REALTOR® Kharee Shorter shares six easy points to remember when starting a home search.

 

 
“First, determine how much home you can afford. As a rule of thumb (and only a rule of thumb), you can afford to buy a home equal in price to about three times your gross annual income.

More precisely, however, the price you can afford to pay for a home will depend on six factors:

• Your income

• The amount of cash you have available for down payment, closing costs, and cash reserves required by the lender

• Your outstanding debts

• Your credit history

• The type of mortgage you select

• Current interest rates

The process of buying a home is much easier if you start out by getting pre-qualified or even pre-approved with your lender for a home loan. This amount will let you know how much home you can buy, and makes you a more credible buyer.”

A good motto for new home buyers should be “always be prepared” – preparation will make your home purchase run much smoother.

Click here to read Kharee Shorter’s blog.

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To recap the top stories in real estate during 2009, we reached out to our  friends in the blogosphere and in the media. Not surprisingly, respondents agree with David Kres of Buyers Brokers Only, LLC who says, “2009 will go down in history as the year of the first-time homebuyer.” Supported by the tax credit and low interest rates, first-time buyers had an unprecedented showing in 2009 and helped to boost the struggling economy with their aggressive approach to the market.

Although first-time buyers were this year’s big stars, the drama surrounding  foreclosures and short sales almost stole the show. Mary Shanklin of the Orlando Sentinel and Martin Wolk of MSNBC agree that foreclosures, and the problems created by them, were among the most important stories of 2009. Coined “toxic assets” these homes were either sitting vacant or creating a flurry of paperwork as first-time buyers and investors competed to find the deal of a lifetime. Due to defaulting loans,  foreclosures in 2009 helped cause the financial collapse, but by year’s end had become the most sought after properties. 

The rush to buy was due to a miraculous combination of factors. Interest rates continued to stay low, setting records as they fell against speculation. Low priced foreclosures and the high inventory of homes on the market brought prices down to, dare I say, affordable levels. Even the luxury home market saw steep declines as “sellers of luxury homes began driving their prices way down – some with price reductions in the millions,” says Kelli Hart of the OC Register.

Home sales continued to drop throughout the year until the Fed stepped in and passed the $8000 tax credit for first-time homebuyers. Then home sales shot straight up, according to Kay Severinsen from the Chicago Sun Times, to their highest levels in more than two-and-a-half years. REALTORS® Sonya Loose and Timothy McBrayer along with Kristin Schott of the OC Metro, all agree that the tax credit is one of the most important stories of 2009.

The impact all of these significant events will have on 2010 has yet to be seen. “The big unknown for 2010 is whether all the private and public efforts to strengthen the market can be sustained in the face of what will probably be rising interest rates,” says Les Christie of CNNMoney.com. With the tax credit extended and expanded, the hope is that 2009’s momentum will carry into next year and the real estate market can continue to aid in our country’s economic recovery.

-Naj Alikhan, Social Media Moderator, REALTOR.com®

The unprecedented affordability in the housing market is coming to an end as interest rates begin their rise and home prices stabilize in many areas. Although mortgage interest rates have fallen from their summer high, the speculation is that the sub five percent rates are gone again. As the economy recovers, expect interest rates to rise even more.

Ki Gray blogs about rising interest rates and affordability:

“So are sub 5.0 rates gone forever? The short answer is probably yes. While rates might briefly fall below 5 in the next month, for the most part the era of sub 5.0 rates is over. Mortgage rates rose for the third straight week. The 30-year rate rose from 5.00 to 5.03.The only two mortgage products that are interesting is the 30-year and the 15-year fixed rates. A mortgage payment is about $13 more than two weeks ago and about $2 less than it was six months ago.

So why are rates rising? Although it’s a weak recovery, the economy by most accounts is experiencing a recovery. In addition, the government has lowered the amount of mortgage-backed securities it was buying, which was keeping rates artificially low.”

Buyers on the sidelines are realizing that interest rates rising a percentage point is a reality. Between now and a year from now we could see marked improvements in the economy, causing higher interest rates and inflation. Gray advises those looking to buy to lock in their mortgage while affordability is still high.

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