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Buying Is 23% Cheaper Than Renting in Austin

by Rebecca Shahan

According to the latest Rent vs. Buy Report from Trulia, owning a home continues to be cheaper than renting in the largest metro areas in the US, based on a 30 year mortgage. Austin stood out as one of the top cities in this report, with owning a home being 23.5% cheaper than buying.

Only two cities in the study turned out to be cheaper to rent than buy - San Jose and San Francisco CA. Median home prices in those cities rose to over $1 million this year. This is the first time in the six years that Trulia has being doing this study that this happened. Home values rose by 29% last year, while rent remained the same.  But not in Austin!

For the 98 metro areas where owning a home is cheaper than renting, 97 of them are in the double digits in advantage when buying. Austin was one of those metro areas that stood out at 23.5%.

Trulia arrived at these figures by taking into account all renting costs, including deposits, and compared them with the monthly costs of owning a home. Those costs included insurance, mortgage payments, taxes, and maintenance, along with one-time costs such as down payments, closing costs, and sale proceeds. The study also assumes that most homeowners stay in their home for seven years, put 20% down, and have a 30 year fixed mortgage.

In 2016, when buying was 41.3% less expensive than renting, the average mortgage rate was the driving force behind the difference. Rates this year are the highest they have been in six years which has narrowed the gap, all while home price appreciation has also been driven up by a lack of homes for sale.

Cheryl Young, Trulia’s Chief Economist, had this to say,

“One point deserves emphasizing: The ultra-costly San Francisco Bay Area is not a harbinger for the nation as a whole. While renting may outweigh buying in San Jose and San Francisco, it is unlikely that renting will tip the scales nationally anytime soon.”

There's many benefits of owning a home beyond just the money. If you're renting a home and would like to explore the possibility of owning a home, we would be happy to help you analyze the costs and benefits.

Check back on our blog twice a week for more real estate news, ideas, and local events in Austin and Lake Travis. You can search for the perfect home on our website using our powerful home search tools. You can also get free listing alerts of homes as they hit the market at WelcomeToLakeTravis.com. And you can always feel free to call us at 512-657-4467​ to talk to an experienced agent today.  

Is a 15-Year Mortgage Right For You?

by Rebecca Shahan

Are you planning to buy a home in Austin and want to pay it off faster and save money? If so, then a 15-year mortgage can be a great way to pay off your mortgage in half the time and save tons of money on interest. Just keep in mind that to really get the most from this type of mortgage, you need to have enough income to keep on top of the payments, along with all your regular expenses. This fact alone can deter home buyers to stay away from a 15-year mortgage, since the payments are about 50% higher than a similar 30-year mortgage.

As with any mortgage, there’s pros and cons.  What are the pros and cons of a 15-year mortgage?

Pros

  • Owning your home faster. Your home will be paid for in only 15 years.  Plus you’ll have peace of mind that it belongs to you after it’s paid off.
  • Builds equity. Paying off the principal faster helps you build more equity.
  • Save money. As there’s fewer years of risk in a 15-year loan, they have a lower interest rate. And since the term is shorter, you save even more money on interest.

Cons

  • Higher payments. The payments will be 50% higher than a 30-year loan, so you need to be sure you can keep up with them.
  • Locked up equity. The equity you’re building is locked up in the home. The only way to use it is to sell the home or refinancing.
  • Missing other opportunities. Higher payments means you may not have enough money to take advantage of other financial opportunities, such as investments or matching your employers contribution to a retirement account.
  • Lower quality home.  Since you aren’t stretching your payments over 30-years, you won’t qualify for as high of an amount as you would with a 30-year loan.

To sum up, a 15-year loan is an ideal way for those who can afford the higher payments to save money and own their home more quickly. But if you’re not entirely sure your finances are stable, then you should avoid a 15-year mortgage. 

Check back on our blog twice a week for more real estate news, ideas, and local events in Austin and Lake Travis. You can search for the perfect home on our website using our powerful home search tools. You can also get free listing alerts of homes as they hit the market at WelcomeToLakeTravis.com. And you can always feel free to call us at 512-657-4467​ to talk to an experienced agent today.  

First Time Buyers - Avoid These Common Mistakes

by Rebecca Shahan

Avoid these first time buyer mistakesAre you ready to buy your first home?  If so, this is an important time for you.  This is a big decision, so don’t get caught up in the emotions and make the same mistakes that so many first time buyers make. Let’s take a look at just a few of those mistakes and what can be done to avoid them.

Picking Out a House Before the Mortgage

Having enough money to buy your home is a step you would think most people would realize. But it turns out that many first time buyers get so excited that they start looking at houses before they secure financing. You can’t blame people for doing this, as looking at homes is definitely more fun shopping for a mortgage. But if you don’t know what you can afford beforehand, it can lead to disappointment if you can’t finance enough money to buy the home you want.

Make sure you talk with a lending professional to get pre-qualified or pre-approved for a loan before you start looking at any houses.  You’ll have a better idea of what you can afford. And it also gives you leverage, as the seller will be more confident that you’re serious.

Not Looking at First Time Buyer Programs

As a first time buyer, you may not have a lot of money saved up to put down on a home and cover closing costs. This may lead you to think that you have to wait until you save enough for a huge down payment.

However, there are programs such as Veterans Administration or U.S. Department of Agriculture loans that don’t require a down payment. You may also qualify for a Federal Housing Administration loan that only need a down payment of 3.5%. Even some conventional loans have down payments as low as 3%. You never know until you ask.

Applying For Credit Before Closing

The closing period is the worst time to apply for new credit, as some make the mistake of applying for credit cards so they can buy furniture and other items for their new home.  To be blunt, that is a huge error on their part. The lender will be looking at your credit during this period and will base their decision on your debt-to-income ratio.  Applying for credit can lower your score. About a week before closing they will also check your score.  So if they see any change in credit activity, it could change the interest rate or fees.

Pick out what you want to buy ahead of time, and then get any needed credit after the closing.

Not Having the Home Inspected

Not having a home inspected before you buy it is only asking for trouble. Homes, especially older ones, can have many issues that are hidden from immediate view. You need to be able to see the hidden issues. Some buyers feel that if they waive the inspection that it will give them an edge on other buyers.  But if you end up buying a home that needs major repairs, it ends up being a bad deal anyways. 

The simple solution is to hire a home inspector of your own choosing.  This way they won’t have any bias toward the home seller or your agent, and can give you an honest assessment.

Buying your first home can be a positive experience if you take the time and make wise decisions with the future in mind. Check back on our blog twice a week for more real estate news, ideas, and local events in Austin and Lake Travis. You can search for the perfect home on our website using our powerful home search tools. You can also get free listing alerts of homes as they hit the market at WelcomeToLakeTravis.com. And you can always feel free to call us at 512-657-4467​ to talk to an experienced agent today.  

The Steps to a Succesful Home Inspection

by Rebecca Shahan

Steps to having a succesful home inspectionOf all the parts of the home selling and buying process, the home inspection is certainly one of the most important steps.  A home inspection is really important, as it will determine the condition of the home and could save you quite a great deal of money as a home buyer. And if you are selling a home in Austin, then it can give you time to make the needed repairs to get the most money you can from the sale. A home inspection will also give valuable insight into potential problems in the future.

What are some important things to consider when getting a home inspection?

  1. Research the Inspector

A costly mistake that people make is hiring the first inspector they find or is recommended. As with any service, it’s important to research who you hire, as it can make all the difference in the end. You need an inspector who will make sure you understand the issues and will be thorough.

Here are some important questions to ask a potential inspector:

  • How long have you been inspecting homes professionally?
  • How many home inspections have you performed in your career?
  • What are your qualifications, certifications and training?
  • What did you do for work before you were a home inspector? (Preferably, you want someone who was a contractor or builder.)

Also, is the inspector keeping current in their education? They need to be up to date so that you get the best and most current information possible.

  1. Be There During the Inspection

Being present during the inspection may seem excessive or not needed, but that’s not the case.  A good inspector will welcome your presence. And simply reading the report doesn’t always reveal all that needs repairing.  Seeing the issues in person and having the home inspector explain them will be far more helpful.  Even though an inspection may take a few hours, it will be well worth your time, as it could save you a great deal of money.

  1. Get a Presale Inspection

If you’re selling your home, you may think you can leave the inspection to the home buyer. Here’s the issue with that plan. If the buyer’s inspection reveals repairs that are needed to make the sale, you won’t have as much time to make the needed repairs. But if your home is inspected before you put it on the market, you’ll have more time to make needed repairs and will have more control over the costs.

A good home inspection is crucial to buying a home, so make sure you find the best inspector you can.

Check back on our blog twice a week for more real estate news, ideas, and local events in Austin and Lake Travis. You can search for the perfect home on our website using our powerful home search tools. You can also get free listing alerts of homes as they hit the market at WelcomeToLakeTravis.com. And you can always feel free to call us at 512-657-4467​ to talk to an experienced agent today.  

Misconceptions About Home Buying

by Rebecca Shahan

So you’re ready to buy your first home in Lake Travis or Austin? It can be both an exciting and confusing time. Maybe you have some doubts about your ability to buy a home based on information from friends or relatives, or perhaps the internet. Not all the things people think about buying a home are accurate. Real estate is a constantly changing field, so you need to make sure your information about the home buying process is current. What are some of the home buying misconceptions that first time buyers encounter?

  1. You need a 20% down payment to get a mortgage.

This was accurate a few decades ago. Back in the old days, you had to pay 20% - 50% down for a mortgage and needed almost immaculate credit.  Unfortunately this limited the ability of many hard working people to own their own home. In order to make it possible for more people to own a home, the government created the Federal Housing Administration and began offering “FHA Loans”. The FHA currently will back a loan from a home buyer with a credit score of as little as 500 and a 10% down payment. If your credit score is above 580, you only need 3.5% for a down payment! Today it’s more possible for people with less than perfect credit to buy a home.

  1. You Can’t Qualify For a Mortgage With Student Loans

Lenders look at all of your debt combined and don’t single out student loans.  What lenders look at is your total debt to income ratio. That means that when you take into account all that you owe in loans and can still afford a mortgage payment, then that’s what matters.

  1. You can save money by not using a real estate agent.

Real estate agents not only make your buying experience simpler, but safer. Most people don’t know how to deal with the paperwork. Real estate agents also make their commission from the sale of the home, which is worked into the price regardless of whether you decide to use an agent. So why would you go it alone when you really won’t save money by not using one? The agent takes care of all the paperwork, appraisals, inspections, and other matters that are part of the process, so you don’t have to deal with it.

  1. It’s cheaper to buy a home that needs a lot of renovating.

It’s fun to watch those shows where they turn a worn out home into a palace. But let’s just say it’s more fun to watch than to do in this case.  After all of the time and money you put into the renovation, you may end up spending much more than if you bought a home that’s move-in ready. Save yourself the pain and chose the home in Austin that meets your needs without all the mess of renovation.

Are you planning to buy a home in the Austin and Lake Travis area and have questions about the home buying process? Please contact us today for more information. You can also search for your dream home now using our convenient home search tool.

What is PMI?

by Rebecca Shahan

If you plan on buying a home in Austin and want to go with a low down payment loan, are you familiar with a type of insurance called Private Mortgage Insurance (PMI).  There are plenty of mortgage options that offer down payments under 20%.  But if you plan on getting one of these types of loans, it’s a good idea to look into and educate yourself about Private Mortgage Insurance. How can Private Mortgage Insurance help you buy a home in the Austin area?

Here’s how Freddie Mac defines PMI:

“An insurance policy that protects the lender if you are unable to pay your mortgage. It’s a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%.

Once you’ve built equity of 20% in your home, you can cancel your PMI and remove that expense from your mortgage payment.”

The simple explanation is that the buyer pays the monthly premiums for the PMI insurance policy, and the lender is the beneficiary. As Freddie Mac explains:

“The cost of PMI varies based on your loan-to-value ratio – the amount you owe on your mortgage compared to its value – and credit score, but you can expect to pay between $30 and $70 per month for every $100,000 borrowed.”

The average down payment last year for all home buyers across the nation was 10% and 5% for first time buyers, according to the National Association of Realtors (NAR). They also reported that the average down payment for repeat buyers was 14%. In other words, PMI didn’t stop these buyers from getting loans.

Here’s an example of the cost of a mortgage on a $200,000 home with a 5% down payment & PMI, compared to a 20% down payment without PMI:


What is Private Mortgage Insurance

The larger the down payment, the lower your monthly housing cost will be, but as Freddie Mac says:

“It’s no doubt an added cost, but it’s enabling you to buy now and begin building equity versus waiting 5 to 10 years to build enough savings for a 20% down payment.”

Are you planning to buy a home in the Austin area and have questions about home loans and PMI? Please contact us today for more information. You can also search for your dream home now using our convenient home search tool.

Spring is a Great Time to Buy a Home in Lake Travis

by Rebecca Shahan

Reasons to buy a homenow in Austin and Lake travisAre you thinking about whether Spring is the right time to buy a new home in Lake Travis, Austin, or the surrounding areas? If so, here's some great reasons why now is a good time to buy a home instead of waiting.

Prices Will Continue to Rise

According to CoreLogic’s latest Home Price Index reports, home prices have continued to increase by 6.6% over the last 12 months. The same report predicts that prices will continue to increase at a rate of 4.3% over the next year.

The bottom in home prices in Austin has come to pass. Home values will continue to appreciate for years. Waiting to buy a home in Texas just doesn't make sense.

Mortgage Interest Rates Are Projected to Increase

Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage hovered close to 4.0% in 2017. And according to experts, that rate will continue to rise. The Mortgage Bankers Association, Fannie Mae, Freddie Mac and the National Association of Realtors all agree that rates will increase by nearly a full percentage point by this time next year.

Higher mortgage rates means higher mortgage payments. You likely want to avoid that from happening.

Either Way, You Are Paying a Mortgage

Many renters are afraid to take on a mortgage. The thing to remember is that you are paying a mortgage when you rent, it's just someone else's.  

Having a mortgage payment is a form of ‘forced savings’ that allows you to have equity in your home that you can tap into later in life. when you rent, it's your landlord is the person with that equity.

It’s Time to Move on with Your Life

There are two things that determine the cost of a home: the price of the home and the current mortgage rate. Both of those factors are rising. Would you still wait if they weren't?

Examine the real reasons you want to wait. Are you doing fine where you are living now?  Or do you need to have a better place for your children? Maybe safety is a concern.  Maybe now is the right time to buy.

Rebecca Shahan has been helping people buy their homes in Lake Travis and Austin for years. She can help you make the right choice in a home if you do decide it's time to move. Call today at 512-657-4467. Or search for a home online with our convenient home search tool.

Millenials - Take Advice From a Millionaire: Buy, Don't Rent

by Rebecca Shahan

Millenial Home BuyersAre you a millennial and currently renting a home? Why not take some solid advice from a self-made millionaire? David Bach is just such a person and has written nine consecutive New York Times best-selling books. For 31 weeks his book, “The Automatic Millionaire,” was on the New York Times bestseller list.  He is also one of the only business authors in history to have four books simultaneously on the New York Times, Wall Street Journal, BusinessWeek and USA Today bestseller lists. He has also been profiled in many major publications, including the New York Times, BusinessWeek, USA Today, People, Reader’s Digest, Time, Financial Times, Washington Post, the Wall Street Journal, Working Woman, Glamour, Family Circle, Redbook, Huffington Post, Business Insider, Investors’ Business Daily, and Forbes. 

In a recent CNBC article, Bach says that: “The biggest mistake millennials are making is not buying their first home.” Then he said that, “If you want to build real financial security, real wealth for your lifetime, then you need to buy a home.”

Here's his reason why buying a home is so important:

“Homeowners are worth 40 times more than renters. Now, that first home doesn’t need to be a dream home, it can be a very small home. You might literally have to buy a small studio apartment, but that’s how you get started.”

 “Don’t do a 30-year mortgage. You want to take that 30-year mortgage and instead pay it off early, do a 15-year mortgage. What happens if you do a 15-year mortgage? Well, one, you pay the mortgage off 15-years sooner, that means you’ll be able to retire in your fifties. Number two, you’ll save a fortune (on potentially hundreds of thousands of dollars in interest payments).”

What will it cost to pay your mortgage in fifteen years?

“For fifteen years, you got to brownbag your lunch. Think about that! Brownbag your lunch literally for fifteen years. You can retire ten years sooner than your friends. You’ll have real wealth, because you bought a home – you’re not a renter. And you’ll be financially secure for life.”

When a well-respected millionaire gives you advice, it’s usually a good idea to follow it.  But this is hardly the first time that experts have given advice on the wisdom of buying a home. Many successful individuals have found that over time, buying a home is the most advisable course toward financial security.

As an additional note on David Bach’s experience, he has been a contributor to NBC’s Today Show, appearing more than 100 times, as well as a regular on ABC, CBS, Fox, CNBC, CNN, Yahoo, The View, and PBS. Not a bad resume!

If you are currently renting a home in Austin or Lake Travis and are looking to take this advise, give us a call at 512-657-4467 to see how this dream can become a reality.

Protecting Yourself From the Equifax Breech

by Rebecca Shahan

Other than natural disasters, the big news this week is about the disaster of the massive data theft of 143 million consumer’s personal data from national credit bureau Equifax.  This is a situation that is expected to affect a lot of lives, especially home buyers and mortgage applicants. Why?

Most American with a credit history could have addresses, Social Security numbers, driver’s license and credit card numbers stolen.  These could be made available to the highest bidders on the Dark Web. 

Since there is a significant amount of information on file at the credit bureaus for home buyers and mortgage applicants, this group is especially at risk. This could cause serious problems down the road, especially during the buying process.

But don’t worry, as you can take steps to protect your identity and credit.  You can lock down your credit files with fraud alerts or credit file freezes, which will prevent people from opening accounts in your name and will prevent them from getting credit reports.

The FTC has helpful information on identify-theft countermeasures at consumer.ftc.gov/features/feature-0014-identity-theft. And if you’re thinking of doing a freeze, a good site is uspirg.org/resources/usp/protect-yourself-against-new-account-id-theft. You can also get free, three-bureau credit monitoring service being offered by Equifax at equifaxsecurity2017.com. The most important first step is to check your three credit reports for free at annualcreditreport.com and see whether anyone has compromised your accounts.

Tips For First Time Buyers

by Rebecca Shahan

Are you ready to buy your first home?  It's certainly an exciting, yet sometimes terrifying, time. It's one of the biggest decisions you can make, and the process can intimidating. But there are a number of things you can do to make the process more pleasant, and as the same time save money.

Here's a few tips for those who are just starting out on the journey of buying their first home.

  1. Start saving early.  You can put down as little as 3% on a loan, but that may mean you pay more for private mortgage insurance.  Keep in mind that even a small down payment can be hefty. Try this mortgage calculator to find out how much a down payment might be based on the price range of home you're looking for.
     
  2. How much can you afford? Of course you need to know what price range is within reach.  You can use a home affordability calculator to find out.
     
  3. Check your credit. Your credit score means a lot when getting a mortgage and how much you can borrow.  Make sure your credit record is clean of any problems or incorrect items that may affect it.

These are just a few tips to get you started.  If you're seriously thinking about buying your first home, please feel free to give us a call.  We'll be happy to help you start your journey to home-ownership.

Displaying blog entries 1-10 of 11

Contact Information

Photo of Rebecca Shahan Real Estate
Rebecca Shahan
Keller Williams Realty, Austin
1921 Lohmans Crossing, #100
Austin TX 78734
512-657-4467
Fax: (512) 263-0109