Ask the Expert: I have never applied for a mortgage. What does a lender look for in an applicant?
This is one time in life when your sparkling personality and good intentions don’t matter so much as the financial facts!
Lenders want to know: Can you afford the loan? Will you pay the loan?
The answers are calculated using documents. Mortgages are loans that span decades and require the lender to risk a lot of money on your promise to pay. Your commitment is a promise to pay back the lender over many years to come.
With that much money and trust at stake, you have to provide documentation that you can do just that.
Income, employment, assets: Just like on a rental application, you have to prove you are employed. With a mortgage, you will need copies of tax statements, paycheck stubs, and W2 forms. You want to prove steady income over at least two years in the same line of work, if not at the same employer. This tells the lender that you do work and likely will work in the future. If you are self-employed, you’ll need to provide more documents.
The best case is that you also have a savings account in which you have at least two months of mortgage payments. If you will be dead broke after you sign the mortgage, this might go against your application.
Debt: Lenders use a formula called the debt-to-income (DTI) ratio. You can figure it out yourself. Simply add up all your monthly payments (credit cards, auto loans, child support, alimony) and divide that by your monthly income. The percentage you get is your DTI ratio. That should be 36 percent or less. What you don’t want is maxed-out credit cards or applications for new credit.
Down payment: Do you have enough cash to make the required down payment? Can you document where you got the money? Best case: Equity from a home you are selling or your own savings.
Purpose: If you are buying a home, do you plan to live in it? If it is to be a rental, you may need to show more information.
Are sellers now courting buyers?
Home sellers have been in the real estate driver’s seat for some time since there was more demand for homes than homes available to buy.
However, as 2023 opened, sellers were making some concessions to buyers.
According to Redfin, 42 percent of sellers in late 2022 offered at least one concession to buyers. That is 31 percent higher than the year before. These concessions, according to Redfin, tend to mask the true cost of a home purchase since list and closing prices don’t change. So even though prices remained steady, sellers were often giving cash credit for repairs, closing costs, and mortgage buy downs, according to Redfin.
Still, in late 2022, when interest rates started rising, fewer buyers were out. People who had to sell were eager to attract a buyer.
That micro-economy might not hold through the home sales season this summer, though. New mortgage applications have picked up somewhat as interest rates tick slowly down.
In many locations, the supply of homes to buy is still below demand, which suggests that it’s still a great time to sell.
Meanwhile, there is good news for buyers, too, with a new FHFA mortgage discount program for first-time buyers, which makes it easier to get a mortgage approved without 20 percent down.
Virginia sees slowest April housing market in more than a decade
According to the April 2023 Virginia Home Sales Report released by Virginia REALTORS®, there were 8,252 homes sold in Virginia in April, a 31.2% drop from last year, making it the slowest April market the state has had in over ten years.
Typically, new listings increase between March and April as the spring market ramps up, but fewer sellers are listing their homes in housing markets across Virginia. There were 11,174 new listings added to the market in April statewide, 4,458 fewer than a year ago, a 28.5% reduction. “During the refinance boom of 2020 and 2021, many homeowners were able to lock in extremely low interest rates,” says Virginia REALTORS® 2023 President Katrina M. Smith. “Because of this, there is little incentive for them to list their homes and move into a new home with a much higher rate. This trend is keeping Virginia’s already tight inventory even tighter.”
Despite the slowdown in sales, the constrained supply has kept the state’s median sales price holding firm. Following a modest dip last month, the median sales price in Virginia in April was $391,000, inching up $1,000 from last year.
In April, Virginia’s average sold-to-list price ratio rose back above 100% for the second month in a row. Homes that sold above $800,000 in April had an average sold-to-list price ratio of 102.2%, the highest of all price segments. Homes that sold below $200,000 had an average sold-to-list price ratio of 98.2%, Virginia’s only price segment below 100%.
“Right now, many sellers are likely getting multiple offers if their homes are priced competitively,” says Virginia REALTORS® Chief Economist Ryan Price. “It’s likely that this trend will continue into the summer because the demand side of the market is so robust.”
The Virginia Home Sales Report is published by Virginia REALTORS®. Click here to view the full April 2023 Virginia Home Sales Report.
Ask the Expert: Are there any new home buying programs out there?
If you’ve never owned a house, or haven’t owned one in three years, a new Federal Housing Finance Agency (FHFA) mortgage discount program, launched in late December of 2022, can cut up to 1.75 percent from your mortgage rate.
You can qualify for this discount program if you are buying your first home (or a home for the first time in three years) for your main residence and you are using a conventional mortgage. There is also an income requirement that you must earn less than the median income for your area.
The best mortgage rate discount of 1.75 percent goes to buyers with below-average credit scores who can make a 3 percent down payment on a fixed-rate mortgage. The higher the credit score, the lower the discount. So a buyer with a 620 credit score and 3 percent down gets a 1.75 percent discount. But a buyer with a 760 credit score and 3 to 20 percent down gets a .25 rate discount.
The income requirements are based on the mortgage giant Fannie Mae’s median income for the area. You can see what the median income is for an area by searching for the income tool. Median incomes are not necessarily low incomes. A small town in the Midwest, for example, might have a median of $76,000. Meanwhile, the median income in San Francisco is about $151,000, and FHFA offers a 20 percent income exception for this area.
There are also some exceptions to the first-time buyer requirement if the buyer is a displaced homemaker or a single parent whose prior residence was jointly owned with a spouse.
Finally, to get the discount, you must move in within 60 days of closing, and you must live in the home at least 180 days a year as your primary residence. Some exceptions apply for deployed military.
Community News & Real Estate (April 2023) with Jen Avery, REALTOR
Family Fun Day – C & C Frozen Treats
- Event link: facebook.com/events/703907138034127
- May 13th – at the gazebo!
- This will be the 8th Annual Family Fun Day. The Louisiana style parade kicks off at 10am. Nina and John will be boiling crawfish!!!
35th Annual Virginia Wine & Craft Festival
- Event link: facebook.com/events/1124013938315829
- May 20 – Main Street will be transformed into a fabulous festival with vendor tables including 2 stages for bands! Over 100 vendors will be participating this year!
Safe At Home – The Un4gettable Series
- Event link: facebook.com/events/1670278446743771
- May 27 – Community Day will be held on May 27th, 2022 at Bing Crosby Stadium from 1PM – 5PM. The event will feature three timed exhibition baseball games featuring various athletes from our Warren County baseball community, along with games for children, a 50/50 raffle, and concessions. Warren County and Skyline High School students will also be supporting the event assisting with stands and entry. Entry to the event is $5 (plus fees) for adults and children 13 and under are free.
- Game 1 – Front Royal Little League
- Game 2 – Athletes from the current WCPS Baseball Programs
- Game 3 – WCHS Alumni vs SHS Alumni
- This year’s event will be held in memory of Skyline High School students, Harlee Hire and Nathan Jenkins, with proceeds going toward scholarships for athletes from Warren County and Skyline High Schools and the House of Hope. House of Hope is a program, based in Front Royal, for homeless men who are ready and committed to making a permanent change in their lives. They offer shelter, food and guidance developing a proactive plan with each client to re-enter society as a productive citizen with stable housing.
Warren County Market Report for April 2023 with Jen Avery, REALTOR
Watch this video for a quick summary of Warren County real estate for April 2023. We are not experiencing a normal spring market right now. It is slower and will most likely remain a slower spring market but will last longer into the summer. This prediction is from the Bright MLS Economist. Buyers are still struggling with low inventory numbers.
In general summary:
- New Listings are DOWN -37.9%
- New Pending DOWN -33.7%
- Closed sales are UP -15.8%
- Average Median Sold $375,000
- Average Days on Market 30
*If you would like a copy of this report emailed to you, please send request to email@example.com.
Resource: April 2023 Market Stats by ShowingTime
Bright MLS: Statistics calculated May 2023
Jennifer Avery, REALTOR® “Your Happy Home Expert!”
BPOR, SRS, CNE, E-Pro Certified | Licensed in VA
firstname.lastname@example.org | 540-683-0790 | www.jenaveryrealtor.com
CRUM REALTY, INC| 318 S Loudoun St, Winchester VA 22601 | 540-662-0400
Invest in landscaping to raise your home’s value
Landscaping is a no-brainer to add curb appeal to your home, but the value is more than just cosmetic — researchers at Virginia Tech found that it can increase property value by as much as 15 percent. According to the Pennsylvania Association of Realtors, landscaping can significantly affect the perceived value of a home. And, like many investments, a long-term approach can provide the biggest payoff in the end.
- Don’t just stick flowers and shrubs in the ground at random — follow a well-thought-out plan. You can download pre-made plans or hire a designer to create a custom plan just for you.
- Use bright colors. Bright flowers are a quick and easy way to add interest to your landscaping and can conceal a few sins, too.
- Nurture the grass. A well-maintained lawn is one the easiest and most cost-effective places to start — according to LawnStarter, a $268 investment in lawn care services adds about $1,200 in value.
- Add trees. Small young trees in 15-gallon pots are easy to transport home from a nursery and already offer some sizes, often at very affordable prices. The trees will continue to add value as they grow taller.
- Maintain fences and walls. Well-kept fences add to property values, but broken panels or cracked walls can actually decrease your home’s value.
- Avoid large outdoor water features. If you ever plan to sell your home, potential buyers probably won’t consider a fountain or fish pond an asset — they’ll just see a hassle that must be maintained or removed.
The pros and cons of having an open house
Are you selling your home and wondering if an open house is the best move? Here are a few pros and cons.
First and foremost, an open house will give your home a lot of exposure through online and newspaper ads. Street signs can also attract spontaneous and curious buyers.
Open houses often attract first-time buyers who may not know how to start home-buying. These laid-back events allow your real estate agent to establish relationships with these prospects and convert them into buyers.
On the other hand, an open house allows people to walk around your home with little to no supervision. Opening your home to strangers can make your property vulnerable to theft, vandalism, and unintentional damage.
Additionally, although open houses attract many people, you’ll likely end up with unqualified buyers or inquisitive neighbors who are curious to look at your home but have no capacity or intention to purchase. It can potentially waste your time and that of your real estate agent.
Speak with your real estate agent to determine if an open house makes sense for your sale.
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