A Financial Advisor’s Guide to Real Estate Investment in an Uncertain Economy

We are living through uncertain times that seem to be getting even more uncertain with every passing month. In an environment like that it can be difficult to invest and think about your financial future. David Means from the DeNovo Advisory Group joined us on the Where We Live Podcast to discuss whether or not real estate is still a wise investment during uncertain times and how to approach investment and planning for your financial future in 2022. 

How to Invest In Uncertain Times 

There are a number of approaches you can take to investing but David favors the “Warren Buffet” approach to help his clients build a solid foundation for their financial futures. This approach focuses on long-term growth rather than worrying about the short-term rollercoaster. Real estate offers a major benefit here in comparison to other forms of investment because you can’t see the short-term price fluctuations. It is much easier to pursue long-term growth because you’re not watching the market movements like a hawk. 

Long-term growth is about building wealth for 20+ years ahead. In the future you can use these assets as leverage or liquidate them to fund future life stages like retirement. 

It Is a Mistake to Sell Assets In Uncertain Times 

Where inexperienced investors often go wrong is they sell their investments when prices drop. The gut reaction to get out when times are tough looks sound on the surface. They are worried prices will continue to fall, so they’d rather sell now rather than eat a bigger loss. Often, they would also prefer to have a little more liquidity to weather uncertain times too. 

The reason why you need to fight this gut instinct is because it goes against the most basic of financial principles, “buy low and sell high.” It is daunting to buy assets during economic uncertainty. You are tying up your money and watching prices continue to drop. What we continue to see though is that regardless of short-term economic events, the housing market and stock market continue to grow long-term. So, you should aim to buy assets in economic downturn and sell them in times of stability. 

What Makes Real Estate a Recession-Proof Investment?

Real estate is such a monster asset class and responsible for most of the wealth that everyday people will generate in their lifetime. We are seeing future generations using their real estate as a retirement nest egg. That is something that David encourages all his clients to consider when purchasing real estate. It’s not just about buying your dream home; it’s about buying something that will provide a stable financial future. 

A unique benefit that real estate offers is that you can leverage other money to invest in an asset. Instead of putting down the entire value of the property, you can use the bank’s money to leverage returns. This is completely different to say the stock market, where you need to put the entire value of the investment into the market to play. By making a smart investment, this leverage can provide a huge tailwind for investors. Working with the right professionals is key in order to leverage mortgages effectively. 

What Is the Next Step To Financial Freedom After an Emergency Fund? 

The first step to financial freedom once you have discretionary income is building an emergency fund. That is a universally accepted standard amongst all financial advisors. Where advice usually differs is what to do next. 

David advises his clients to play defense where they play offense. That means insuring your assets and insuring against future liabilities. If you have income from working, then that means life insurance and disability insurance to protect your earning ability. If you have real estate, that means insuring your real estate assets. This step builds a stable financial foundation so you can keep moving forward instead of being knocked backwards by circumstances outside of your control. It also helps protect your family in the event that you’re not around to. You know that your kids and partner are taken care of not only while they’re grieving, but also in the long-term. 

Once that has been taken care of, then it is time to talk about taxes. Financial advisors like David and the team at DeNovo Advisory Group can help you claim tax deductions short-term and look at long-term tax sheltering, so assets are only taxed once. Those are the steps that a financial advisor would suggest to ensure you are able to sustain the wealth you build. 

If you’re ready to take the next step towards financial freedom and want to contact David to talk about your options visit the DeNovo Advisory Group website to talk about your finances.  

Protecting Your Investment: Home Insurance vs Home Warranties

Today, we’re discussing how to be prepared for what might happen. If you’re brand new to home ownership or just considering dipping your toe in the water, you’re aware that things can (and do) go wrong. While we hope that this doesn’t happen to you, acts of God are out of your control. Hail, robbery, flood; the list is long!

As a new homeowner, you are a target of marketing for countless products and policies advertised to protect you. What is the difference between home insurance and a home warranty? What’s the best way to protect against the unknown?

What Is Home Insurance?

Home insurance covers you in the event of an accident or a disaster. It fixes the damage to your house, to your yard, to other structures and your personal property inside of the house. It really protects you against things that are absolutely out of your control and/or going to be a big out of pocket expense. Most common things that we see here are hail and flood.

Other examples beyond mother nature would be burglary. Home burglary insurance will help you out in that arena. Also, if you have a guest over at your house and they trip on the stairs, they get injured, and they now have medical bills - It could help out in that situation too, since it happened on your property, in your house.

A ton of companies offer home insurance policies, larger ones like State Farm and Allstate as well as local companies. You have the freedom to shop around on home insurance and it is required if you have a mortgage. Your lender requires you to have home insurance, because they want to protect their investment in lending you the money to actually buy that house.

Cost Breakdown

For your insurance policy, you pay an annual fee and it's likely that if you have an escrow set up, it feels like it's monthly to you, but it's actually paid once a year. If you need to make a claim, you just pay the minimum deductible and then your insurance policy helps cover the rest of the expenses. You can shop every single year for the best coverage for you and then you need to have money set away for that deductible as well in the case that an event happens. Luckily, instead of having to set aside $20,000 for a new roof, it might only be $1,000- $5,000. It can really help you in terms of cash flow, budgeting, and protecting you from having to spend a ton out of pocket unexpectedly.

Claims Process

Let's use the roof issue as an example, because that is definitely one of the most common scenarios that we see in north Texas. We're going to walk you step by step through how that claims process would actually work. 

Damage Occurs -

The shingles are there to protect  and shed water away from your house. As the shingles deteriorate, they are less and less likely able to do that job. A leak occurs so the homeowners then call the insurance company they chose and now hold a policy with. They file a claim and say, “Hey, we had hail damage. I need somebody to come out and take a look at my roof and see if insurance would cover the cost of a new roof.”

Adjuster Assessment -

They then have what's called an adjuster come out. The adjuster works for the insurance company, they assess the damage to see if it's a valid claim and if it's something that the insurance company should cover. If they say the claim is approved, you would pay your deductible and they would complete the roof work and basically cover any of the cost above what your deductible was.

The Deductible - 

What we most commonly see with roof deductibles is a range from 1% to 4%, and that's a percentage of the value of your policy. So if you have a $400,000 home, a 1% policy means you're going to pay $4,000 deductible to have your roof replaced entirely. If you have a 4%t deductible, your deductible is going to cost $16,000 on that $400,000 home, which is a very large and substantial difference. You do have to pay something, but paying $4,000 for a brand new roof is well worth the investment.

Just to reiterate, home insurance is required if you have a mortgage. If you do not maintain home insurance, your lender is going to put a policy in place for you and you are not going to like it because it's going to be expensive. They have a luxury taste in home insurance, because they're not paying for it.

Home Insurance Shopping Musts!

We're going to give you some tips on important things to look for when shopping; We advise buyers a lot on this as they are looking for homes and assessing what insurance policies they need. 

#1 Be aware if you are in an area where you're going to require or would want special insurance. For example, in California you can add on a policy in case of an earthquake. Sometimes lenders will require you to have such things, some of them they will not. You just have to assess your risk tolerance, your financial situation, and whether that's worth paying for those kinds of policies for you and for your specific home.

#2 We want you to not only look at how much this policy cost, but also the deductible. Oftentimes the least expensive policy has the largest deductible. We are advising that you pay special attention to the deductible in the event that you need to replace your roof, because chances are fairly high that you will need to use that and pay that deductible. Compare that along with what is how much the policy costs? What's the actual annual payment? A cheap policy might look really attractive in the short term, but if they don't actually pay for what they need to do in the long term, it may be a lot more expensive for you.

#3 We want to know who will actually pay out in the event of an issue and I would say that the best way to figure this out is just word of mouth. Who do you know that has a policy with a certain company, ask them their experience or look up reviews! Chances are that your local community has plenty of insurance brokers who help you shop those policies. They can kind of compare everything side by side. We have a great one we're always happy to connect you with, so you don't have to do all of that individual searching yourself!

#4 You want to understand what the claims process is like and really who you can communicate with when you have an issue. There are a lot of companies, especially recently, that are going online only - they don't even have service representatives. The claims process is completely online and you are at the mercy of how they move that process along. There's no one whose office you can walk into and say “what's the status” or a phone number you can call and ask the questions that you need to. Be aware of those cheaper options where it's all online, you don't have an actual agent that's there to represent you, Whereas, a good agent will tell you whether a claim is even worth filing because it may not be in your best interest to file a claim for something. We see a ton of value in having an actual local agent that can just give you more guidance.

#5 When you're comparing to make sure that you have enough personal property coverage, you can include things like your wedding ring or some expensive piece that you have in your home. You don't have to have your homeowner's policy and your car policy through the same company, but you can and oftentimes there's opportunities to bundle those together and save a little bit of money.

The World of Home Warranties

We're going to talk about home warranty now in detail. Which, in contrast, is an optional policy that protects your budget more than it really protects your home. It covers the major systems and appliances from normal wear and tear, but it really protects you from big expenses all at once. Home warranty is typically a one year at a time policy and you can continue to keep it on, but it's one year at a time so you could shop it each year as you do your home insurance. 

It's a policy that protects the major systems and appliances in your home. An average policy is going to cost you $500 hundred bucks a year, depending on kind of what you include.  How you use a home warranty is, if you had a leak under your sink, you can call to tell them the issue, they're going to come out to fix it, and what you pay for is the service call. Your dishwasher goes out or your refrigerator goes out, if those are covered and they come out and service those items.

It’s common that this is part of a real estate transaction here in Texas, where the seller would pay for a home warranty of the buyer's choosing up to a certain amount. You have complete freedom to choose and if you want to buy a more expensive policy, you just pay the difference from what was written in the contract to the policy that you chose. It's a one year policy and the thought behind this is that it helps so that you don't have some large, unexpected expense right after closing. This will protect you.

Warranty Woes

Here’s the deal, home warranties have a really bad reputation for actually paying out. It really matters when you're shopping what policy that you choose and which company you choose. We are partial to more local home warranties where there are people that we can physically get a hold of. We completely can see the value of a home warranty, especially the first year that you own a home if you don't have good savings and an emergency fund. For every homeowner we recommend that you have an emergency fund or an unplanned expenses fund, because there are going to be things that go wrong that you just don't foresee. It's good to have $5,000 in a little savings account so you have a buffer. A home warranty can really help with your budget in that as you attempt to build up that emergency fund that first year, all you have to pay is your service call.

In conclusion:

We really hope that you walk away from this article with greater clarity on what function insurance serves and how a home warranty could supplement that while one is generally required, the other can assist if you don't have emergency savings or just don't want an unexpected expense right after closing.

If you guys have any further questions, please shoot us a note in the Where We Live Facebook group. We love to connect with you all over there so come join us! If you're a current homeowner and want to know more about how to keep your home in the best shape it can be signed up for our monthly home maintenance checklist at WhereWeLivepodcast.com.

Brianna & Keelie

Renting Vs Buying

We're talking to you renters! Would you be surprised if we told you it wasn't always the right choice to buy? We process these decisions daily and we'll shoot you straight on the reasons to keep renting and when it's time to seriously consider making a new home purchase. We have to assess what's your current status of where you are living, your motivation for moving, and what your current rent is. 

Let’s go ahead and get money-talk out of the way. Rent is probably the first real data point that we need to talk about to help you make this decision. If you compare how much you're paying in rent to how much of a house you could buy for that same payment, that's a really good launching point for this conversation. Let's be clear, when we say house, we mean any sort of property that you could own: condo, townhouse, duplex, or a standalone family house. Now, the way that you determine how much you pay in rent would actually buy in a mortgage is by just having a conversation with a lender. 

Lenders Are Your Best Friend

Consulting with a lender is not as intimidating as it may seem, even a quick 30 minute conversation with them can be extremely helpful. You'll tell them what your budget is once you've calculated what you're currently spending monthly on your living expenses, what are you willing/able to pay if you're buying a home, what your credit score is, and how much you have for a downpayment. Based off of that they can kind of tell you, “OK, this is the ballpark that you could get for a house.” The two most important people to have on your team, if you're going to purchase, is a realtor and a lender.

Another thing to speak with a lender about is if your credit is in a place to buy. Maybe you're going to be surprised when you talk to them and they say, “Hey, we're going to need you to spend the next couple of months repairing X, Y, Z, paying off this, or saving up for a down payment.” They are experts at being able to coach you on what tools you need to be able to put yourself in the best situation to win the house that you really want. That part of checking your financial picture can never be done too early. It would really help you if you need to rent another year just to get yourself in the place that you want to be, to buy the house that you want to buy.

Before we wrap up this segment on lenders, let’s quickly touch on interest rates, because I’m certain that’s all you’re hearing on the radio and news lately. What low interest means to you, in basic layman's terms, is that you can buy more house now with the same qualifications. On the flip side you wouldn't be able to afford as much and would have to pay more with a higher interest rate. Now’s a great time to buy, because rates are low. Your income doesn't change, your debt doesn't change, the only thing changing is the interest rate, and the amount you can afford is now lower. 

Your Home, Your Asset

Now that we’ve established what you are paying in rent and how much that equates to in a mortgage, you’ll have a clearer picture of what your budget is. It’s time to consult with an agent to see how much that buys in your desired location or at the very least you can look at similar houses in your price range on Zillow. Oftentimes we see people who are renting are doing so in a prime location as opposed to what they end up buying in. It's not uncommon to leave the apartment or condo that you are renting in uptown to make your first purchase in the suburbs.

Keep in mind, wherever it is you choose to move, owning a home is an appreciating asset. By renting you are helping landlords pay their mortgage and then some. If you choose to forego renting anything you will not only see the money again that went towards your principal, but most likely by the time you sell your home, the value of it has increased. So you're earning and making more money on top of that; which is not an option when you're renting. It's a hundred percent outflow when you're renting. 

Speaking of landlords, you could have the opportunity to become a landlord and we see first time homebuyers do this in a different way than you might be thinking. Some first time homebuyers buy a home and have their roommates that they previously were renting with, move in and rent a room from them; in turn they are now helping pay their mortgage. Instead of being a renter, you now become a homeowner and a landlord. Your roommates are helping you pay your mortgage and the situation hasn't really changed for them. They're still renting like they were and you're now the one building wealth as a landlord. In general, owning property is the quickest way to build wealth. You're building equity, meaning you are paying down the balance that you owe on that house and someday when you go to sell it you will see that money again.

*Listen to Episode 3 and learn about all the details of house hacking. 

What’s Your 5 Year Plan?

Now let’s do a little soul searching and a little game planning. Two important questions to ask yourself are: What are your goals and timeline? Where do you see yourself in the next 3-5 years? It’s important to consider any big life changes coming up and if a property will fit your life for the next couple years. Your goals and timeline will really give clarity on what home set-up will work best for your lifestyle. Things such as changing jobs where you have to consider commute time and salary. Or if you plan on expanding your family in the near future, you’ll need to take into account how much space you’ll need. Even something small like getting a puppy may change your point of view on the importance of a yard. Take a look at where you are and where you want to be. If you don't have a lot of clarity in that regard it may be best to continue renting for 6 more months; that way you are looking at what kind of property you would want to buy based on your timeline, not just what will work at the moment. 

Good ol’ Pros and Cons List

Before we dig into the renting vs buying pros and cons list, we just want to remind you that there are so many options out there on either side. There is a solution and home for everyone. For example, if you’re concerned about maintenance there are other buying options to consider such as townhomes or condos. They are a lot less home and a heck of a lot less maintenance. There are always different homes for different buyers. Say if you don’t want to care for a yard you could budget to hire someone to do so or you can opt for a smaller lot with less outdoor space. Do you see what we mean? There’s something for everyone!

Renting

• Very little maintenance.

• Adhering to a landlord.

• Renters insurance is inexpensive.

• Your landlord will take care of things.

• Possible rent spikes.

• You can’t make permanent changes.

• More likely you can live in the exact area you desire.

• Having to move more frequently is costly.

•  You won’t see the money you pay for rent again.

Buying

• Maintenance is on you or you can hire someone!

• You’re your own landlord!

• Homeowners insurance can be pricey.

• All financial responsibility lands on you for fixing things.

• Mortgage doesn’t change drastically until you refinance.

• Your home, your rules, your style.

•  Likely you’ll have to move further out of your rental area.

• General stability and ability to put down roots.

•  Homes appreciate every year, you’ll be building equity.

It all comes down to this; renting can give you flexibility, luminance, something new and close to an area that maybe you can't afford otherwise. While buying you get to build equity, build a place for you that you could be in for the foreseeable future, and get on the property ladder to start building that equity. Pros and cons we’re here for it, if you ever want to talk! 

It’s Up To You

We started this off talking about what your rent would buy you and if maybe the next year is the time for you to get aggressive and start saving. You can make those decisions once you're better informed about what your financial picture looks like and how that relates to real estate in your area. We're just happy to help you really explore and understand the question of: should you be a homeowner or should you be a renter at this point in time?

*If you've decided buying is the right choice, check back on Episode 7 and 24.

Okay folks, it’s time to do your homework and run some calculations on what your current rent amount will buy in your area. Pair this with some soul searching about your willingness to own a home and the answer is going to be right in front of you. We're huge advocates for buying a home, but we ultimately want you to do what's right for you! Give us a call any time if we can help you process this decision. (Our contact info is thecastillogroup.net.) We hope all of this gave you a little more clarity and direction when it comes to buying vs renting. 

Until next time!

Brianna & Keelie

The Terrifying World of Inspections

Home inspections can be the most intimidating part of the home buying process when nerves and emotions run high. Luckily with the right mindset, teammates, expectations, and inspections, things don't have to be so daunting. Today, we talk you through how you can prepare for your inspection, how to know as much as you can about your future home, and what are the major deal breakers that we see weekly.

First thing that we do with our clients when we talk to them about the home buying process in general, is the inspection and helping them understand what to expect. When we're going to look at homes, a key part of what we do as your teammate is looking to see if there are any major red flags that might be structurally wrong with the home, not just the color of the countertops. We're trying to do a basic visual inspection based on the common issues that we see so that you can be given a heads up so everything is not a complete surprise.The best place to start is always the beginning, so we are going to walk you through the entire process as well as things to be on the lookout for when it comes to inspections!

Step #1: Finding the Right Inspector

Choosing the right inspector is of the utmost importance and a good inspector is going to be doing a lot of work. We want to make sure that they are seeing a lot of homes, are up to date on what's common to see, can shoot you straight on what is/isn’t a big deal, and is as detailed as possible. In Texas, inspections are done during the option period, which is typically the first week of a contract period to answer the question of, “What are the things that we didn't know when we first walked through the home?” It is a small investment to really know what could be wrong with your house. Inspections are typically going to run you around $600, but of course that varies based on your location and the size of your house. It truly is a drop in the bucket compared to the overall home price and what it may cost to do some of these repairs. Make sure you have money set aside for your inspection and do not skimp on hiring the right people during the inspection phase!

Keep in mind a general inspector cannot see through walls like a superhero, they are going to get into the home as much as possible though; top to bottom, attic to crawl space. A general inspector is like a family doctor, they might find something and say you need a specialist. For example, if they were to find something wrong with the plumbing they’d then refer you to a plumber to do a deeper inspection. Yes, that’s going to cost money too, but it is less expensive than leaving a problem unsolved and dealing with it in the future.

You need to be aware that things are likely going to break and we want to make sure we know as much as we possibly can from this process. Now let's talk about the inspection itself after we’ve found a great inspector that we trust is going to do a good job for us on inspection day.

 Step #2: The Inspection

We're going to get the inspector out there ASAP, so it may or may not work best for your schedule, but the sooner in your option period the better. It’s best to do this so we have more time to do follow up inspections if we need them and to really wrap our mind around what was found. We highly recommend not attending the inspection and just allowing the inspectors to do their job. The reason for that is they're very used to working alone and have an efficient system, so we don’t want to distract them or they may miss something. The inspection will be hours of them going in, out, and around the home. They’re wanting to get to the root of any problems they may see, collect their thoughts, and give you a thorough report. It’s in your best interest to meet them after the inspection to ask questions and get clarity on what needs to be done. A great inspector will happily go over all of your questions, don't worry! I call the inspection the “sandwich rate,” the roof and foundation are the buns then the plumbing in between. Those are typically the three most expensive things we see, which for most people, the more expensive it is, the scarier it is. Make sure that you have an agent on your team that isn't going to be afraid of these things either, but can really shoot you straight on the common issues in your area.

Roofs &  Foundations & Plumbing, OH MY!

The Roof:

• Check to see if there is any hail damage. If any damage is found then call the insurance company to come take a look.

• Look into the manufacturer's warranty.

• Make sure there are no leaks or subsequent water damage in the attic.

The Foundation:

• Based on the soil type surrounding your home it may be expanding or contracting in big ways.

• Keep an eye out for cracks and sloping floors.

• If any issues are found surrounding the foundation they'll take a thorough look at the beams and slab underneath the home.

• Your home IS going to move, we want to make sure that it's within a reasonable amount of movement and not outside of a tolerance.

The Plumbing:

• Foundation issues can lead to plumbing problems.

• Older homes often have cast iron plumbing, which erodes from the inside out.

• Checking the status of functionality and making sure there are no cracks or leaks.

Step #3: The Report

The report that they make is going to be a really long list, but the majority of those items are “honey do” list items. They are going to be small issues, but we’re not going to ask the seller to repair all of these items in an older home. The whole point of this is looking for those larger issues. We were wanting to eliminate the chance that you are going to have to spend thousands or tens of thousands of dollars unexpectedly. Our focus is big ticket items, not things that can be remedied by a trip to the hardware store on a Saturday morning.

An inspection is good for information for you, regardless of what that looks like, but the negotiation piece of what we go back and ask the seller for really matters depending on your negotiating position. Your agent is going to help you weigh what is important. Keep in mind, a seller doesn't owe you a brand new house, so just because we found out that something was wrong doesn't mean it's their responsibility to fix it. One of the most common things we see are things not being up to today's current codes or current standards. For example, there are requirements now around the amount of space between stair bolsters, but we're not going to ask the seller to take down the entire staircase and rebuild it so it's up to current child safety codes. The seller is going to move on to the next buyer if you want them to rebuild that whole staircase. Use your inspectors' experience to gage what is normal, versus what you should be concerned about.

*Keep in mind inspectors are not contractors despite all of the knowledge they have. When we are asking for an estimate on a repair of some kind it’s important to get the appropriate professionals hard numbers.

Step #4: The Negotiation

Say we find some larger issues, how do we determine what's what and how can we move forward? It’s important to note if the issues are deal breakers for you, while keeping in mind most things can be fixed and it's highly uncommon that your home is on a sinkhole.  It’s really a matter of how much it will cost and who's going to pay for it in the negotiation period.

It will ultimately come down to your willingness financially and otherwise. Make sure that you're checking in with yourself or with your spouse, on what your willingness is in terms of putting up money for repairs or negotiating with repairs. As we had mentioned before, know that buying a home means that some things are going to go wrong. If you have a really low tolerance for repairs then a new home might be right for you. Even then, a newer building doesn’t guarantee that everything was done correctly or that there won’t be any issues. Your agent should be able to help you understand how far you can negotiate, what the market looks like, if you’re in a strong position, or if a seller is in a stronger position. They'll help guide you through that! Just remember, while you’re in the negotiation process be reasonable, don’t get too in your head, and know your limits.

Quick Tips for Current Homeowners:

• The best way to minimize the length of an inspection report is to make sure you're caring for your home while you live there. 

• Sign up for our monthly home maintenance checklist at WhereWeLivepodcast.com. 

• Listen to Episode 18 titled Big Mistakes in Caring for Your Home.

You’re now inspection ready!

Put on your hat as an investor in this new property and look at what are the big things that may be expensive for you down the line. We hope this showed you that inspections aren't as scary as they seem, it’s simply another part of your due diligence process as you buy a home. A great inspector is a key resource to knowing more about your future home and what problems you might encounter. Remember, when it comes to houses, most everything can be fixed. It simply depends on how much it will cost and who is going to pay for it.

Happy home buying!

Brianna & Keelie

3 Questions To Ask Before Buying Your First Home

The real estate market is constantly changing, so of course DO YOUR RESEARCH before buying! Do not jump the gun on this one! Unbiased advice from family and peers may be kind, but you are the only one who knows what your needs are when it comes to buying a home. That's why as part of your research, you should ask yourself these 3 questions:
 

Q1: WHAT MADE YOU CONSIDER OWNING A HOME?

Forget finances for a minute and focus on what made you consider even buying a home in the first place!

• Is your family expanding?

• Does your family feel safe?

• Is there a STELLAR school system in the area so your children can get the education they deserve?

• How about that unbearable landlord?

• Simply need more space?

• Looking to build equity?

Knowing the primary reasons for why you're buying can help you (and your future real estate agent) hone in on what options are best for you, right now and long-term.

Q2: WHICH WAY IS THE REAL ESTATE MARKET GOING?

Include this question in your initial research and don't sleep on your decision to buy for too long! Home prices in general are on the rise. Not only are they on their way back up, but these increases are happening monthly.

According to Existing Homes Sales Report from the National Association of Realtors (NAR), the average price of homes in May 2017 went up 5.8% from last year.

If you wait until next year to buy, you might be scrapping for change in the cushions to say the least. Not only will it cost you more to buy, but you will also need to increase your down payment to account for the higher price of the home. Talk to your agent for more information on why right now may be a better time to buy than taking some time to save more up-front.

Q3: WHAT IS THE MORTGAGE FORECAST?

The initial process of purchasing your home may seem quick (especially in the fast-paced Dallas real estate market), but there are a lot of moving parts! The ‘long term cost’ of buying a home can haunt you if you buy at the wrong time! Mortgage Bankers Association (MBA), and NAR have projected that mortgage interest rates will definitely increase over the next twelve months. The smallest increase in mortgage rates can have a huge impact on a home owner over time.

Final Thoughts

If you and your family feel it is the right time to buy a home then GO FOR IT! Just consider these points when making the final decision, and contact us at The Castillo Group to get any of your questions answered!

Debunking Myths to Home Buying

Finally ready to make the transition into home ownership? That's awesome, and in this exciting time you can be turning to friends and family for an insight into the process. However, there seems to be a circulation of misinformation spreading around, so we're here to clear up a few myths. 

1. MYTH: THE FIRST STEP IS SEARCHING FOR A HOME

You know the saying, "Don't put the cart before the horse," well that's important to remember when it comes to buying a home. You don't want to start looking for a house until you have gotten to sit down with a lender and discuss what the bank will qualify you for. If you fall in love with a house that's $250,000 and come to find out you're only qualified for $200,000 you can get your hopes crushed and waste a lot of time. Don't start the process on the wrong foot and make sure the numbers line up.

2. MYTH: YOU DON'T NEED A REAL ESTATE AGENT

For starters, when buying a home, 99% of the time the buyer's agent gets paid by the sellers. That random 1% can be for odd circumstances. So you're getting to use the services of a real estate agent for free. Having a real estate agent on your side means you'll get to see homes that aren't as readily available on public searches, you avoid outdated listings and scammers (there are lots of them), and you have protection when it comes to navigating the legalities of contracts and buying a home. Why wouldn't you want an awesome negotiator working to ensure you get the best from the transaction? For FREE!

3. MYTH: YOU CAN'T BUY A HOME WITH BAD CREDIT

Fortunately for some, this is a myth. Lenders and banks come by the hundreds of thousands and all though there are a few loan options, a lot of lenders can work with credit scores down to the low to mid 500's. Get in touch with an agent to help you connect with the right lender who can help you potentially approved. There is a lot of factors that go into approvals, but your credit doesn't have to be a sore thumb during the process. However, you will be doing yourself a favor if you connect with a credit repair specialist to at least get those numbers in the 600's. A better score will lower you interest rate.

4. MYTH: YOUR DOWN PAYMENT HAS TO BE 20%

Think you have to sell an arm and a leg to buy a home? Not at all! An FHA loan only requires 3.5% while a conventional only requires 5%. There are a lot of programs that can potentially help you with down payment assistance or be 0% down mortgage. USDA and VA loans are the most popular 0% down programs. If you qualify, this can take a big chunk off the amount of cash you have to bring to the closing table. 

5. MYTH: DOWN PAYMENTS ARE THE ONLY UPFRONT COST

This is one of the biggest misconceptions. There are a lot of cost that go into buying a home, and that includes upfront costs. One of the mandatory ones are a termite and appraisal. If you are getting a mortgage, the home will have to appraise and get a letter stating there are no termites in the home. Termite assessment can range between $25-$75 dollars. An appraisal can range from $300-$700 dollars. Aside from your down payment, you then have to pay for closing costs. And NO, they are not the same thing. Closing costs can range anywhere between 3-6% of the purchase price. In certain markets, this can be negotiated for sellers to cover by rolling into the offer price, but whether that decision is smart to do or not when it comes to landing your dream home will need to be discussed with your agent.

Now that you have some knowledge to get the process started, get in touch with an agent (*cough, cough* The Castillo Group!) who will help you get through the process as smoothly as possible.

Avoid the Wrong Real Estate Agent

In what will likely be the biggest investment you make in your life, buying a home needs the attention and assistance a professional real estate agent can provide. But not just any real estate agent, it's important to find the "right" one. With the ease of being able to land a license, you want to make sure you're hiring an agent who has the experience and drive to ensure you're provided the tools and skills to walk away from a closing knowing your needs were met. Let's jump into issues you can face if you don't have the right agent on your side.

1. THE "WRONG" AGENT WON'T LISTEN.

It's important to find a real estate agent that sits down with you, actually listens to your needs, and acts on those needs. What type of home do you want? Where do you want to live? Does the commute to school or work have to be a certain distance? Etc. Working with an agent that doesn't take the time to listen to your real estate needs will end up wasting your time and sending you homes to look at that don't match your needs. Sit down with an agent that wants to get to know what fits you best, and wants to help you achieve your goal of buying the house you're really looking for.

2. YOU'LL GET TERRIBLE ADVICE.

Choosing the wrong agent means you'll find yourself in situations with terrible advice. Make sure you choose an agent that is able to give you the proper direction when it comes to the whole sales process. From negotiations, to repairs, you want to ensure you choose a trusted, experienced adviser that can guide you on the right path.

3. THEY WON'T NEGOTIATE THE BEST DEAL FOR YOU

A great agent will negotiate for you to get an amazing deal. Now this isn't to equate to unrealistic negotiation expectations of what the market will sell a home for - because that can mean losing your dream house. But the "wrong" agent won't bother to negotiate on any part of the sales process, or may lean too much on you for what you want the next step to be. You want to find an agent that not only negotiates for you, but does it in an effective way and advises you on the best steps to take, to ensure you still get the right home.

4. DIFFICULT TO GET IN TOUCH WITH

A great agent has a set and active schedule that allows you to get in touch with them, or a member of their team, on a reasonable time frame. The "wrong" agent will be difficult to get a hold of, even not getting back to you during the sales process for days (sometimes even weeks.) To find a great agent, you want to find one that has dedicated business hours that allow you to get in touch with them at anytime during those hours, and is available to call you back if they miss your call, in a timely manner. Bonus if they have a Buyer's Agent dedicated solely to the buying process! This is incredibly important during the sales process, if something needs immediate attention, and your agent is nowhere to be found, you can lose the deal.

5. CAN LEAD TO A LEGAL MESS

The "wrong" agent can be unethical, or simply not have the proper knowledge about the legalities within the industry that is standard for agents to follow through on. As a professional, in an industry with a lot of accompanying laws, it's a great agent's job to know how to protect you throughout the sales process. While providing the necessary contracts and guidance to ensure you're protected by the decisions you make as well.

6. AN UNHAPPY BUYING EXPERIENCE

Buying a home is an important and big process in a person's life. If you're buying your first home, or you're purchasing your dream home, you want the experience to go smoothly obviously. A great agent will be able to navigate the bumps that come up within the sales process in an experienced and professional manner. The "wrong" agent will create a mess of the sales process, not find you the right home, and you can end up with a home you don't actually love - or one with too many issues. Find a great agent that knows the process - ask them plenty of questions before securing their business! - and can ensure it goes as smoothly as possible, giving you the time to prepare for common situations that may cause delays. Although some things can occur that neither party is aware of, having an experienced agent will help you through general hurdles that could arise through the sale.

You need the right agent to find you the right home! Find out why The Castillo Group is a great option.