To Do List for Getting Your Finances in Order

It is always a good idea to get your financial situation in good shape before either selling or buying a home. Here are some tips to help you do that:

1.  Develop a household budget.  Instead of creating a budget of what you would like to spend, use receipts to create a budget that reflects your actual spending habits over the last several months.  This approach will factor in unexpected expenses, such as car repairs, as well as predictable costs such as rent, utility bills, and groceries.

2.  Reduce debt.  Lenders generally look for a total debt load of no more than 36 percent of income. This figure includes your mortgage, which typically ranges between 25 and 28 percent of your net household income. So you need to get monthly payments on the rest of your installment debt (car loans, student loans, and revolving balances on credit cards) down to between 8 and 10 percent of your net monthly income.

3.  Look for ways to save.  You probably know how much you spend on rent and utilities, but little expenses add up, too. Try writing down everything you spend for one month. You will probably spot some great ways to save, whether it’s cutting out that morning trip to Starbucks or eating dinner at home more often.

4.  Increase your income.  Now is the time to ask for a raise.  If that is not an option, you may want to consider taking on a second job to get your income at a level high enough to qualify for the home you want.

5.  Save for a down payment.  Designate a certain amount of money each month to put away in your savings account.  Although it is possible to get a mortgage with only 5 percent down, or even less, you can usually get a better rate if you put down a larger percentage of the total purchase.  Aim for a 20 percent down payment.

6.  Keep your job.  While you don’t need to be in the same job forever to qualify for a home loan, having a job for less than two years may mean you have to pay a higher interest rate.

7.  Establish a good credit history.  Get a credit card and make payments by the due date.  Do the same for all your other bills, too.  Pay off the entire balance promptly.

Realtor^®  Magazine, reprinted by permission of the National Association of Realtors^® , 2008 

Seven Reasons to Own Your Own Home

There are many benefits to owning your own home. Here are 7 you may want to think about when deciding on buying a home:   1.  Tax breaks.  The U. S. Tax Code lets you deduct the interest you pay on your mortgage, your property taxes, as well as some of the costs involved in buying your home.  2.  Appreciation.  Real estate has long-term, stable growth in value. While year-to-year fluctuations are normal, median existing-home sale prices have increased an average 6l.5 percent each year from 1972 through 2005, and increased 88.5 percent over the last 10 years, according to the National Association of Realtors.^®    In addition, the number of U. S. households is expected to rise 15 percent over the next decade, creating continued high demand for housing.   3.  Equity.  Money paid for rent is money that you will never see again, but mortgage payments let you build equity ownership interest in your home.  4.  Savings.  Building equity in your home is a ready-made savings plan.  And when you sell, you can generally take up to $250,000 ($500,000 for a married couple) as gain without owing any federal income tax.    5.  Predictability.  Unlike rent, your fixed-mortgage payments don’t rise over the years so your housing costs may actually decline as you own the home longer. However, keep in mind that property taxes and insurance costs will increase.  6.  Freedom.   The home is yours.  You can decorate any way you want and benefit from your investment as long as you own the home.   7.  Stability.    Remaining in one neighborhood for several years gives you a chance to participate in community activities, lets you and your family establish lasting friendships, and offers your children the benefit of educational continuity.

Reprinted from REALTOR^®  Magazine with permission from the National Association of Realtors^® , 2008

Five Things to do Before Putting Your Home on the Market

Before you take the final step of listing your home for sale, there are key steps you should take to help get the home sold:

1.  Have a pre-sale home inspection.  Be proactive by arranging for a pre-sale home inspection.  An inspector will be able to give you a good indication of the trouble areas that will stand out to potential buyers, and you will be able to make repairs before open houses begin.

2.  Organize and clean.  Pare down clutter and pack up your least-used items, such as large blenders and other kitchchen tools, out-of-season clothes, toys, and exercise equipment.  Store items off-site or in boxes neatly arranged in the garage or basement. Clean the windows, carpets, walls, lighting fixtures, and baseboards to make the house shine.

3.  Get replacement estimates.  Do you have big-ticket items that are worn out or will need to be replaced soon, such as your roof or carpeting?  Get estimates on how much it would cost to replace them, even if you don’t plan to do it yourself.  The figures will help buyers determine if they can afford the home, and will be handy when negotiations begin.

4.  Find your warranties.  Gather up the warranties, guarantees, and user manuals for the furnace, washer and dryer, dishwasher, and any other items that will remain with the house.

5.  Spruce up the curb appeal.  Pretend you are a buyer and stand outside your home.  As you approach the front door, what is your impression of the property?  Do the lawn and bushes look neatly manicured?  Is the address clearly visible?  Are pretty flowers or plants framing the entrance?  Is the walkway free from cracks and impediments?

Realtor^®  Magazine, The National Association of Realtors^® , 2008

First Time Home Buyer Mistakes

If you have not as yet purchased your first home, here are some common mistakes that some ‘first timers’ can make:

• Not asking enough questions of your lender and ending up missing out on the best deal
• Not acting quickly enough to make a decision and someone else buys the house
• Not finding the right agent who is willing to help through the complete homebuying process
• Not doing enough to make the offer look appealing to the seller
• Not thinking about resale before buying. The average first-time buyer only stays in their first home for four years.

Benefits of Home Ownership

While the real estate market is going through a transition at the current time, there remain true benefits to home ownership. Did you know …

• Over the past 30 years, home values have risen more than 6 percent annually
• On average, the value of a home nearly doubles every 10 years
• Sixty percent of the average homeowner’s wealth comes from home equity
• The average homeowner’s net worth is nearly 46 times that of a renter’s

Homeowners benefit from the power of leverage. At an annual appreciation of 5 percent, a 10 percent down payment on a home will return 94 percent after 3 years. After 5 years, the rate of return increases to 225 percent and after 10 years, 623 percent.

There will always be fluctuations in the real estate market through the years; good times, and not so good times. And yet, through the difficult times, owning a home remains the American dream.

National Association of Realtors – Housing Market Facts

Housing Prices

Yale University economist Robert Shiller recently calculated the long-term trend in U. S. housing prices. The good news? His conclusion is that since 1890, housing prices have risen 0.4 percent per year after inflation.

Had the calculations begun in 1960, the result would have been that prices rose 0.8 percent per year, he says.

Ending the calculations at 2000, before the housing bubble, would have reduced the estimate of growth from 1960 through 2000 to 0.2 percent.

Shiller concluded that despite the current housing slump, home prices are still above their long-term trend.

Published in the REALTOR, Feb 8, 2008

Today’s Real Estate Market

Listening to all the media reports on the current state of the real estate market would certainly frighten anyone. However, there is one thing unique to the New Jersey real estate market … it does not follow national housing trends. There are communities throughout our state that have continued to do well in today’s changing market.

It is important to keep in mind that all real estate is local and homeownership is one of the best long term investments an individual can make.

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Coming soon!

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April 2008!