Three Ways Buyers Benefit from Seller-Paid Points
Here's a great negotiating strategy for a changing market. "Seller-paid points" are where the seller pays points to reduce the interest rate on your mortgage. One point = 1% of the loan amount paid up front to your mortgage lender at the closing. This buys you a lower interest rate on your mortgage and a lower monthly payment. Here are three ways you can benefit from this strategy as a buyer: 1 - More Purchasing Power Paying points to reduce your rate can have 2-3 times the impact on your purchasing power vs. reducing the purchase price by that same amount. For example: 2 points on a $500,000 mortgage is $10,000. You'd probably need to reduce your purchase price by $20,000 - $30,000 in order to have the same impact on your monthly payment 2 points on a $1,000,000 mortgage is $20,000. You'd probably need to reduce your purchase price by $40,000 - $60,000 in order to have the same impact on your monthly payment 2 - Less Interest Cost Over the Life of the LoanYour total savings over the life of the loan is likely to be significantly more with seller-paid points vs. a reduction in the purchase price. In fact, it could end up being 2-3 times the impact, depending on the specifics of your situation. 3 - Easier to Qualify for a MortgageYour interest rate, your APR, and your monthly payment would all be lower with seller-paid points vs. a reduction in the purchase price. This means that your debt ratio would also be lower and it would likely be easier for you to qualify for financing. Let me know if you'd like for me to run some numbers and see if seller-paid points might make sense in your situation! [credit: Brian Reno, BDR Mortgage Capital | source: Momentifi]
Two New Reasons To Sell Now Vs. Later
The government is driving up housing costs...again. 1 - The Government's New Rule The FHFA, which is the government agency that oversees Fannie Mae and Freddie Mac, decided that lenders must charge higher fees and interest rates to homebuyers who have a debt-to-income ratio greater than 40%. The debt-to-income ratio is the buyer's total monthly debt payments DIVIDED BY their total monthly income. For example, if the buyer's total monthly debt payments (credit cards, car, mortgage, etc.) are $2,800 and their total monthly income is $7,000, their debt-to-income ratio would be 40% ($2,800 / $7,000 = 40%). The new rules go into effect on May 1, which may impact potential buyers at that time. Buyers won't have to pay the extra fees if you close on the sale of your home before then. 2 - The Domino Effect Unfortunately, this new rule may cause closing delays or deals to fall through at the last minute after May 1. That's because the buyer's income and expenses can change several times throughout the home-selling process. This is especially true if the buyer's income is from self-employment, part-time employment, or “gig economy” employment. Even small changes in income and expenses can cause the buyer's debt-to-income ratio to cross the new 40% threshold. This may drive up interest rates at the last minute, invalidate loan approvals, or result in closing delays. NUMBER OF THE WEEK: 40% The new rules will impact buyers if their debt-to-income ratio is greater than 40%. [credit: Brian Reno, BDR Mortgage Capital | source: Momentifi]
All About Moving
Before Moving Day: Arrange for movers or moving van. Need additional storage? Arrange for a storage unit as well. Purge items before packing. Consider donating unwanted items. Checkout Goodwilll, Salvation Army, 1-800-Got-Junk, or estate sale services. Measure large furniture pieces; this will help when trying to navigate tighter spaces. Collect, purchase durable boxe or bins, packing tape, and markers. Go to USPS.com to notify the change of address. (It is best to do this 30 days prior to your move.) Update your online accounts, especially shopping outlets like Amazon.com. Notify your bank. Notify credit card companies. Notify magazine subscriptions. Call utility companies for the home you are vacating and for your new home. Cancel any home deliveries. Empty the refrigerator and freezer prior to your moving date. Have appliances serviced for moving. Do you need to arrange boarding for your pets? Take care of that now. Plan for the transport of pets and plants. Moving Day! Carry currency, jewelry and important documents or use registered mail. Pack an overnight bag, including towels and sheets. Inform family & friends of route and schedule for that day. Notify them if any changes occur. Moving to a New Area? Bank: does your current bank have locations in your new city? Health care providers: request recommendations and the best way to transfer records. Schools: contact the current and new school district to enroll and transfer records. Vehicles: check with local bureaus on appropriate procedures, regarding drivers licesnes, etc. Pets: consult your current veterinarian for records and recommendations.
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