If you want to buy a home, you’ll probably need to take out a mortgage. Here are some tips to help you get approved.
1. Improve your credit score
Before you apply for a mortgage, review your credit score. This is the number lenders use to evaluate your credit risk and determine if you’re a good loan candidate. The higher your credit score, the better your mortgage rate is likely to be.
To improve your score, pay your bills on time, keep your credit balances low and reduce the amount of debt you owe.
2. Pay off debts and avoid incurring new ones
Another important factor that mortgage lenders look at is your debt-to-income ratio. The lower your debt is when compared to your income, the more likely you are to be approved for a home loan. In addition to paying off existing debts, you should reduce the amount of new debt you incur. Take a careful look at how you spend your money and figure out where you can cut back on expenses.
3. Save for the biggest down payment possible
The minimum down payment you need to get a mortgage is 3.5 percent of the home’s total cost. However, if you can afford it, a 20 percent down payment will lower the balance of your mortgage and alleviate the need for private mortgage insurance, thereby reducing your monthly payments.
If you don’t currently meet the requirements for a home loan, don’t give up. Instead, take steps to improve your financial situation and, once you’re in a better position, try again.
Virginia’s median home price crosses $400K mark
According to the May 2022 Virginia Home Sales Report released by Virginia REALTORS®, despite cooling demand, home prices around Virginia continue to climb rapidly. The statewide median sales price for a home in May was $401,082, rising 8.7% from a year ago, a gain of more than $32,000. This is the first time Virginia’s median home price has eclipsed the $400,000 mark.
The commonwealth’s housing market continues to moderate from last year’s busy pace. In total, 13,048 homes were sold in Virginia in May 2022, an 8.5% decrease from the same time last year. While sales activity rose 8.8% between April and May, this increase is considered a typical seasonal bump. Nearly all regions in Virginia are experiencing a cooling housing market through the first five months of the year compared to last year.
“The moderating trend we are seeing reflects not only a return to more normal levels, but also a cooling of demand from home buyers,” says Virginia REALTORS® Chief Economist Ryan Price. “Buyers are feeling the weight of surging home prices, high inflation, mortgage rate jumps, and an extremely competitive market with few options to choose from.”
“Because the state’s inventory is so low and demand remains relatively strong, we do not expect that Virginia home prices will fall,” says Virginia REALTORS® 2022 President Denise Ramey. “Rather, the price growth will likely moderate from the rapid pace of the last couple years as interest rates continue climbing, pushing more buyers on the sidelines.”
While the overall supply in Virginia’s market is still getting smaller, the shrinking trend appears to be changing. Statewide, there were 16,875 active listings on the market at the end of May, a 5.6% decrease from last year. This is the smallest decline in three years. Additionally, the number of active listings at the end of May was 9% higher than the end of April—an increase larger than a typical seasonal bump.
The Virginia Home Sales Report is published by Virginia REALTORS®. Click here to view the full May 2022 Virginia Home Sales Report.
Beat inflation with low-cost renovations
The rising cost of building materials has hindered many renovation projects. Do you want to put your house up for sale but feel it needs a little TLC? Here are a few ways to lower your reno costs and make your home irresistible to potential buyers.
Refresh rather than replace
Before throwing something away, ask yourself whether you might be able to give it a second life. The internet is full of creative upcycling ideas.
Talk to your neighbors
Did your neighbors redo their roof last year? If so, they might have a few bundles of extra shingles they’d be happy to sell you at a discounted price. Don’t hesitate to ask for input from those around you.
Keep an eye out for bargains
If you’re not in a rush to complete your renovations, keep an eye on store flyers over several weeks instead of buying everything at once. You may be able to find good discounts to help lower your bottom line.
Save on labor
Don’t dismiss your own handyman skills. If you plan to hire a professional to do your renovations, consider taking on some of the work yourself. In any case, ask for quotes from several accredited contractors to get the best price.
Finally, find out if you’re eligible for any available government subsidy programs.
Sellers still getting big prices; demand dips
Nationwide, the red-hot real estate market is losing a bit of its blush as the pressure of inflation and higher interest rates mean fewer buyers are looking for homes.
It’s not bad news, since homes are still selling briskly throughout the country at higher prices. Most homes remained on the market for less than a month.
The number of houses available to buy is growing slightly, perhaps indicating that buyers will have more choices in the coming months. Meanwhile, sellers are getting good prices, especially in cities in the South.
Here is the latest look at the market in the four key regions of the U.S., according to nar.org.
Sales in April were up 1.5 percent compared to the previous month, but this was 10.7 percent lower than April last year. Prices on existing homes were up 8.1 percent.
Sales in April of existing homes were up 3.1 percent from the prior month, but this was a 1.5 percent slide compared to April 2021. Prices were up 8.7 percent from a year ago.
Prices are rising in the South, where home prices posted a 22.2 percent hike from 2021. Sales of existing homes were slower compared to the previous month, with sales falling 4.6 percent, a decrease of 5.7 percent from a year ago.
Prices saw a 4.3 percent increase, but much less than in the rest of the country, and sales dropped. Existing-home sales in the West dropped 5.8 percent compared to the previous month, down 8.1 percent from a year ago.
The numbers show that the South and the Midwest were winners during the first quarter of the year, with big price growth compared to last year in cities like Miami (38.3 percent), Orlando (30.7 percent), and Las Vegas (32.6 percent).
What if the perfect home is pending?
It happens a lot — you see a great home, but there is a big ‘Pending’ sign on it, or maybe the home is labeled ‘Contingent.’ Are you out of luck?
Probably. But there is some hope, especially on a contingent property.
A pending transaction means that the home sale is far along. The home is under contract, the offer has been accepted, all contingencies have been met, and the parties are ready.
Your real estate agent could still find out if the seller would still accept offers, but likely the seller and buyer are ready to make the deal.
Contingent sales have more possibilities.
There are all sorts of contingencies.
The main one is financing. If for some reason the buyer can’t get financing, the deal can be off. This can happen if the buyer has been pre-approved for a loan but something happens. Maybe the buyer suddenly loses a job or the lender finds unreported debt during underwriting. In this case, the deal might well fall through and the home will be up for sale again.
A home sale is also contingent on an appraisal. The lender can’t make a loan above fair market value. So if the appraisal comes in low, the deal could fall through. To keep the deal, the buyer would have to make up the difference between the loan (say $125,000) and the appraisal (say, $100,000). The buyer would have to come up with $25,000 to close the gap.
Buyers usually want a sale contingent on inspection. If the inspection reveals problems, the buyer can quit the deal or renegotiate the price.
Some buyers need to sell their own home before buying the new one. This home sale contingency is often rejected by sellers in a tight market.
A kick-out clause benefits the home sellers because, during the contingency period, the sellers can continue to show the house and accept offers. If the sellers receive a better offer, they can ask the original buyer to remove contingencies or lose the home sale.
Selling your home: focus on the most profitable upgrades
If you’re planning on selling your home, you may want to make a few upgrades to make it more attractive to potential buyers and maximize your profit. This is an excellent idea if you invest in the right places. Here are a few things to consider.
Refresh your walls
If you’re on a tight budget, a fresh coat of paint can do wonders. For just a few hundred dollars, you can drastically improve your home’s appearance to make a good first impression on potential buyers. However, make sure you choose a subdued palette.
Redecorate the kitchen
A bright and attractive kitchen can instantly make foodies fall in love with your property. If your appliances are dated, or the space is poorly designed, renovating it is a profitable investment.
Transform the bathroom
Potential buyers often try to imagine their everyday lives when touring your home. Consequently, a cramped, dark, and unwelcoming bath¬room won’t earn you any points. Instead, turn this room into a true oasis of relaxation. You’ll be glad you invested the money.
Focus on the details
Although large-scale renovations like repairing the roof or finishing the basement can really pay off, replacing accessories, such as light fixtures and faucets can instantly modernize your home and increase its sales potential.
Hire a renovation specialist in your area to make your home stand out from the rest of the housing stock.
Advantages and disadvantages of short-term rentals
The short-term rental industry has exploded in recent years because of platforms like Airbnb and VRBO (Vacation Rentals by Owner). If you’re thinking of getting into this market and renting your residential space, there are a few things to consider. Here’s an overview of the pros and cons to give you some insight.
Short-term rentals can be a substantial source of passive income that requires relatively little effort. The initial investment is often negligible. Therefore, you’ll quickly see profits with minimal risk. This income is also flexible since you have the freedom to rent when it suits you best.
You must put in a substantial amount of effort to make your visitors happy and have a successful enterprise. Consequently, expect several expenses, from maintenance and repairs to legal obligations and insurance coverage.
Moreover, short-term rentals are increasingly singled out as an aggravating factor in the housing crisis occurring across the country. Therefore, be aware that your new source of income could provoke disapproval among residents in the area, especially if you live in a small community.