Ask the Expert: I built equity in my house. Now how do I get rid of the PMI?
Private mortgage insurance, or PMI, is required when you buy a house using a conventional loan and make a downpayment that’s less than 20 percent of the home’s price.
Naturally, most homebuyers want to get rid of that extra amount on their monthly mortgage payments.
You have the right to remove PMI in two ways: you can get ‘automatic’ or ‘final’ PMI termination at certain home equity milestones, or you can request the removal when you reach 80 percent home equity.
* Automatic trigger: This occurs when your mortgage balance reaches 78 percent of the purchase price or at a set time period of halfway through your amortization schedule. Payments must be up to date.
* You can request removal of PMI when the loan balance reaches 80 percent of the original value. Some homeowners hasten the process by making extra payments toward their principal. You make the PMI cancellation request in writing to the lender.
* You might be able to refinance out of PMI, which tends to apply when mortgage rates are low and values are on the rise. It usually takes two years before you can refinance.
* Get the home reappraised. Calculate the cost of an appraisal against your savings, but if your home’s value has risen appreciably, this could be a good strategy.
Ask the expert: What is a mortgage rate lock?
A mortgage rate lock freezes your interest rate after your loan is approved until the loan is closed.
Rate locks can be useful in times of rising interest rates. If interest rates rise, you are protected at a lower rate.
Of course, every single month, interest rates ping-pong up and down somewhat, but if you are afraid mortgage rates will jump in the period between your loan approval and closing, a rate lock could at least give you peace of mind. Some lenders offer them, and others don’t.
Rate locks are not free — even if you aren’t directly charged for them. Some lenders might offer a free rate lock, but the cost is mixed into your rate.
Direct fees for rate locks vary quite a bit. Some lenders will calculate the charge based on basis points, and the lock is only good for a certain amount of time. For example, a rate lock fee of $500 would not be unusual for a $200,000 loan.
Rate locks can span periods of 30 to 60 days for conventional mortgages. If you pay for one, promptly answer requests for information. You don’t want any delays in processing or underwriting.
One warning: Ensure the information on your application is correct and your financial position doesn’t change. If your credit score drops or you lose your job or income, your rate lock could be voided. Also, if you change your mind about the terms of the loan (length of time or type of mortgage), the lock could be voided.
Virginia home prices climb despite slowing sales
According to the February 2023 Virginia Home Sales Report released by Virginia REALTORS®, there were 6,505 home sales across Virginia in February. This is a 20.3% reduction compared to February 2022, or 1,655 fewer sales. This marks the fifteenth consecutive month ending with a decrease in sales activity in the state’s housing market, as interest rates have more than doubled during this period.
Even with the slowdown in sales activity, home prices continue to trend up in many parts of the state, a reflection of the tight inventory conditions that persist in most areas. At $370,000, the statewide median sales price rose 5.7% from this time last year, a $20,000 price jump.
The statewide average days on market in February was 38 days, eight days longer than a year ago. In addition to homes staying on the market longer, Virginia’s sellers, on average, are getting slightly less than their asking price. “This is some good news for buyers that are active in the market,” says Virginia REALTORS® 2023 President Katrina M. Smith. “Nearly all of Virginia’s markets have more active listings available than they did one year ago.”
At the end of February, there were 14,558 active listings on the market statewide, 2,416 more listings than last year. “Active listings are building up, but keep in mind that it’s not from new listings, which remain down,” says Virginia REALTORS® Chief Economist Ryan Price. “February saw a 22% reduction in new listings since the same time last year, reflecting hesitation from sellers.”
Following the collapse of Silicon Valley Bank and Signature Bank and the subsequent drop in mortgage rates, it’s possible there could be an influx of buyers who might have pushed pause when rates were trending up. “The recent events in the banking sector continue to resonate across the nation’s economy,” says Virginia REALTORS® CEO Terrie Suit. “If mortgage rates continue to drop, it could induce activity in what has been a slowing housing market.”
While this could provide a boost heading into the spring market, overall sentiment for buyers remains low.
The Virginia Home Sales Report is published by Virginia REALTORS®. Click here to view the full February 2023 Virginia Home Sales Report.
Should you remodel the house or tear it down?
Sometimes it pays to raze a house and build a new one.
Is your house 80 or 100 years old and seriously damaged, but in a location you love? You might be better off knocking it down instead of trying to remodel or buying a house somewhere else.
Tearing down a house is a good idea when:
- The house has rotted beams and antiquated wiring or plumbing.
- The foundation is faulty.
- A renovation that solves all of its problems would be too expensive.
- The house is on a large or attractive lot, and you like the location. Sometimes the land alone would be more valuable than the house on the land.
- The house has structural problems and is less valuable than others in the neighborhood.
Tearing down is a bad idea when:
- The house has historical value or features that would be difficult to re-create.
- You can get the updates you want with a modest renovation.
- If you aren’t sure, you will stay long enough to justify the effort and expense of a teardown.
If you decide on the renovation:
- Never start a renovation yourself if you don’t already possess the skills and time to finish it.
- Never count on an interested party to help you with renovations.
- Plan for at least three to four months in renovation mode for a room.
- For whole house projects, plan to live somewhere else.
- Reserve at least 20 percent over your budget for unexpected problems.
- Leave serious structural issues to a professional.
Price it right to sell your home in a brisk spring market
A new job, a new baby, retirement, or maybe just a taste for change. You want more space, less space, new space — whatever the reason, you just want to sell.
There are plenty of buyers even in this market since mortgage rates have dipped and slightly more houses are available nationwide.
So one of the key questions is how to price your house.
Your real estate agent will look at comparable properties and show you the sale prices, but there is always some strategy in pricing a property, depending on the market and even the reasons for selling.
If you need to sell your home quickly, pricing the property at market value or below can attract buyers and lead to a fast sale. A modest price could also attract multiple bids if there are not a lot of comparable houses in the area and potentially net a higher price than you ask. On the other hand, if there are lots of similar homes on the market, you will probably not get more than your asking price since buyers won’t get into a bidding war.
Pricing at or below the market can also be a good strategy if you don’t want to do any renovation. You may attract buyers who want a deal to put some sweat equity into their new home.
You don’t want to price the home so low that buyers think there is something wrong with it.
Now there is a time to list a house above market value. That time is when there aren’t many comparable houses selling in the area. Another reason to go higher in price is when the house you are selling is in particular demand, maybe because of its location in a great school district or waterfront property. But in general, you don’t want your price to be higher than comparable homes.
No matter how you price your home, you can get the best price by following traditional rules for sellers. Cleanup, declutter, and paint. Give your home its best look and increase your chances of getting the best price.
Slow start to the year for Virginia’s housing market
According to the January 2023 Virginia Home Sales Report released by Virginia REALTORS®, 5,609 homes were sold across the state in January, more than a 30% decline from January 2022. This marks the slowest January market the state has seen in eight years.
As sales activity has cooled, so has the sold dollar volume. There was approximately $2.4 billion of sold volume in Virginia in January, which is about $1 billion less volume than a year ago, a 28.5% decline.
In Virginia, the average days on market has been slowing since last summer. “This cooling has been a result of rising interest rates coupled with rising home prices and a lack of homes available on the market. This has led to more potential buyers choosing to sit on the sidelines,” says Virginia REALTORS® Chief Economist Ryan Price. In January, the average days on market statewide was 39 days, a full week longer than January 2022.
With homes remaining on the market longer, Virginia’s supply of homes continues to increase for the fourth month in a row; however, the overall inventory remains low compared to historical averages. At the end of January 2023, about three out of every four cities and counties Virginia had more active listings than the same time last year. The sharpest increases in listings occurred in parts of Northern Virginia, the Charlottesville region, and the Northern Neck market.
Though still considered a “seller’s market” due to the low inventory, the state’s overall market dynamics continue to shift in favor of buyers. “On average, we’re seeing fewer offers coming in, and there is less of a scramble to outbid other buyers,” says Virginia REALTORS® 2023 President Katrina M. Smith. “We are also seeing fewer sellers receiving their full asking price.” These trends are expected to continue in the coming months as the market responds to economic uncertainty and the volatile interest rate environment.
The Virginia Home Sales Report is published by Virginia REALTORS®. Click here to view the full January 2023 Virginia Home Sales Report.
Instead of going up, mansions go down
Down is the new up when it comes to luxury homes. Or at least that’s what architect Randy Correll said in a recent interview with the Wall Street Journal. Instead of expanding their homes’ footprints or building new floors — sometimes prohibited by local zoning codes or historical designations — wealthy homeowners are building huge basements with amenities that most homeowners can’t even fathom (pun intended).
These aren’t your youth’s musty unfinished basements or dated rumpus rooms. Luxury basements occupy thousands of square feet, sometimes across multiple levels.
Natural light warms the spaces through skylights and staircases, and high-tech engineering keeps Mother Nature out.
When former Dallas Mavericks owner David McDavid and his wife Stacie purchased a 9,000-square-foot Aspen estate, they dug into the mountainside to add a 4,000-square-foot basement at their daughter’s insistence. The new subterranean space has multiple guest suites, a gym, and a vast hot tub and steam room.
On the island of Nantucket, where house footprints are often strictly regulated, another homeowner is constructing a 16,000 square-foot home with an extra 5,600 square feet underneath for a bowling alley, 3-D golf simulator, and spa. Not to be outdone, another new Nantucket build will be a modest 5,000 square feet on the surface, but with 10,000 square feet below to house a basketball court, garage, additional bedrooms, and a bespoke “wellness space.”
And in Beverly Hills, a $500 million mega-mansion boasts about 105,000 total square feet — about half of it below ground.
But while homeowners might love their underground mansions, not everyone feels the same way. Massive basements require noisy, dirty, and prolonged construction, and the neighbors will certainly complain. After a local outcry, the city of Aspen recently limited basements to a paltry single level. And Beverly Hills may never see a 50,000-square-foot basement again — property owners in the Hillside area now need special permits to remove more than 3,000 cubic yards of earth.
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