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2018 Realtor Tips: Handle Rising Interest Rates

 1000 500 Sam Radbil
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Rising interest rates in real estate — sounds awful for both homebuyers and realtors, right? Well, you’re in the right place find out. Below, the C4D Crew will outline what factors influence interest rates and what rising interest rates mean for the real estate industry.

The 2008 housing crash was hard enough to deal with. Besides the record foreclosure numbers, Realtors had to deal with very tight lending conditions along with a new and stringent set of government banking regulations. Gone are the days of wild west type appraisals and easily obtained no income documentation loans. While this period has been replaced with a mortgage market some would call the “new normal,” there is an evolving twist MN Realtors now must deal with.

Rates Are Going Up

Mortgage rate predictions for 2018 and 2019

Agency

2018 Prediction

2019 Prediction
Mortgage Bankers Association 4.9% 5.4%
Freddie Mac 4.6% 5.1%
Fannie Mae 4.5% 4.5%
Realtor.com 5.0% No forecast
National Association of Realtors 4.5% 4.8%
Kiplinger 4.7% No forecast
National Association of Home Builders 4.5% 5.0%

Early in the recovery, nicely qualified buyers could actually get 30-year traditional mortgages at rates around 3.25 percent. Now, rates are nudging up to the psychological five percent barrier. Simple math shows us that a $200,000 mortgage at 3.25 percent costs $870.41 per month. At five percent, however, the payment jumps by $203.23 to $1073.64.

To get that payment close to $870.00 with a five percent interest rate, the mortgage amount needs to drop to $165,000. This is a significant 18 percent drop in purchasing power. In other words, a buyer that could have qualified for a $200,000 mortgage at 3.25 percent, now may only be able to finance $165,000.

What Do Rising Interest Rates Mean?

CNBC reported in February:

Sales of newly built homes are falling, and the culprit is clear. Homebuyers increasingly can’t afford what they want. Higher mortgage rates, combined with the loss of homeowner tax breaks in some of the nation’s most expensive markets, are taking away buying power.

Home Sales

Image source: Redfin

Sales fell in December, when the new tax law was signed, and then again in January, when mortgage rates moved higher. Sales are now at their lowest level since August of last year.

“It seems that the jump in mortgage rates in January had an immediate impact on contract signings,” wrote Peter Boockvar, chief investment officer at Bleakley Advisory Group. “You can’t get more interest rate sensitive when it comes to homes and cars with the associated cost to finance.”

What Realtors Can Do

Savvy Realtors need to understand that while upward interest rate trends can be an issue, there are some ways this situation can be managed. Sellers can make things easier by offering to pay closing costs buyers certain remodeling credits, or of course lowering sale prices.

Rising Interest Rates Loan Rejection

Buyers may need to rethink their plans for an ultimate dream home and take an intermediary step instead of a final one. Maybe that $350,000 home will have to wait and a $240,000 will have to work for now.

Make It Happen Now

The upward interest rate trend is no secret, however, and Realtors should push both sides to get deals done before rates rise even more. Lock in today’s rates as soon as possible as each Federal Reserve interest rate hike will do more damage to the housing market.

Consumers Getting Priced Out?

Family Buying A Home

In a rising interest rate environment, more consumers are going to be priced out of traditional mortgage financing, and this is where we at C4D can help. Using MN contract for deed, we make deals happen that banks have refused. We understand bad credit issues, and we want to help ensure that good people that may have had some financial issues are able to become homeowners. Don’t give up on your rejected traditional mortgage deal; instead, bring it to C4D and we will see if we can help.

The American Dream: Immigrant Homeownership

 1000 500 Sam Radbil
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The housing market needs immigrants, and the gap between native-born and immigrant homeowners has been shrinking for several years. But housing for immigrants is a tough subject to navigate. And the biggest question is … is it possible for more immigrants to become homeowners in 2018?

There are many ways to enter the U.S. legally. For example, student visas are relatively easy to get if you are enrolled in a US educational institution. Since foreign tuition rates may be higher, many universities recruit foreign students and will actually help them receive visas.

If you are a non- US citizen starting a business and you plan to invest money in it and therefore create American jobs, there are visas available. You can get a visitor’s visa–for vacation purposes–or you can apply for an immigrant visa. You may be able to get a green card that allows you to work in the US. If you do remain in this country after your visa has expired, however, you become undocumented, and that can lead to difficulties.

I’m Staying Here Anyway

Whether you have a green card, a student visa, a business or professional visa, or whether you may be here illegally, you may decide that you want to buy a house. Maybe you’re tired of renting, are pretty sure that you are not going to have legal trouble if you stay, and like most Americans, you want to build future equity. You may have read that even financially secure US citizens may have trouble getting mortgages. If that’s the case, should you as a non-US citizen even consider buying a house, and furthermore, can you even do it?

Yes! It Can Be Done

President Trump’s failed university offered this advice to its students in a 2010 blog brought to us by The Weekly Standard.

“First of all, you do not have to have a social security number to buy or sell a home in the U.S. Some mortgage lenders require one; however, there is not a law requiring one. You do need to have some form of government issued identification, even if it is from another country (such as a passport or driver’s license).

Those without a social security number will need an ITIN (individual taxpayer identification number) number which is issued by the IRS to foreign nationals for paying taxes on money they earn in the U.S. (The author) noted that while it is difficult for illegal immigrants to get mortgage loans, several banks have programs designed for those immigrants. ‘Lastly, it is not illegal to own real estate in the U.S. even if one is in the country illegally,’ she wrote. ‘If getting a mortgage is not an option, one can always pay cash.’”

Housing for Immigrants

Problems That Can Arise If You Don’t Have the Cash

While a cash purchase may be completely legal, obtaining a mortgage–if you don’t have the cash–can be difficult for the following reasons:

  • Hard to prove foreign income.
  • Banks may not believe your foreign accountant.
  • Lenders may fear that you will be deported.
  • Thin credit or no credit history.
  • Bad credit MN.
  • No ITIN or SSN.
  • Low credit score.
  • Other legal issues.
  • Massive student loan debt.

Immigrant Housing No Cash

Housing for Immigrants: What Now?

So, you’re here, you’ve found a great home, you have a job, you can afford a modest mortgage payment but you just can’t convince a lender to take that risk and allow you to become a homeowner. Now is the time to think non-traditional financing. With a contract for deed, you can pay for your home on installments, and after you have completed all of your payments, you will own the property. These transactions can be accomplished by two willing parties without concern of bank denial. There are even reputable Minnesota lenders like C4D that can help you do this.

Rent-To-Own

Contract for deed’s cousin, rent-to-own might also be a viable option. NOLO says, “A rent-to-own agreement is made up of two agreements: a standard lease agreement, and an option to purchase; these may be incorporated in one document or two separate documents.” In this scenario, a portion of your rent goes toward a down-payment that you can use to obtain future financing.

Rent To Own for Immigrants

Exotic and Risky?

Don’t let a conservative banker derail your plans for home ownership. Of course, alternative home financing plans can be costlier and have some inherent risks. Didn’t you take a risk, however, when you came to the US in the first place?

Just Do It

As we have shown, they are ways to purchase a home even if you’re not a US citizen. Make sure you understand all of the options available to you and start with a bank or mortgage broker, and if that doesn’t work, consider MN contract for deed or rent to own, even if you have bad credit or immigration issues.

For more immigrant housing resources, view the links below:

Should I Buy A House?

Are You (Actually) Ready To Buy A House?

 1000 500 Sam Radbil
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Should I buy a house? This is the question that almost every 20- or 30-year-old must answer at some point in time. But are you getting terrible advice from parents and friends? Or do they actually know what they’re talking about? But is buying what’s best for you individually? There are so many questions to answer.

And to add to the endless questions, your parents did it, your friends and co-workers are doing it, everyone says it’s the American dream, but buying a home is a major obligation, and while there are great reasons for joining the club, there are equally important reasons for waiting.

Let’s first look at the top five reasons you should NOT buy your first home just yet:

Should I Buy A House?

Why You Should NOT Buy

  1. Everyone is telling you to do it

Just because you just got married, graduated from college, got a great job or turned 30 doesn’t mean that you automatically need to buy a home. Individual circumstances are always different, and don’t take the home ownership path just because someone else tells you it’s time to do it.

  1. You got a new job and must move

It can be stressful to suddenly find out that you have to move because of employment changes. Still, that’s not a good reason to think you have to immediately re-create your present living circumstances by buying a house. Those that quickly buy houses in an unfamiliar city sometimes find out that if they would have waited, they would have chosen a different neighborhood. Furthermore, if you think you may be transferred again within the next five years, renting may be a better option.

  1. You got pre-qualified for a mortgage

Don’t borrow money just because you can. If you qualify for a mortgage today and are financially prudent, you will probably qualify in the future without much difficulty. While mortgage qualification is paramount, it should never be the only reason to purchase a home.

  1. You are loaded with debt

 Millennial Debt

*Check out how many Millennials are NOT buying homes because of debt!

If you are just getting by and carry large credit card balances, high-payment car loans and a lot of student loan debt, you may want to make sure that you can afford a mortgage payment + taxes + insurance + maintenance + furnishings. If you can’t, then wait until you can.

  1. You found a fixer-upper!

Too much HGTV may be bad for your financial health. While it’s fun to watch the Property Brothers fight through yet another renovation, reality TV sometimes skips a lot of steps and if find out you need a supporting beam and don’t have $10,000 to pay for the work, you might have been better off renting.

OK, so that takes care of the reasons not to but a home; now look at these reasons to jump into home ownership:

Why You Should Buy

Buying A Home

  1. You are finally ready

If you have saved a downpayment, your overall debt situation is good, you don’t like giving the landlord money every month with no return for you, and you really like cutting the grass, you might be ready to buy a home.

  1. You want to build equity

Go to bankrate.com and calculate an amortization schedule. Even though your equity may be slow to build, a portion of every mortgage payment will go toward your principal balance. A 30 year mortgage means just that—after 30 years you will own your home and your mortgage will be gone.

  1. You’re in control at work

You know when you have job security and also when things may be tenuous. If the future looks great, you have one less thing to worry about, and it may be the right time to become a homeowner.

  1. Mortgage interest deduction

Even though the latest tax bill dinged the mortgage interest deduction for the rich and famous, you can still benefit if you itemize deductions. Remember however, that the standard deduction has been significantly increased, so talk to your accountant about this one. Ask about property tax deductions also.

  1. We fear change

Home ownership takes a big “what if” out of the picture. As long as you make your payments, you can stay in your home. If you rent, you could be facing a different situation at lease-end, or if, for example, your apartment building is sold. Homeownership brings needed stability as it’s great knowing that you are in control.

But Wait — You Have Options!

Remember, bank mortgages aren’t the only way to finance homes. There are rent-to-own plans and better yet, MN contract for deed situations available. Alternative and non-traditional financing are two great paths to homeownership, so if you do have bad credit, large student loan balances, judgments, levies or just general bad credit, find a company like C4D that can help you.

Real Estate Blogs

19 Amazing Real Estate Blogs To Follow In 2018

 1000 500 Sam Radbil
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The real estate industry has changed a lot over the last decade. New technologies have impacted the industry in a huge way. It’s hugely important to keep up with new technology, consumer psychology and other innovations that change the way real estate agents do the job. A great way to stay in tune with the industry is to consistently read the top real estate blogs of 2018.

Whether your customer base is primarily young professionals, millennials, baby boomers or even retirees, it’s critically important for you to be aware of what’s happening in your ever-changing market. These sites can help you stay informed and communicate more efficiently with your clients:

National Blogs

Inman

Inman is a techy blog that also has some great stories about Realtors’ experiences in the field. In addition, it has a great pop-up that links to valuable 2018 market predictions.

Bigger Pockets

This site is more entrepreneurial and features articles about real estate investment like, “10 Lethal Mistakes to Avoid on Your First Real Estate Investment.” If you have clients that are considering flipping properties, Bigger Pockets a nice place to send them.

Redfin

Redfin is a traditional web real estate portal like Trulia, but unlike others, Redfin also makes money as a real estate brokerage. Even though you might consider them a competitor, it’s certainly valuable to see what they are doing. This site is like the CNN of standard big real estate sites, and is full of varied information.

Realtor.com

While Redfin’s site may look like CNN, the one is similar to MSN, with generic and wide-ranging articles like “Pending-Home Sales Tumble to a 3-Year Low as Housing ‘Crisis’ Worsens.” This site is more newsy than bloggy.

REwired

Rewired describes itself as “open commentary on everything impacting the U.S. housing economy.”

Here you will find articles ranging from the history of property valuation to the extent that high student loan debt is affecting mortgage qualification rates. Lots of more in-depth blogs here.

Bankrate News

Bankrate was one of the first, and is still the go-to site for many that are looking for a wide variety of loan rate calculators. It also boasts a good section that covers straight real estate financing news in a no-frills manner.

Geek Estate

This site claims that they “analyze Real Estate Technology and trends, and provide advice for tech savvy agents, brokers, technology vendors, consultants, and entrepreneurs.” We would definitely agree, and if you lean to the tech side, or just want to know how to begin to upgrade your business systems, Geek Estate provides great info.

REtipster

Investor Seth Williams says that his site will show you how to make money in real estate with less risk and more personal free time. If that isn’t the best of all worlds, what is? Worth a look, though.

RISmedia

Rismedia’s real estate site features news, blogs, advice, and some good general information. Not our favorite for cutting edge info, but still a good place for general guidance with an abundance of varied articles.

Rentec Direct

While this site focuses on landlords and their tenant issues, it also addresses tenant concerns like “What to do if you are facing eviction.” If any of your clients are landlords or want to ascertain the real costs of renting a property, this is a good place to start.

Agent Image

Agent Image is a real estate web development site. As you know, it’s critical to have an easily readable, modern and up-to-date site, and Agent Image will get you there. There are also blogging and SEO guidelines here.

Property Shark

Property Shark deals with high end properties in luxury destinations. Sample articles outline the 10 most pricey US zip codes, and if you have any interest in the upscale market anywhere in the US, this site is for you.

Realty Times

Realty Times is a nice general real estate newsletter with lots of agent tips and advice. It includes a useful local market outlook section and is easy to navigate.

Local Blogs

Minnesota Real Estate Journal

If you are familiar with your city’s local business journal, you’ll like what you find here: Local news, features, trends and advice all presented in a business-friendly manner. You’ll find all of the latest Minnesota property development news here.

MPLS Realtor

This is the Minneapolis Area Association of Realtors’ site, and is loaded with membership news, education opportunities, and market research. This is an excellent place to visit at least once a week as you keep abreast of major trend changes.

Minneapolis / St. Paul Business Journal

Local business journals are usually real estate intense, and this one is no different. You can find a few breaking real estate news articles every week, along with information about the top agents and where they are currently working. Their Top 25 lists are invaluable marketing tools.

Homes MSP

Homes MSP is a ReMax site. That said, there is some good information there—especially if you want some new recipes (!) Anyway, if you have some extra time, take a look.

REjournals

They say they are “the midwest’s leading source for real estate news.” No too many informational blogs, but there is a nicely updated Midwest real estate market section.

MN Property Group

This is another Remax site with listings interspersed with some worthwhile posts. You do need to check the pulse of the local market, and looking at sites like this will give you insight into what’s happening.

That’s a lot of reading, and we know you’re undoubtedly busy, but be sure to spend some quality self-education time adding to your cumulative local and national market knowledge.

For additional blog posts (new posts every Monday) from the C4D Crew, check out this page.