The Pros and Cons of Buying a New Home Versus Buying Pre-owned

Are you thinking about buying a new home? Congratulations!

Buying a house, condo or townhouse is an exciting and rewarding time which tends to be a lot of fun. However, along the way you'll need to make a number of decisions – including whether you want to buy a pre-owned home or one that has been built recently and is brand new.

Let's take a quick look at some of the pros and cons of buying a new home versus buying pre-owned.

New Homes Tend To Have Fewer Problems

One of the major upsides of buying new is that newly-built homes tend to have very few problems within the first few years of ownership.

While you'll still be required to make regular maintenance on a new home, when you buy pre-owned you're buying a house that has seen years or decades of weather and regular wear-and-tear.

New Construction Allows For Customization

If you want to be able to customize certain aspects of your home, it might be better to buy brand new as the builder will be able to incorporate your requests as they're building the home. Of course, you can always renovate and upgrade a pre-owned home but if you have significant needs you may find it easier to get them built into the home as it's being developed.

The Major Downsides To Buying New: Cost And Location

While there are a number of upsides to buying new, there are some downsides that you'll need to know.

First, new homes almost always cost more than an equivalent pre-owned home. Brand new homes are filled with new appliances, fixtures and modern building materials which add to the overall cost of the home. Unless the pre-owned home is on a larger lot or property, you'll generally be able to save a bit when you buy pre-owned.

Depending on where you're buying, you may also find that the location where brand new homes are being constructed is much further from the downtown or urban area. In many cities, the only available space for new construction is in suburban areas, which means that you may be in for a lengthy commute to and from work each day if you choose to buy new.

These are just a few of the factors that you'll need to consider when buying your next dream home.

Self Employed and Seeking a Mortgage? How to Ensure That Your Lender Knows You're Able to Pay

Whether you're a freelance web designer who spends their days working from a coffee shop or a small-business entrepreneur with a team of staff, if you're a self-employed individual and you're thinking about buying a new house you may face some difficulty getting approved for a mortgage.

In today's blog post we'll share how you can provide paperwork and other evidence to show your mortgage lender that you're a quality applicant who has the ability to make their payments.

Have Your Accountant Prep Your Paperwork

As a general rule of thumb, if you're in business you should invest in the services of an accountant to handle your tax preparation and other financial matters so that you don't miss anything important.

If you have an accountant, let them know that you're applying for a mortgage and ask them to create a package that includes your business financials as well as your past two or three years of income tax documents.

Watch Your Debt-to-income Ratio

Your debt-to-income ratio is one of the primary factors calculated during the mortgage application process and if you don't have a regular paycheck or salary this is how your lender will assess your ability to pay.

In short, this number is the percentage of your monthly gross income that is used to pay debts, taxes, insurance, and other items. Add up your car payment, loan payments, credit card payments, child support and any other regular debts and divide this number from your monthly income. If this number is too high, your application may be declined.

Ensure You Have A Clean, Stable History

Your credit rating – and that of your business – will be intensely scrutinized by any potential lender in order to determine whether or not you present a significant risk of missing a payment or defaulting entirely.

Maintaining a positive credit history can be challenging as an entrepreneur, especially if you're in the early stages of your business and you're relying on loans or other financing to help fund your operations. Try to make sure that every bill is paid and avoid situations that can leave a blemish on your credit report.

Seek The Advice Of A Mortgage Professional

Even if you have your past taxes and a clean credit history you may still face a bit of an uphill battle in getting that mortgage approved. It's best to seek a mortgage professional's advice as early on in the process as you can, as they work with self-employed individuals regularly and will be able to help you craft your application. Good luck!

Closing Costs: Understanding What It Costs to Close on a Home and What You Can Expect to Pay

If you're in the process of buying a new home, you've likely heard the term "closing costs" in regards to the many different fees and taxes that you'll be required to pay during the purchase process.

In this post we'll look at a number of these closing costs and what you will be expected to pay when you buy that next dream home.

Taking out a Mortgage? There Will Be Fees Attached

If you're taking out a mortgage to finance the cost of buying your home you'll end up incurring a variety of fees. Nearly all lenders will charge a mortgage application fee, which covers the cost of processing your application and all of the necessary paperwork.

You'll likely have to pay for a professional appraisal of the home as well, as the lender will want to ensure that they aren't lending you more than the house and property are actually worth.

Inspection And Insurance Costs Will Add Up

If you're buying a pre-owned home you'll need to pay for a home inspection to gain an understanding of the home's condition and if you'll need to make any repairs in the near future. You'll also need to purchase homeowner's insurance on the property to protect yourself in the event that something does go wrong with the home.

If you put less than 20 percent down on the cost of the home, your mortgage lender may also require that you purchase private mortgage insurance; this will vary depending on which state or province you are buying in.

Don't Forget About Escrow Fees and Taxes

As with any major financial transaction you'll need to satisfy the tax man by paying various taxes on your purchase. These will vary depending on where you are buying your home, but might include sales taxes, property taxes, transfer taxes, recording fees, title transfer fees and more.

If you used a third-party escrow service to manage these fees or to hold your deposit during the closing process you'll also need to pay escrow fees prior to signing the final paperwork.

Shopping Around: How to Compare Mortgages from Different Lenders or Underwriters

Buying a home is a major financial transaction, especially if you're going to need mortgage financing to help cover the purchase cost.

The only way to know if you're getting the best deal on a mortgage is to shop around, but with so many different lenders vying for your business it can be very tough to choose which mortgage is the best fit for your own situation.

In this post we'll share how you can compare mortgages from different lenders or underwriters so that you can get the best possible deal on your mortgage loan.

Start By Comparing Interest Rates

The most important factor in your mortgage is the interest rate that you'll be required to pay so this should be your starting point.

While most lenders will keep their rates competitive with one another, you may find that there are discounts available based on your credit or financial history. You might also find that some lenders are willing to adjust the rate based on how long of a mortgage term you'll need, and how much you're investing in your down payment.

Get An Estimate Of Your Total Closing Costs

While the number that you're likely focused on is the total monthly payment that you'll be making for the next few years, you'll also want to find out how much in fees and closing costs you will have to pay in order to take out the mortgage.

Every lender charges different fees and the amounts can vary wildly, so be sure to get an estimate on these costs to find out how they'll affect your home purchase.

Watch Out For Early Payment Penalties

Finally, you'll want to keep an eye out for early repayment penalties as these can cause you a headache later on if you decide you want to pay your mortgage off a bit faster. The ideal mortgage is one that allows you to repay the principal amount at any time without facing a penalty, but depending on the other terms that you require you might need to shop around a bit before you find a mortgage like this.

You may find that comparison shopping can be a bit overwhelming with so many different mortgage options, terms and interest rates to choose from. If you have questions or you need help sorting through it all to determine which mortgage suits you best, contact your local mortgage professional today to book a quick consultation.

What's Ahead For Mortgage Rates This Week - October 6, 2014

Last week's economic news included multiple reports on housing and the labor sector. The good news is that job markets appear to be stronger, with new jobless claims and the national unemployment rate lower. Unfortunately, housing continues to struggle in its recovery.

Pending home sales slumped in August and the S&P Case-Shiller Housing Market Index reports for July showed slower growth in home prices with 19 of 20 cities posting lower gains than for June.

Mortgage rates were mixed, but remained relatively steady.

Housing Reports Show Slower Price Gains, Suggest Falling Demand

The National Association of REALTORS® released data for August that showed that pending home sales dropped by 1.10 percent to a reading of 104.7 as compared to July's reading of 105.8. Pending home sales indicate upcoming closings and mortgage loan volume.

Pending home sales fell by 2.20 percent year-over-year. Analysts attributed the drop in pending sales to lower investor participation.

Analysts said that as distressed home sales diminish, mortgage rates and home prices rise, investors are not buying as many homes Regional results showed fewer pending sales in all regions except the West, where pending sales rose by 2.60 percent in August. A reading of 100 in the pending home sales index is consistent with 2001's average contract level.

S&P Case-Shiller Housing Market Index reports indicated that July home prices gained 6.70 percent year-over-year as compared to June's year-over-year reading of 8.10 percent. Prices even dropped in San Francisco to its lowest reading since 2012. On a seasonally adjusted basis, July home sales fell by 0.50 percent in July as compared to June's decrease of 0.30 percent. 19 of 20 cities showed lower rates of price growth in July.

Slower growth of home prices was viewed by analysts as potentially increasing demand for homes provided that mortgage rates stay low.

Construction spending for August fell by 0.8 percent on a seasonally adjusted basis. The good news here is that spending on residential construction dropped only 0.10 percent.

Freddie Mac Mortgage Rates: No Major Changes

According to Freddie Mac's PMMS report, average mortgage rates were a mixed bag. The average rate for a 30-year fixed rate mortgage dropped by one basis point to 4.19 percent with discount points lower at 0.40 percent. The average rate for a 15-year fixed rate mortgage held steady at 3.36 percent with discount points unchanged at 0.50 percent. The rate for a 5/1 adjustable rate mortgage fell by two basis points to 3.06 percent; discount points rose from 0.40 percent to 0.40 percent.

Lower mortgage rates are seen as a potential stimulus for housing markets as more buyers may be encouraged to enter the market.

Jobs Reports Readings Improve, Unemployment Rate Drops

Job markets are showing signs of improvement according to data on weekly jobless claims and reports released by the Department of Commerce. Weekly jobless claims grew by 287,000 as compared to expectations of 298,000 new claims filed. The prior week's reading was also higher at 295,000 new claims filed.

The Department of Commerce released its Non-farm Payrolls report for August with more good news. 248,000 jobs were added against expectations of 220,000 new jobs and 180,000 new jobs reported in the prior week. The national unemployment fell below the six percent benchmark in August with a reading of 5.90 percent, which indicates proof that the jobs market is improving.

September's Consumer Confidence Index suggests that economic conditions continue to concern consumers. The reading for September was 86.0 against an expected reading of 92.3 and Augusts reading of 93.4.

What's Ahead

There is no scheduled housing news for next week other than Freddie Mac's weekly report on mortgage rates. Other economic news includes Labor Market Conditions Index, Job Openings, and the release of minutes from the last FOMC meeting, which is expected to reaffirm the Fed's position that it doesn't expect to increase the target federal funds rate for a "considerable time" after the Fed concludes its asset purchases this year.