Start planning now to buy a home in 2015

Hoping to Buy a Home in 2015?

Start Planning Now

At the start of a new year, many real estate agents’ phones begin ringing with calls from potential buyers who want to get in the market. If buying a home is on your agenda for 2015, now’s the time to begin working toward your goal. Here’s a guide to the home buying experience to get you started.

The dreaming phase

We are all more connected than ever, which makes researching a new home easy and convenient. The dreaming phase — which has no definitive start time or length — means thinking about what you want in a home, exploring neighborhoods and casting the widest net possible.

This phase includes looking at photos of homes online, comparing and contrasting listings or prices per square foot and understanding the price differential between two school districts.

Dreaming happens on your terms and your timing. It doesn’t require help from a real estate agent or mortgage professional. It’s a good time for you to play around with the market, start to get the real estate bug and develop a feel for what could be a reality in the future. Don’t rush, and don’t feel pressured.

Search and discovery mode

When you feel ready to make a reality of the dreaming phase, it’s time to move the process along. Search and discovery allows you to get the facts, build your team and begin to amass a strong approach to pushing ahead. Connect with a local real estate agent and a mortgage lender to get started.

Typically, buyers meet with a real estate agent first, who then refers them to a good local mortgage professional. Connecting with an agent means asking lots of questions about how the market works, school districts and the home buying process in general.

In the dreaming phase, you don’t know what you don’t know. But during search and discovery, you’ll start gathering solid information. A mortgage professional will run some numbers and do a full review of your finances, including pulling your credit. They will marry that data with available loans in the market and teach you about the different loan options.

Full steam ahead

After weeks or months (or sometimes even years) of dreaming, searching and discovering, you will know the market inside and out. You will have seen enough homes to know what you like and don’t like, and you’ll have prioritized your criteria based on what you’ve learned. You’ll have seen many homes come on the market, go pending and close, which will help you understand list price vs. sale price, and why some homes sell faster than others.

When you are full steam ahead, you’ll be online 24/7 and being a home buyer becomes a part-time job. You’ll be in constant contact with your agent, who may be texting or emailing you listings throughout the day.

When a home that matches your criteria comes on the market, get out and see the home in person. Don’t wait for an open house — go view the home ASAP with your agent.

At this stage, you’ll be ready to make offers, and you may miss out on one or two homes before getting one. Or you may move forward on a home, only to find out there are inspection issues. You might even experience a little buyer’s remorse.

All of this is to be expected. When the right home comes along, it will work out because you’ve done all the prep work and have your team in place.

Think you can’t afford to buy a home? Think again

Think you can’t afford to buy a home? Think again

Did you have a bad credit event in recent years? Do you have less than two years in the same career field? Is your monthly income less than three times your proposed payment? Fear not, when your financial picture doesn’t fit neatly into the box, you may still qualify with some lenders. Here’s how.

When you apply for a mortgage, lenders use four pillars to measure your finances and put together a loan suited to your purpose. Your credit, debt, income and assets play integral equal roles in lenders’ eyes. Let’s break down the nuts and bolts of what lenders want to see on loan applications, and how working within these four pillars may help you find a mortgage to suit you, even if your situation isn’t “perfect.”


The credit score is the best-known financial barometer to predict a borrower’s future likelihood of default. Of course, you’re not planning to get a mortgage to subsequently go delinquent, but lenders nevertheless use it to measure your payment predictability. Lenders want a credit score of at least 620 or better. Beyond the credit score is the credit report, which reveals details about your past and current financial habits. Mortgage companies consider delinquent payment patterns a red flag — including old collections of all kinds, past-due balances even on accounts that are no longer active. Expect an inquisition on such accounts.

So what if you have a previous bankruptcy, foreclosure, short sale or loan modification? What if more than one of these events exist in your credit history? Again, fear not, but do be prepared to answer all questions regarding such events. If you have supporting documentation, provide it to your mortgage broker upfront. Generally, even today you can still get a mortgage just a few years out of one or more of these credit events. Most commonly, there’s a three-year wait time for government financing (i.e., FHA) and seven years on conventional financing (with the exception of a short sale — the waiting time is now four years). The most recent date is considered if one or more such credit events exist in your credit history.

Active trade lines (meaning open credit) are another lending hot button. You’ll need to have at least two forms of open and available credit that you use regularly – that doesn’t necessarily mean carrying a balance, but it does mean you need to show credit activity. Unfortunately, gone are the days of using alternative forms of credit, like a cell phone bill or a cable bill, in lieu of credit report trade line.

Checking your credit in advance of applying for a mortgage can give you time to work through any issues, or to take time to work on your credit score if it needs to be higher. You can check your credit reports for free once a year from each of the three credit reporting agencies, and you can see two of your credit scores for free on


A lender wants to see every single minimum payment obligation you have – whether or not it’s on your credit report — independent of your general household expenses.

The typical forms of debt a lender must account for when determining how much mortgage you can afford are: any form of car payment, minimum payments on credit cards, student loans, personal loans installment loans, alimony or child support, garnishments and IRS debt.

This seems simple enough, but sometimes the way a debt is listed on your credit report can cause a problem. Let’s take a common example: Student loans. You may have multiple student loans through one creditor, and they are all listed out on your credit report that way, but you make one monthly payment to that creditor for the multiple loans. The fix: You’ll need to provide your mortgage broker a payment letter from the creditor identifying what loans are included with the student loan creditor and the amount of your monthly payment.

Another common issue is co-signed loans – specifically, loans someone else took out that you co-signed. In order for the other party’s debt to not hurt your mortgage application, you’ll need to provide documentation that the other person is making the payment directly to the creditor and has been since either the inception of the loan or the most recent 12 months. This is usually accomplished with bank statements or canceled checks. Reducing your debt load is immensely beneficial when trying to qualify for a loan.


Lenders must be able to show that your income supports your proposed mortgage payment plus your other debt payments. If your debt, including the proposed mortgage payment, exceeds 45% of your income, you may need to look for less house, borrow less money, or pay off some of your debts to improve your numbers.

When it comes your income history, lenders like to see a minimum two-year period of working in the same or a similar field. Don’t have it? That’s OK. Make sure you explain this to the lender in writing, and be sure include any occupational gaps. If you’re an hourly wage earner, expect your banker to average your year-to-date income. If you’re salaried, it will be much more transparent in terms of qualifying because typically a salary is a more stable form of income.


The down payment amount you have can dictate the loan program and ultimately how much mortgage you can handle. Assets include both funds for a down payment as well as savings in the bank post-closing of escrow. Mortgage brokers, banks and lenders expect to see two to six months of savings post-closing, and at least 3.5% of the purchase price for down payment. If you have access to funds that aren’t yours, gift money, for example, is a viable alternative, just be sure provide the full paper trail in any exchanging of funds.

*Mortgage tip: When buying a single family home, your full down payment funds can be gifted.

If you’ve been told that you can’t get approved for a mortgage, get a second opinion — perhaps even a third or fourth. Make sure to disclose all the pertinent known facts about your financial situation. A quality professional will ask you to provide details on the who, how, what, when, where and why — which can help make your quirky financial picture much more cohesive and thus more likely to get you approved for a mortgage.


4 Reasons It Will Be Easier to Buy a Home in 2015

From 12/23/14

Housing economists and would-be homebuyers are finding reasons for optimism as 2015 nears. To be fair, the bar’s set pretty low after a tough year for housing.

However, there are some genuinely encouraging signs that next year will be better for prospective buyers. Economic recovery and an improving job market will go a long way to boosting affordability for buyers in many markets.

Here’s a look at four reasons why the upcoming year might be a difference-maker for would-be homebuyers.

1. Looser Mortgage Credit 

After years of hyper-cautious lending, more mortgage lenders are starting to relax credit and underwriting requirements, which are also known as “overlays.”

A big push in that direction came earlier this month when new guidelines from Fannie Mae and Freddie Mac took effect. These government-sponsored mortgage giants purchase about two-thirds of all new home loans.

The new policies were aimed at clearing up confusion about when lenders must buy back loans that go sour. Economists and industry insiders expect the newfound clarity will lead to broader access to mortgage credit.

“I’ve been told with absolute confidence that some lenders are lifting almost all of their overlays,” David Stevens, president of the Mortgage Bankers Association, told the Wall Street Journal.

The Urban Institute estimates more “normal” lending requirements could mean an additional 1.2 million home loans every year.

2. Lower Down Payments

Prospective buyers have another reason to high-five Fannie and Freddie: They’ve recently agreed to get behind loans with just 3% down. That lower benchmark, coupled with loosening credit standards, will likely help more first-time buyers enter the market.

Buyers will need at least a 620 FICO score and be on the hook for private mortgage insurance. Requirements for the 3% option vary between the two agencies. Depending on their path, buyers may need to complete a homebuying education program or show they haven’t recently owned a home.

“Our goal is to help additional qualified borrowers gain access to mortgages,” Andrew Bon Salle, a Fannie Mae executive vice president, said in a statement. “We are confident that these loans can be good business for lenders, safe and sound for Fannie Mae and an affordable, responsible option for qualified borrowers.”

FHA loans currently feature a 3.5% down payment requirement, but the accompanying mortgage insurance premiums have become increasingly expensive for many low- and middle-income borrowers. On a typical $200,000 loan, an FHA buyer might pay an extra $200 per month in mortgage insurance costs.

3. Cooling Home Prices

Some housing markets are still hotter than others. But the overall pace of housing price growth has slowed considerably. Freddie Mac’s housing price index soared 10% from September 2012 through September 2013.

Over the last year, the index is up just 5%, and Freddie Mac economists expect only a 3% increase for 2015.

Increases in housing inventory may also help to push down prices in some places.

4. Rates Still Low

Heading into 2014, most economists and housing wonks expected mortgage rates to top 5% by year’s end.

Last week, the average rate on a 30-year fixed mortgage didn’t even top 4%, according to Freddie Mac’s weekly lender survey. The 3.89% average rate marked an 18-month low.

A host of economic and geopolitical factors combined to keep rates lower than anticipated this year. They’re almost certainly going to rise in 2015, maybe even into that long-predicted 5% range, but they’ll still remain far below historical averages.

Before you buy a home, it’s important to check your credit to get an idea of whether you’ll meet lenders’ requirements. You can check your credit reports — you can get them once a year for free, and you can also get a free credit report summary on — to see where you stand. You can also use this calculator to see how much home you can afford, which can help you target your search to a price range that is right for you.

Refinance if you are able to, it could save you a lot of money

How refinancing helped one

homeowner lower his interest rate

and save $70,000

West Virginia homeowner, Kevin B., didn’t sleep well for a long time. He had a good job, good health, and good friends. But he had a bad mortgage.

It didn’t start out that way, of course. When Kevin bought his home in 2007, he got a decent rate and good terms. But because of the housing crisis and slumping economy, Kevin soon got stuck with a rate that seemed higher and higher with every year of lowering interest rates.

“It was tough watching friends get mortgages with interest rates lower than mine,” he says. Kevin was stuck because his property had lost value and he couldn’t refinance – something that happened to many people.

Then, recently, home prices rebounded enough for Kevin to qualify for a refinance. And, with rates still historically low, he didn’t hesitate.

Kevin’s Original Mortgage

Kevin’s initial mortgage was not the simplest thing in the world. He bought a $193,000 condominium in West Virginia in 2007. He took out a 30-year, interest-only mortgage for $154,400, or 80 percent of the purchase price, with an interest rate of 6.5 percent.

The interest-only part meant that Kevin would not be paying off any of the principal for many years and would need to make a balloon payment years down the line. Not exactly sleep-inducing.

Further, Kevin took out a second, variable-rate mortgage to cover the down payment so that he could avoid paying private mortgage insurance (PMI), which lenders make borrowers pay if they put less than 20 percent down on the home. The initial rate on the second loan was 9.25 percent, but he hoped to either pay it off soon or for the rate to go down.

His monthly payment on the first mortgage was $836 and $250 on the second. His total monthly payment was $1,086.

He knew he was taking a risk with his interest-only and variable-rate loans, but he had a plan. “When I purchased the condo, I did not see myself living there for more than a few years. I planned to sell it and buy another home, so I wasn’t too worried about the interest-only mortgage,” he says.

How Refinancing Helped Save Him Money and Sleep

Kevin’s plan to sell his home didn’t work out as the housing market crashed. What happened to so many between 2007 and the 2010s hit Kevin hard. His condo lost value, sticking him with his suddenly less attractive mortgage. “I wasn’t able to refinance because home prices dropped considerably, leaving me upside down on my home.  In other words, I owed more than it was worth,” says Kevin.

Finally, in late 2014, Kevin felt that his condo had regained enough value to enable him to refinance. He sought the help of John Wines, sales manager of Atlantic Bay Mortgage Group, a mortgage lender. Wines says that Kevin came to him with three primary goals: Pay off his condo sooner than was now planned, save money, and pay no fees or costs to refinance.

That may sound like a tall order, but Wines says that in Kevin’s case, everything fell right into place.

First, he suggested a 15-year, fixed-rate mortgage. Typically, these mortgages have lower interest rates than 30-year, fixed-rate mortgages, but still result in higher payments because you must pay off the loan in half the time.

However, because Kevin was significantly reducing his interest rate to a low 3.5 percent, his new payment is only $990, about $150 more than his old one.

With the new terms from his refinance, Kevin will pay off his home seven years earlier than originally planned. His first mortgage was set to be paid off in 2037. His new one will finish in 2030.

Kevin still has his second loan, the one he took out to cover the down payment, but the rate on that has dropped to 4.25 percent, with a payment of only $95 a month.

That brings his total monthly payment to $1,085 a month. It’s only $1 less than his original monthly payment, but the total savings go way beyond that.

“True, I pay the same every month, but I am on track to save around $70,000 in interest,” says Kevin. Kevin calculated his savings by taking into account how much he’s already saved by paying off his principal and how much more he’ll save by paying off his mortgage seven years early.

Incredibly, Kevin could have gotten a lower rate and saved even more, but remember, he didn’t want to pay any fees or costs to refinance. “So Kevin took a slightly higher interest rate, about an eighth of a percent, in exchange for a lender credit that pays off the closing costs,” explains Wines.

“Increasing the interest rate by an eighth of a percent only raises the payment by a few dollars a month, but saves me almost $2,000 in closing costs,” says Kevin.

Kevin says his refinance, even though complicated, went really smoothly. It took about three weeks, the paperwork was minimal, and everything was clearly explained.

“The refinance itself was simple. The savings were clear. The most nerve-wracking part of the process was waiting for the appraisal to come back to ensure that the value of my home had increased enough to make it possible. Had the value not come back as much as it did, refinancing would not have been possible,” says Kevin.

The Bottom Line

Kevin’s homeownership journey may not have started out easy, but thanks to refinancing, he’s now able to sleep better at night. He now has peace of mind knowing that he’ll pay off his home 7 years early and as a result, save plenty in interest.

Under 35 homeowners to dominate housing

Millennials are moving in: under-

35 homeowners to dominate the

housing market next year

Millennials are moving in: under-35 homeowners to dominate the housing market next year

View photo

Rising rents may be forcing adults 35 and younger to do something they’ve been stolidly resisting: buy a home. Zillow, the real estate information service, says Millennials will comprise the largest demographic of home buyers by the end of 2015, edging out Gen X (those 35 to 50 year olds).

Home value appreciation will continue to cool down, from roughly 6% now to around 2.5% by the end of 2015. But rents will see no such slowdown, and will continue to grow around 3.5% annually throughout 2015,” said Dr. Stan Humphries, Zillow chief economist, in an analysis. “As renters’ costs keep going up, I expect the allure of fixed mortgage payments and a more stable housing market will entice many more otherwise content renters into the housing market.”

In the meantime, Humphries says builders will be constructing less expensive homes, in order to meet the demand.

“In recent years, home builders seem to have made a conscious decision to sell fewer, more expensive homes instead of more, cheaper homes,” Humphries said. “In 2015, that will change, especially as demand moves toward the lower end of the market as Millennials begin buying en masse. New home sales volume has been stuck around the 450,000 per year mark. In order to break out and get that number above 500,000, builders are going to have to start to build cheaper homes, which will help to narrow the price gap between new and existing homes and contribute to more rapid inventory gains.”

Millennials have so far delayed their first home purchase, as well as marriage and starting a family. But Humphries says as the generation grows older, they will be “a home-buying force to be reckoned with.”

Zillow has profiled the markets that seem to be most favorable for first-time buyers in the coming year, with strong income growth among 23-34 year olds, a growing number of entry-level homes on the local market and moderating real estate prices. Considering these factors, the top five best markets for new homeowners in 2015 will be Pittsburgh, Hartford, Chicago, Las Vegas and Atlanta.

How one woman paid off her mortgage 20 years early

When Jenna Rose began her hunt for a home in 2004, she had two things on her mind: A small mortgage, and paying off her new home fast.

With those two things at the forefront, Rose, who is now 49, began looking for the right home for her and her daughter in New Haven, Connecticut.

Now, 10 years later, Rose can proudly say that she is mortgage-free. Here’s how she paid off her mortgage in 10 years.

Getting an Affordable Mortgage

When she started her house hunt in 2004, Rose worked as an elementary teacher in New Haven, where she earned a salary of just over $48,000 per year.

“Although that’s a very decent salary, I did have a nine-year-old kid, and kids are always expensive, especially when you’re a single mom!” explains Rose, who adds that her daughter was one of the reasons she decided to buy a home in the first place.

“I went through a very tough divorce and lived in three different rental homes over a period of two years,” Rose says. “It was difficult for my daughter, Avery, and I wanted to give her some stability.”

But before Rose could give her daughter the stability she wanted, she first needed to make sure that she could afford a home. That meant finding a mortgage lender that could help her with the process.

“I called around and asked friends for recommendations, but in the end I met with a lender that advertised himself as ‘family friendly,” Rose says. “Turned out my instincts were right.”

Why? Because Rose says she knew her credit score wasn’t outstanding and she needed a lender who would work with her to make things happen. “The marriage and divorce left me with a credit score of just 630,” Rose explains. “That’s barely over the minimum of 620 that most lenders require to even consider you for a loan.”

With the help of her lender, and the fact that she was successfully paying down her student loans and other bills on time for the previous two years, Rose was able to get pre-approved for a loan.

“It showed the lender I was being responsible with my money,” she explains.

Rose was pre-approved for an $80,000 loan, which she adds was on the low side for her location on New Haven. “It’s an expensive city and back then houses often sold for upwards of $150,000,” Rose explains. “I was worried $80,000 would get me nothing.”

Finding a Home within a Low Budget

Rose’s low budget did prove to be somewhat problematic, as it took over five months for her to find a home.

“I knew I would have to go with a ‘less-than-perfect’ house, but as a single mom with no DIY experience, I didn’t want something that required a lot of work and time,” she says.

And that’s exactly the way Rose felt when she saw a $74,900 home with 1,109 square feet of space, two bedrooms and one full bath. The house required a significant amount of updating, as the house came with a cracked counter backsplash, scratched cabinets, and old carpet, among other things.

“However, the house had no structural damage,” Rose says. “So none of the changes required were affecting my quality of life.”

What’s more, in addition to the low price, the house had another major advantage: It was close to major roadways and parks, so it would be easy to get around and get some fresh air on weekends if she didn’t feel like driving far.

Once she took all that into consideration, Rose decided to take the plunge on the house. She signed for a 30-year fixed mortgage loan on September 4th, 2004.

“I ended up with an interest rate of 6.29 percent, which was just slightly higher than the average at the time,” Rose explains. “The lender accepted a 10 percent down, so I ended up spending almost $11,000 to get the house, including almost $7,500 down payment, closing costs and some taxes I had to pay in advance.”

Once private mortgage insurance (PMI) was added, her monthly mortgage payments ended up being $848 per month. “That was a lot of money for me at the time and I really had to stretch to pay it every month.”

Paying Down Her Mortgage

Rose wanted to get rid of her mortgage as fast as she could, so she attempted to add extra to her payment every month.

“Some months it was an extra $20, some months an extra $100,” she explains. “A good friend once gave me a scratch-off lottery card as a joke and I ended up winning $400 and putting the money towards the mortgage.” She added extra payments from bonuses at work, selling her car and buying an older one, and even reselling some old, unused electronics she owned.

After four years of making extra payments, however, Rose says she still owed around $62,000 on her loan. “I was disappointed and thought it would take me forever to pay the house off.”

Her solution? She decided to refinance in December 2008.

“By then, my credit score was up and I could afford to switch to a 15-year fixed mortgage loan,” she explains. The new loan was for $62,000 at an interest rate of 4.31, which made a huge difference: Her monthly payments went down to $662 per month.

Because Rose was already used to paying over $848 a month, she decided to keep paying at least that amount every month. “Most months I paid $1000, simply because I realized coming up with the extra $150 a month wasn’t that difficult,” she explains. “I gave up my cable, which cost me a ridiculous $90 a month, and got my daughter movies from the local library instead.” Eventually, she signed up with Netflix and started streaming instead.

Rose admits she caught a break a year later when she was promoted to vice principal at her school and her salary went up almost $9,000 per year. “I thought long and hard about it and in the end I decided to invest a percentage of it and put the rest towards the loan principal,” she says. “I knew a lot of people would have chosen to invest all of their money instead, but I didn’t have any other debt except some old credit card debt I paid off during the first year and I wanted to focus on my mortgage.”

Because Rose continued to pay extra money towards the principal, she actually finished paying off her loan in October 2014, just 10 years after she originally signed for it. “That’s technically 20 years faster than I thought it would happen,” says Rose.

Was it easy? Definitely not, Rose says. “I gave up a lot of things to pay off the mortgage,” she explains. “It took me two years to repaint the house and a couple more to replace those old cabinets and carpet.”

Plus, she adds that the house could use other updates, like new windows and a nicer fence.

“The good news is that now I can afford to focus on that because I don’t have a mortgage anymore,” she explains. “And since I’ve learned to live on a smaller salary, I can now focus on investing more and saving more for retirement.”