sf with 4 Bedrooms and 2 Full Baths. Recently New Remodeled Bathroom and Some Flooring. In the Last 5 years, the Roof, Septic, Well, and HVAC have been replaced. Old Charm with Large Living Spaces. The Home Site Pad is big enough to Add a Metal Shop, Park Trucks, and/or Setup for Animals. Almond Trees are Independence, Planted in 2017, and Very Good Producers on Lovell Root Stock. The spacing is 20×15. TID Flood Irrigation and Setup on a 15 Hp Booster Pump on Micro-Sprinklers, irrigates in One Set. There are Two Improvements in Ag Wells for Winter Irrigation or Frost Protection. Great Location. A Must See! The 2024 Almond Crop is included in the Sales Price!! 

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SOLD – 19-AC Faith Home Rd. Ceres

SOLD - 19-AC Faith Home Rd. Ceres

SOLD – 19 Acres on the Edge of Ceres. Within the General Plan of Ceres with a future zoning of Very Low Residential Housing. 2 Different Irrigation/Water Sources. Butte/Padre Varieties on TID Flood Irrigation and this property is part of the Gilbert Well Improvement. Invest in Almonds Trees, Growth, Truck Parking, and Tax Shelter. This can be the Right Property for the Right User. Long Term Purchase to Develop into your Dream Property. A Must See!! The 2024 Almond Crop is included in the Sales Price!! 

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Is Your House Priced Too High

Is Your House Priced Too High

Every seller wants to get their house sold quickly, for as much money as they can, with as few headaches as possible. And chances are, you’re no different.

But did you know one of the biggest things that could jeopardize your success is the asking price for your home? Pricing your house correctly is one of the most crucial steps in the selling process.

So, how do you know if you’re missing the mark? Here are four signs your high asking price might be turning potential buyers away—and why leaning on your real estate agent is the best way to course correct.

1. You’re Not Getting Many Showings or Offers

One of the most obvious signs your house may be overpriced is a lack of showings. If it’s been on the market for several weeks and only a few buyers have come to see it—or worse, you haven’t gotten any offers—it could be a clear indication the price isn’t matching up with what buyers expect. Because buyers who have been looking for a while can easily spot (and write off) a home that seems overpriced.

Your real estate agent will coach you through this, so lean on their experience for what you may want to try to bring more buyers in, including considering a price cut.

2. Buyers Have Consistent Negative Feedback after Showings

And if after the showings you do have, comments from the potential buyers aren’t great, you may need to course correct. Feedback from showings is an important part of understanding how buyers see your house. If they consistently say it’s overpriced compared to other homes they’ve seen, it’s time to reconsider your pricing strategy.

Your agent will gather and analyze this feedback for you, so you can look at how your house stacks up in the market. They can also suggest specific improvements or staging changes to better justify your asking price, or recommend one that aligns with today’s buyer expectations. As the National Association of Realtors (NAR) explains:

“Based on all the data gathered, agents may make adjustments to the initial price recommendation. This could involve adjusting for market conditions, property uniqueness, or other factors that may impact the property’s value.”

3. It’s Been on the Market for Too Long

And that lack of interest is ultimately going to lead to it sitting on the market without any serious bites. The longer it lingers, the more likely it is to raise red flags for buyers, who may wonder if something is wrong with it. Especially in today’s market with growing inventory, a long listing period means your house is stale – and that makes it even harder to sell.

Your real estate agent will be able to give you perspective on how quickly other homes in your area are selling and walk you through what’s working for other sellers. That way you can decide together if there’s something you want to do differently. As a Bankrate article says:

“Check with your agent about the average number of days homes spend on the market in your area. If your listing has been up significantly longer than average, that may be a sign to reduce the price.”

4. Your Neighbor’s House Sold Without an Issue

And here’s the last one to watch out for. If similar homes in your area are selling faster than yours, it’s a clear sign that something is off. This could be due to things like a lack of upgrades, outdated features, or a less desirable location. Or, it may be priced too high.

Your agent will keep you up to date on your competition and what changes, if any, you need to make your home more competitive. They’ll offer advice on small updates that could increase your home’s appeal or how to adjust your strategy to reflect the reality of the market today.

Bottom Line

Pricing a home correctly is both an art and a science. It requires a deep understanding of the market and buyer psychology. And when the price isn’t drawing in buyers, there’s no better resource than your agent on what you may want to do next.

Source: keepingcurrentmatters.com ~ Image: Canva Pro

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How Does Buying a House As-Is Work?

How Does Buying a House As-Is Work?

Key Takeaways:

  • When you buy a home as-is, you are assuming financial responsibility for the home in its current condition.
  • You can complete inspections and, if desired, cancel the contract within the inspection period without penalty.
  • Buying as-is is becoming more popular in today’s hot market and doesn’t necessarily signal issues with the home.

If you’re in the market to buy a home there’s a good chance you’ll come across a house being sold as-is during your buying journey. The term “as-is” indicates the owner’s desire to sell the property as it sits, making no repairs before closing.

While it could signal a red flag, this type of home sale is becoming a common transaction in today’s market, and in many cases could be a beneficial move for a buyer.

What Does Buying a House As-Is Mean?

Buying a house as-is means you purchase a home in its existing condition. There are different types of contracts sellers can use. One is the standard “repair limit” purchase and sale agreement, where the seller is required to fix any issues on the home totaling less than a specific amount before closing. The amount will vary depending on the contract and can be as little as $500 or as much as 1.5% of the purchase price.

The second type, the as-is contract, basically allows the buyer sole discretion to cancel the contract for any reason within the inspection period.

“With the as-is contract, the seller is not required to make any repair whatsoever, even if something is found in an inspection,” says Marcia Socas, a broker with Castro Realty Group in Orlando, Florida.

By allowing a buyer to withdraw their offer during the inspection period without penalty, gives buyers more flexibility and an easier exit.

What Types of Homes Are Typically Sold As-Is?

Bank foreclosures and other distressed properties in need of major repairs are exclusively sold as-is. Since as-is contracts were used with distressed homes in the wake of the Great Recession, many people believe homes being sold as-is need a lot of work.

“However, that’s shifted over the years. Now, it’s the standard way of selling regardless of home condition,” says Socas.

There are a few reasons a seller will sell as-is even if their home is in good condition.

  • The seller needs to sell quickly for relocation or other purpose.
  • It’s an inherited property and the heirs don’t want to deal with repairs to sell it.
  • There’s a divorce or other legal motivation.
  • The seller wants to get more competitive bids in a hot market.

Selling as-is more of an indication of the market and the fact that the owner would prefer not to make repairs, says Scott Beloian, broker and owner of Westcoe Realtors in Riverside, California.

“If it’s a completely hot seller’s market, a lot of sellers will sell as-is. In a buyer’s market, it doesn’t happen a lot,” says Beloian.

How Does Buying a House As-Is Work?

“A lot of first-time homebuyers are scared when they hear as-is. They think they can’t have an inspection,” says Beloian. “However, you’re not buying it sight unseen. You can still do your inspections, ask for repairs and have time to decide if it’s the right home or not. As long as it’s within the inspection period, the buyer can walk away without repercussions.”

The as-is purchase offer contract is customizable.

“Contracts are fill-in-the-blank, where you can add in the desired inspection period,” says Socas. If it’s left blank, the inspection period goes to the default period for the state, which is typically 15 days, but can be longer. For example, in California the default inspection period for as-is contracts is 17 days, says Beloian.

In a seller’s market, Socas advises her clients to include a 10-day inspection period. However, if it’s extremely competitive, “sometimes we lower that inspection period to three days or even one day,” says Socas.

If the contract is accepted, the buyer places the earnest deposit money with the specified closing agent or title company. The seller relays all required disclosures about the home and the inspection period begins immediately.

The contract says buyers can cancel at the “buyer’s sole discretion.” If they discover they can’t get the financing terms they wanted, there are more repairs than anticipated on the inspection report or possibly a large, expensive issue is discovered with the home, they can cancel the contract without forfeiting the deposit so long as its within the inspection period.

If buyers cancel outside the inspection period, however, the earnest money deposit is forfeited to the seller, even with an as-is contract. If the buyer proceeds with the purchase, the closing continues as usual with a title company and the buyer assumes financial responsibility for the home’s condition as it sits at closing.

Does Buying a House As-Is Save Money?

For most, buying as-is doesn’t really save money, Socas says. Rather, she adds, “You have more flexibility with your options and have a more attractive offer with negotiating power.”

If the inspection report comes back and has something that needs to be addressed, you can still ask the seller to fix it with an as-is contract.

Since you and other potential future buyers can cancel without repercussions during the inspection period, a seller might be willing to negotiate so you don’t cancel the contract. This is especially true over something small or that regards safety, Socas explains.

Beloian says homes that need to be completely renovated can offer notable savings, but buyers will spend some or all of that savings on repairs to the home.

“A lot of times people can get a deal buying ‘borderline homes,’ where it’s not in complete disarray, is still financeable but needs some work,” says Beloian. “These can offer some savings, but in a tight market like we’re seeing today, these homes are few and far between.”

Who Is Buying a House As-Is Right For?

“Buying an as-is home can work for anyone as long as they understand the advantages and limitations of that type of contract,” says Socas.

Since you can cancel without reason within your inspection period, there isn’t a huge risk involved when making an offer. “But you are taking on more responsibility to repair the property after that period,” says Socas.

Pros of Buying a House As-Is

 

  • Buyers can cancel their contract within the inspection period for any reason without losing their deposit.
  • You can still conduct inspections and even ask for repairs, although the sellers aren’t required to agree to make them.
  • Using a short inspection period can help you have a stronger offer in a competitive market.
  • You potentially get a good deal on a home because it’s priced for its condition.

Cons to Buying a House As-Is

  • The home may need extensive repairs or be in uninhabitable condition.
  • The poor condition of the property might limit access to financing.
  • If you request repairs, the seller may deny them, leaving you financially responsible for repairs if you proceed.
  • You must cancel the contract in the inspection timeline or lose your earnest money deposit.
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Complete Timeline of the Mortgage Process

Complete Timeline of the Mortgage Process

Each mortgage runs on its own timeline, but you might need about three to five months to secure a property and a home loan.

If you’re using a mortgage to buy a home, here’s what to expect from start to finish

Key Takeaways

    • The homebuying process can last about three to five months, but how long it ultimately takes depends on your unique situation.
    • The biggest variable in the mortgage timeline is finding a home to buy – and having your purchase offer accepted.
    • Once you’ve found a property and decided on a lender, loan processing and closing typically lasts about a month.

Borrowing a mortgage to finance your home purchase can be complex and confusing, especially if you’re a first-time homebuyer. Thankfully, having the right professionals in your corner can make the mortgage process easier to understand, so you can focus on finding a home you’ll be happy living in for years to come.

Here’s what the mortgage timeline usually involves, keeping in mind that delays can arise from factors outside of your control:

Securing a Mortgage Preapproval: Up to 45 Days

When you’re in the planning stage of getting a mortgage, it’s a good idea to check your finances and set a budget. Then, get preapproved to see how much you can borrow. Here’s what to expect during each step of this part:

Review your finances. Your financial standing influences whether you qualify for a mortgage, how much you can borrow and your lending terms. Lenders usually give the best loan terms to borrowers with credit scores in the mid-700s or above and debt-to-income ratios of around 45% or less.

Before applying for a mortgage, consider checking your credit report for errors.

“People are often surprised by their credit score because it’s being dragged down by something on their credit reports they had no idea about,” says Lindsay Barton Barrett, a licensed associate real estate broker with Douglas Elliman in New York. “That’s something you want to dig into.”

You may decide to dispute errors on your credit report, work on raising your credit score or pay down your debts to qualify for favorable loan terms. This part of the mortgage timeline may take a few weeks or longer if you need to improve your finances.

Create a budget. Setting a budget upfront is a good idea to avoid falling in love with a home you can’t afford. One rule of thumb says to spend 28% or less of your monthly income on your total housing payment.

If you bring home $7,000 a month before taxes, then you can spend up to $1,960 on your monthly mortgage payment. That amount should cover your principal, interest, taxes, mortgage insurance and homeowners insurance, plus any HOA fees.

“The biggest mistake is spending what you’re fully qualified for instead of what your budget allows,” says Nicole Rueth, senior vice president of The Rueth Team Powered by Movement Mortgage. “I’ve seen a lot of first-time homebuyers overspend.”

A mortgage calculator can help you figure out which homes you can buy, based on your estimated monthly budget and how much you’ll put down at closing. A lender may say you can borrow more based on your financial situation, but only you know what you’re comfortable paying every month while still meeting your other obligations.

Get pre-approved. Once you have a budget in mind, contact a lender and ask for a preapproval in that amount. You’ll save time if you have the necessary documents handy:

    • W-2 forms from the last two years.
    • Most recent pay stubs.
    • Copies of tax returns for the last two years.
    • Personal bank statements for the last two to three months.
    • Identification, such as a driver’s license.

The lender reviews these documents and pulls your credit report to determine whether you qualify for a home loan. It’s a good idea to keep your mortgage shopping within a 45-day window to reduce the impact to your credit score.

If everything checks out, the lender gives you a letter saying how much you can borrow. Most preapproval letters are valid for 60 to 90 days.

This letter not only helps you define your budget but also shows sellers you’re a serious buyer who has lined up financing. “In some markets, there are properties you can’t even see if you don’t have a preapproval letter,” Barton Barrett says.

Finding a Property and Making an Offer: 10 Weeks

Homebuyers typically view homes for 10 weeks before finding a property to buy, according to Freddie Mac.

The timeline for finding a property and making an offer vary with each homebuyer, but a real estate agent can help speed things along. The right agent will be familiar with homes in your market that are within your budget and guide you through the whole process.

“If you see a property and it’s not quite right, you can communicate what you liked and didn’t like to your agent, which will help guide your search,” Barton Barrett says. When that property closes, “Take note of what it listed for and what it closed for. That can help you set expectations.”

Once you find your dream home, you will work with your real estate agent to create an offer. This document includes a price, a suggested closing time frame – typically 30 to 90 days from the accepted offer – and conditions that allow you to cancel or renegotiate the contract. For example, you might make the offer contingent on mortgage financing and a satisfactory home inspection.

When you and the seller agree on price and terms, you will both sign a purchase agreement.

Applying for a Mortgage: One Week

Once you’ve had your purchase offer accepted and you’re under contract for the property you want, you can get official loan estimates from the lenders you got preapproved with. Compare their closing costs and interest rates, using the best offer to try to negotiate your loan terms because some lenders will match interest rates or offer discounts.

You could save thousands of dollars just by doing this. For instance, if you buy a $400,000 home and put down 10%, you save $117 a month with a 6% interest rate compared with 6.5%. This adds up to over $9,000 in interest savings over the first five years of the loan.

Once you’ve found the right lender, tell the loan officer that you’d like to move forward with the mortgage application. This is called your “intent to proceed.” At this point, you’ll be able to lock in your interest rate and purchase mortgage discount points to buy down your rate

Underwriting and Loan Processing: Three to Four Weeks

The underwriting phase starts as soon as you’ve signed a purchase agreement and applied for a mortgage. This part varies from a few days to a couple of weeks, according to loan software firm ICE Mortgage Technology. The timeline depends on how busy the underwriters are and how quickly you answer questions and submit documents.

Here’s what to expect during loan processing:

Review documents. Your lender will send your mortgage application to the underwriting department to review all of your supporting documents. Underwriters confirm that you meet eligibility requirements for the mortgage, make sure your income and employment are stable, and check that you have money for closing costs and a down payment. Respond quickly to questions and requests for additional documents, such as a letter that explains the source of a large bank deposit, to keep your closing date on track.

Order a home inspection. If your purchase offer includes a home inspection contingency, you will hire a professional to check the home’s physical attributes, mechanical systems and major appliances.

“A home inspection is so critical to understanding what you’re buying,” Rueth says. “They are getting in the crawl spaces and up in the attic and the roof, and looking at the electrical panels. They are really looking at the bones of that home.”

Based on the walk-through, the inspector creates a report that lists any problems. Depending on the terms of your contract, you may be able to walk away from the purchase if the report reveals significant damage you don’t want to deal with.

Get a home appraisal. Your lender will order an appraisal to verify the home’s value, which is based on its condition and selling prices of similar homes in the area. Lenders do this to ensure they can sell the home and recoup their investment if you default on the loan.

If the appraised value of the home is higher than the selling price, then that means you’ve found a good deal. But the reverse could create problems because the bank won’t lend more than the appraised value of a property. In that case, you have a few options, including:

    • Pay the difference in price yourself, although it may be risky if the home isn’t worth the selling price.
    • Negotiate with the seller to lower the home price.
    • Walk away from the deal, depending on the terms of your contract.

Complete a title search. During the title search, a title company or attorney researches public records to confirm the property’s legal owner and ensure it has no pending claims or liens. Title insurance is a policy you can buy to protect against future claims on the property. You’ll be required to buy lender’s title insurance, but an owner’s policy is optional.

Closing on the Property: One Week

If your finances and the property you’re buying meet the lender’s underwriting requirements, you will be “cleared to close” on the mortgage. You have only a few days to go until you sign the mortgage agreement and get the keys to the home.

Your lender should send you a closing disclosure, which is a five-page document that sums up the terms of your loan and what you will pay at closing. You’ll have at least three days to review this document and compare the numbers to the loan estimate. You shouldn’t find significant changes between these two documents unless there’s a legitimate reason or you’ve agreed to certain changes.

You’ll be responsible for choosing a closing agent to gather the legal documents for your loan and handle the money for the purchase. Once you schedule the closing, ask your closing agent what to bring. This usually includes a valid ID and your cash to close payment, typically a cashier’s check.

On closing day, you will go for a final walk-through of the house with your real estate agent to make sure the seller addressed repairs and to check for new damage. Then, you’ll sign the final sales contract at closing.

After Closing on the Mortgage

Now that you’ve settled into your home, you’re on a new timeline: making mortgage payments for the life of the loan. To protect against future financial problems, work on stashing away about six months’ worth of mortgage payments in a savings account, Rueth says.

“When you’re late on your mortgage, it can really affect your credit score for a long time,” Rueth says.

Your lender or loan servicer can declare your loan in default, the first step in the foreclosure process, if you’re behind.

Your savings can help you through financial emergencies, but you will also need it to maintain and repair your home.

Source: money.usnews.com ~ By: Kim Porter ~ Chart: US News & World Report

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SOLD – 6912 Faith Home Rd. Ceres

SOLD - 6912 Faith Home Rd. Ceres

Very Quaint Ranch Home!! Lots of Character, Woodwork, and Old-World Charm. This Ceres Ranchette is off Keyes Road and Highway 99. Approx. 18.37 Acres of TID Row Crops. Over 1600sf Ranch Home with Newer Amenities such as Roof, HVAC, Paint, Windows, Replastered Pool, Fencing, Culligan Water System, Water Softener, Carpet, and Flooring. Over-Sized 2 Car Garage. Two Private Backyards with Separate Built-in Pool Area. Great Soil, Great Location, and Pipeline Irrigation off TID Lateral 3. A Must See! 

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How Much Does It Cost To Renovate a House?

Cost To Renovate a House

Average Home Renovation Costs for Bathrooms, Kitchens, and Beyond…

Home renovations and remodeling costs may be a hard pill to swallow after shelling out the purchase price of a new home, but if you’re the proud homeowner of a fixer-upper (or even if you’re the proud owner of an older home that needs some work), you may be itching to make some updates.

And that will get you wondering: How much does it cost to renovate a house? Knowing your numbers ahead of time is crucial, lest you end up with plans that are bigger than your budget.

So, before you take a peek at a tile sample, check out this detailed breakdown on how much your dream home renovation will set you back, plus average home renovation costs and your potential return on investment (ROI).

Average home renovation costs

Your exact cost to renovate a house will depend on its square feet, the region you live in, and just how much of a face-lift your home needs. But to get a rough idea, Than Merrill, founder of FortuneBuilders.com, gave us an estimate of what the average costs associated with different remodels look like:

  • Low ($25,000 to $45,000): A small remodel would likely include interior and exterior painting, small repairs (like refinishing cabinets), and new landscaping.
  • Medium ($46,000 to $75,000): A more involved remodel would include the low-cost upgrades above, plus a total kitchen remodel (depending on appliances) and minor bathroom remodel.
  • High ($76,000 and up): Low- and medium-cost upgrades, plus fixing any foundation issues, and roof and sewer line problems.

The largest home renovation costs

Sure, paint can play a big part in a remodel, but gallons of semi-gloss will be a drop in the bucket compared with big-ticket items for certain rooms (we’re looking at you, kitchen and bathroom).

Remember, it’s the appliances and cabinets in those rooms that eat up the biggest chunk of money. Here’s what homeowners can expect to pay in terms of the national average of home renovation costs, according to Remodeling.com and HomeAdvisor.com.

  • Kitchen: The national average cost of a kitchen remodel is $27,492. If a kitchen only needs minor upgrades, renovations should start at around $10,000. A full gut can reach more than $79,982, depending on the quality of materials and appliances installed.
  • Bathroom: A mid-range bathroom remodel typically costs about $25,251 and tops out at $78,840 for an upscale reno. (Of course, you could spend more by adding such spalike touches as a steam shower.)
  • New roof: The cost of protecting all your upgrades from the elements will run you around $30,680.
  • New floors: You might want to top off your renovation by taking up that old carpet. Installing new wood floors will cost between $2,474 and $7,031, while laminate, which is less expensive, will set you back between $1,472 and $4,638. Of course, the exact cost will depend on how many square feet you have in the kitchen.
  • Electrical updates: If you’re replacing an old panel (and a home’s worth of outdated wiring) as a part of your remodel, expect to spend $3,000 to $5,000.
  • Replacement siding: Any great remodel includes an exterior upgrade. Putting new exterior siding on your home runs to an average of $20,619.
  • Replacement windows: If you plan to replace windows and frames to save on your energy bill (you might need the savings after this renovation), the cost will range between $21,264 (vinyl) and $25,799 (wood).
  • The contractor: Unless you plan to oversee the renovation yourself, a budget should include the cost of a general contractor. They usually charge 10% to 15% of the project’s total budget. So for a $50,000 renovation, expect to pay a contractor $5,000 to $7,500.

One easy way for homeowners to save money on home renovations is to negotiate to pay actual builder costs on finish materials, says Jesse Fowler, president of Tellus Build, a green custom-build firm in Los Angeles and Santa Barbara counties.

The contractor you choose should be getting a discount on retail prices, and Fowler says that this can benefit you, too, in that you can “capture some or all of those savings.”

Home renovation costs and return on investment (ROI)

Ah, the magic words that make homeowner’s pain of parting with thousands of dollars more palatable, as those big checks you write for home renovation costs today may pay dividends if you ever sell your home.

A typical mid-range kitchen remodel typically yields an 96% return on investment. If you plan to go big with a major, upscale remodel however, you can only expect a 49% ROI.

Meanwhile, a mid-range bathroom renovation boasts an ROI of 74.%, with that figure dropping to 45% for an upscale remodel. Check here for the home additions that offer the best return on investment.

Source: realtor.com ~ By: Margaret Heidenry ~ Image: Canva Pro