Mortgage Help | What Are Your Loan Options?

When purchasing a home, a mortgage is the most important step in the process. Finding the right loan should also be the first step in the process. Unfortunately, it is also commonly the least understood step in the process. Like any other service or product, you should be shopping around for your mortgage. This ensures a better chance of receiving a loan that benefits you and you are receiving the best terms that you can possibly qualify for.

But how can you shop around if your not even sure what your shopping for? With so much information out there now-a-days, even a simple Google search can be overwhelming and unhelpful. That is why I took the time to consolidate a lot of information found on the internet to make it simpler to understand and easier for you to shop for the best loan on your soon to be home.

 

Types of  Mortgage Loans: 

–> Conventional Loans – Fixed & Adjustable Rate

Conventional loans are known as “conforming” loans because they meet the guidelines of Fannie Mae and Freddie Mac. These loans are offered by private lenders and are not insured by the Federal Government. They do require mortgage insurance; however, the PMI (private mortgage insurance) fee is usually lower than FHA loans, around 0.50% in most cases. Conventional loan requirements are more strict than Government loans. They require a 620-640 credit score and down payment between 5% and 20%. One of the benefits of conventional loans is that mortgage insurance is not required if at least 20% is put down. PMI cancels once the LTV reaches 78%.

* 30 Year Fixed Rate Mortgage

The most common loan option for buyers.

Benefits:

This loan option is so popular among buyers because of the low monthly payments and the fixed interest rate, meaning it will never change. The payments stay low because the principle and interest of the loan is combined and stretched over a 30 year period. This also ensures the loan is fully amortized, or paid off, after 30 years.

Downfalls: 

If you put down lass than 20% as a down payment you will also need to pay PMI (private mortgage insurance). Another downfall is that since you are paying this loan off in 30 years, that means you will paying interest for 30 years as well and often times will end up paying more in interest than you initially borrowed.

[If you were to receive a 15 year fixed rate mortgage, your monthly payments would be higher however you would pay off your loan in half the time and save a ton in interest.]

>> Read more information and examples on Fixed Rate Mortgages here. <<

* 5/1 Adjustable Rate Mortgage

Adjustable rate mortgages have a bad reputation because of what happened in 2008, however if you don’t plan on staying in your home for more than 5 years, this could be a good option for you.

Benefits:

An adjustable rate is beneficial because the starting rates are usually 1-1.5% lower than a fixed. The 5/1 means that the rate is locked in for the first 5 years of the loan and then after those 5 years the interest rate will steadily increase year after year. So if you plan on moving after a couple years, this may be a good option for you since you will be paying more principal and less interest.

Other Adjustable Rate options:

  • 5/5 Adjustable Rate – locked rate for first 5 years and can only increase every 5 years.
  • 10/1 Adjustable Rate – locked in for first 10 years and increases year after year
  • 7/1 Adjustable Rate – locked in for first 7 years and increases year after year
  • 3/1 Adjustable Rate – locked in for first 3 years and increases year after year

Downfalls: 

As mentioned, an adjustable mortgage is really only beneficial when staying in a home for less than locked in rate time frame. If you are looking for a loan on a long term property purchase – you should not look into adjustable rate mortgages.

>> Read more information on Adjustable Rate Mortgages here << 

–> Government Insured Loans: FHA & VA

Government insured loan were originated after the Great Depression in the 1930’s in order to make it easier to be approved for a home loan. The government does not specifically lend money, however they insure the loan in the case that you default on your mortgage. This allows the lenders to lower loan requirements.

*FHA (Federal Housing Authority) Loans

FHA loans are one of the most popular loan options for first-time home buyers because of their low credit requirements and low down payment options.

Benefits:

If you have a 500 FICO credit score, you can qualify for an FHA loan with 10% down. If you have a 580 or above FICO credit score, you may be able to qualify for an FHA loan with only 3.5% down. They also allow you to receive the down payment as a gift from family or friends where as a traditional loan wants to see you have the down payment in your own savings.

Downfalls:

FHA loans are great in the sense of easy qualifying and low down payments, however your monthly payments may be high because of their MIP (mortgage insurance premium – similar to PMI) which is usually .85% of the loan amount. They also have strict requirements on property condition which may cause issues in negotiations with the seller. The lenders will send an inspector to the property a few weeks before closing to ensure all conditions are met on the loan (for example; chipping paint fixed/replaced, railings and doorknobs in place, and other minor details).

>> Read more information on FHA loans and MIP here << 

* VA (Veteran Affairs) Loan

A VA loan is only available to Veterans offering substantial benefits.

In order to qualify for a VA loans you must receive a  Certificate of Eligibility. 

Veteran loans offer huge benefits such as $0 down payment (100% financing) and no PMI saving borrows thousands per year in their monthly payments.

* FHA 203k Loan (Rehab Loan)

This is a renovation loan for home owners who want to take on a “fixer-upper”. This loan funds the purchase price of the property along with the renovations needed.

203k loans have similar down payment requirements for borrows at around 3.5% however they do require a higher credit score than an FHA loan, usually around 640 or higher.

–> MA Specific Loans: Mass Housing

For MA residents, there is a new mortgage program available to first time home buyers.

* MHP1 Loan

This loan requires only 3% down for condos, single-family and two-family residents. For 3 family property, 5% is required.

You will receive a 30-year fixed mortgage rate with no points charged to the borrower.

No PMI payments required.

Some income eligible buyers will qualify for an additional monthly savings during the first seven years of ownership. Designed to reduce a borrower’s monthly mortgage payment in the early years of home ownership, MHP Interest Subsidy is  automatically applied to those who qualify. This lowers your monthly payment by deducting some interest.

Mortgage Talk Glossary: 

PMI (Private Mortgage Insurance) – if you put down less than 20% as a down payment for your mortgage, most loan programs will require you to pay an insurance premium on your loan. This is in case you default (stop paying) on your loan. Not to be confused with home insurance, PMI is strictly insuring your lender on the money you are borrowing.  This rate varies between .3% and 1.2% of the loan amount and is paid annually.

Amortization –  the gradual reduction of a debt by regular scheduled payments of interest and principal (Amortized = paid in full)

Principal – the total amount borrowed

Fannie Mae  – The Federal National Mortgage Association (FNMA), usually known as Fannie Mae, is a government-sponsored enterprise that buys loans from mortgage lenders, packages them together, and sells them as a mortgage-backed security to investors on the open market.

Freddie Mac – Federal Home Loan Mortgage Corp (FHLMC) is a stockholder-owned, government-sponsored enterprise (GSE) chartered by Congress in 1970 to keep money flowing to mortgage lenders in support of homeownership and rental housing for middle income Americans.

LTV (Loan to Value Ratio) – how much money you are borrowing to how much the home is worth. For example if your home is worth $200,000 and you are borrowing $180,000 your LTV would be 90%.

Points – Charges from a lender when receiving a loan. 1 point = 1% of purchase price.

Interest Subsidy – Some interest may be deducted from one’s taxable income, depending on the type of loan or how it was borrowed. Common examples of interest subsidies include the deduction on home mortgage interest and student loan interest.

Sources:

https://thelendersnetwork.com/types-of-home-loans-available/

https://www.investopedia.com/ask/answers/081214/average-what-can-i-expect-my-private-mortgage-insurance-pmi-rate-be.asp

https://www.lendingtree.com/glossary/what-is-30-year-fixed-rate-mortgage

https://www.redfin.com/definition/Fannie-Mae

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If Your Life Was a Book, Would You Read It?

Inspired by the philosophy of my best friend, Brielle Beaudry.
Thanks B.

“If your life was a book, would you want to read it? Would this book inspire and excite you and keep you going back for more?                                                                                                                   – Brielle Beaudry  10.14.17

Really ask yourself this question. Ponder it. Be honest with yourself. And then decide.

For most of us the answer might be hard to admit. No one wants to admit that their life may be a little mundane, or maybe even boring. But for most of us, it might be the truth. But it okay! Your still alive, and you have the power to finish out that book you’ve been writing, and start over.

Every person makes countless decisions in their every day lives; what foods to eat, what to do in spare time, what music we listen to or watch on TV – all rather simple stuff right? But what happens when we get to a point in our lives when we have to make a really big decision. A decision that will literally change our life by upsetting our daily routine and putting us outside of our comfort zone. Will we do it? Will we take the chance? Should we change everything in hopes that this decision will lead us closer to where we want our lives to be OR should we stay put and “ride it out” because its easier?  If there has ever been a time where you have had even a mere thought of changing something big in your life, JUST DO IT! Stop overthinking it and just make the decision that you feel is right in your soul – I promise the universe will reward you.

In my experience, things have always “gone my way” the minute I decided I’m going to make a change and then put action towards that change. People and situations come into my life to get me to where I need to be. And no, I don’t think I’m just lucky. I think that anyone can change their life positively by overriding fear with hope and making a change.

Going back to the book analogy – is it a good story when the main character does the same thing every day, wallowing in their own sadness without changing anything? NO. The best stories have adventurous main characters who take chances and make decisions that may or may not turn out the way they wanted (yet somehow it always does – and it will for you too.)

The thing is, the only person who can change your life for the better – is you. You’re the only author/ editor of your book. So do you want to write a best seller or something that people read the first chapter of and then get bored?

Make the big decision. Change your job or career path. Move to that city. Get out of that unfulfilling relationship. Change your diet. Have that conversation. No one else is going to do it for you. Decide to live – now.

“…. And then she chose to live.”

– Book ending by Brielle Beaudry

 

Buyers Market OR Sellers Market???

So this seems like an easy question right? Yet over and over again I hear opposing opinions. Obviously, everyone is up to speed on what kind of market we’re in –  everyone’s buying and properties sell fast!! 

BUT do you know the pros and cons of being a buyer in today’s market? Should you be buying when everyone else is buying? What about the pros and cons for the sellers in today’s market? Do you truly know if we are in a buyer’s market (market favoring buyers) or a seller’s market (market favoring sellers)? Well here is your personal real estate guide to fill you in!

BUYERS MARKET

A buyers market is a market that favors and benefits a buyer. This happens when the supply (homes for sale) exceeds the demand (buyers). 

Common misconception: A buyers market is when there are a lot of buyers and interest rates are low. THIS IS NOT CORRECT!!! 

Pro’s of Buyers Market:

  • Lower sale prices because there is big competition amongst home sellers.
  • Seller may pay closing costs to get the deal done.
  • Offers with a lot of contingencies (another home must sell before closing, the seller must fix all issues in home inspection, etc) are more likely to be accepted.
  • Buyers control the transaction and are benefiting when buying a home.
  • THIS IS IMPORTANT: You have more equity in your home. Why? Because if sale prices are lower, the market is “down” and home values are more likely to increase in a market cycle. (For more about market cycles see my post “Future of Real Estate & Economic Markets”)

Con’s of Buyers Market:

  • Properties will have to be in mint condition for a good chance of selling.
  • Financially distressed properties and foreclosed properties are more common because they can’t sell quick enough to stop it.
  • Higher interest rates. Now some people may see this and say well how can it be a buyers market (a market favoring the buyer) if interest rates are high? Well, even though interest rates are high, the property value is low so yes you will be paying more interest but wayyyy less principle and here’s the kicker – you can always refinance when interest rates go down again. This is a good thing people.

 

SELLERS MARKET

A seller’s market is a market that favors and benefits the seller.  This happens when the demand (buyers) exceeds the supply (homes for sale.) 

Common misconception: A seller’s market is when there are a lot of sellers and interest rates are high. THIS IS ALSO NOT CORRECT!!! 

Pro’s of Sellers Market:

  • Low-interest rates which means more buyers which means it will be way easier to sell your house.
  • Low-interest rates also mean it would be a good time to refinance your home.
  • Sellers commonly sell their home for way above market value.
  • Sellers sell quickly with fewer contingencies (some people even waive their inspection contingency!)
  • Some buyers may even pay for sellers closing costs.

Con’s of Sellers Market:

  • More buyers competing for a small inventory of homes.
  • Buyers pay more for homes than they are worth meaning you have less equity in your home (putting yourself at risk for an upside-down mortgage when the market drops.)
  • Buyers put themselves at risk for foreclosure or short sale if they have to sell in a buyers market.
  • Less representation if agents have a lot of clients at one time.
  • Buyers compete in bidding wars when they want the home.
In conclusion, I will fill you on what market we are currently experiencing and my advice to all us young-ins: We are experiencing a seller’s market! Do not feel like you have to or should buy a house now because everyone else is. Wait out the cycle and buy a house when it benefits you, during a buyers market. My prediction is that we will see a shift in 2-3 years. Wait it out, paying rent is worth it until then, I promise! 

Please reach out to me with any questions you may have about when to buy, when to sell, understanding the markets & how and when they shift and any other real estate question or concern you may have!

Hope this was helpful!!

“The big money is not in the buying and in the selling … but in the waiting.”

– Charlie Munger

Modernized Road to Success

I’ve touched on this topic a few times in my blog but it’s something I feel passionately about and I think this topic can relate and help almost all people.

Let’s be honest with ourselves. We all want success, financial freedom, abundance, and happiness.. right? We all want to vacation when we want, be fulfilled by our work and essentially do what we want when we want. But most people don’t know that they deserve this. YOU CAN HAVE EVERYTHING YOU WANT!!! You just need to know how to get there. Well, that’s what I’m here for. Follow these steps to not only realize that you deserve all your goals and dreams but also how to start working towards it.

STEP 1: Acknowledging and Eliminating your Limiting Beliefs.

The sad part is most of us continually tell ourselves the same story, which ultimately creates our reality. “Success takes a lot of hard work, sacrifice, and stress.” “We can’t always get what we want.” “Money is the root of all evil.” “I’ll be happy when ________.” I could go on and on. These negative self-talks are called limiting beliefs and they are the sole reason why you will never get to where you want to be.

>> Check out this article on the 5 Most Common Limiting Beliefs and see which ones are limiting you. << 

If you want to be truly successful, abundant and happy; you must start by telling yourself a different story. You must change your attitude about success and how to get there. You need to have faith in yourself and your ability to create the life you want. You do this by educating yourself. Don’t take my word for it, research limiting beliefs and how thoughts change your physical surroundings. Make your own opinion about what success is and how to get there. I’m just here to get you thinking. It’s ultimately up to you to make a change. 

STEP 2: Acknowledging That Times are Changing and We Can’t Reach Success the Same Way our Parents Did.

It’s really no surprise to anyone that 2017 is very different than 1997 or even 1987 for that matter. Then why is it that people see the route to success as being the same as how their parents got there. NEWS FLASH! We live in a completely different universe than our parents grew up in. We have infinite information at our fingertips (literally). WHY ARE WE STILL LISTENING TO THEM ON HOW TO BE SUCCESSFUL?? No offense Mom & Dad it is natural for you to want to teach us how to grow up and in any other generation this would be okay BUT we, Millennials, are an extremely unique generation. We need to realize this about ourselves and be brave enough to do something different than what we are told by our elders. This is the way to success. Unless your dream is to be engulfed by the rat race, working hard & earning less than the cost to live (which I don’t think is true for anyone), then you need to change your actions. This is a scary realization because now we know the path isn’t laid out for us. We need to create our own path. You might have a limiting belief telling you how hard this will be and that you won’t succeed but if you followed step 1 then you will get over that quickly and continue to move forward.

STEP 3: Follow Your Heart NOT the System

Now that we know that success is different for us than it is for our parents we can move forward with figuring out where we belong in this world. What can we offer? This won’t come to you overnight but if you give it the attention it deserves you will eventually know what you are here for. What are your strengths & interests? What are you good at? How can you make our society a better place to live? You were not put on this unexplainable Earth with an unexplainable body and mind to sit at a desk all day and do meaningless work that may or may not be helping anybody but the CEO buy his 3rd yacht and beach house in Fiji. You simply were not made for that. Find what you were made for and work deeper into that, discovering how you can make a living from it, keeping people at the top of your motives. Even if you are working a job right now that you don’t like but you have no choice because you need income, still find your passion and work on it. This will take you farther than anything else. Find yourself.

STEP 4: Take Action

Make a plan and stick to it. You know what you want to do and where you want to be, so how do you get there? Research people who have come before you and were successful. Follow their systems. Do what they did and then make it your own. DO SOMETHING! Because it isn’t risky going out on a limb to follow your dreams, it’s risky to not doing anything and then wishing you did. Fail and fail hard but NEVER give up. Keep dreaming and doing and you will be successful.

 

“No matter if you say you can or you say you can’t, you’re right”

WHERE IS THE LOVE?

This blog will not have anything to do with real estate, but it will have everything to do with people. There is so much negative energy going on in the physical world as well as the virtual world that it makes me feel sick to my stomach. Where is the love?

I’m really not even going to comment much on this post. I just want you to read these lyrics, listen to this song and think. Every time you see something you disagree with, think of this before commenting negatively. Think of this before “defending” yourself by bashing on someone else. Think of this every time you are being offended and you feel the need to retaliate.

“Divide and conquer.” This is plan and it is working. They are taking our power away. Love your enemy and conjoin to build an undeniable and powerful force. A force that will change the world. Make a difference. Love.

Love conquers all and the only way to get away from this worldly & national drama is to love. Love thy neighbor, love thy family, love thy enemy, love your world, love your country, love all other countries, love yourself, love every living creature that walks this planet. 

 

“I think the whole world’s addicted to the drama
Only attracted to the things that’ll bring the trauma”

“But if you only have love for you own race
Then you only leave space to discriminate
And to discriminate only generates hate
And when you hate then you’re bound to get irate”

“Madness is what you demonstrate
And that’s exactly how this angle works and operates
Man, you got to have love just to set it straight
Take control of your mind and meditate
Let your soul gravitate to the love y’all”

“People killing, people dying
Children hurt and you hear them crying
Can you practice what you preach
Or would you turn the other cheek”

“It just ain’t the same
All ways of change
New days are strange
Is the world insane
If love and peace is so strong
Why are there pieces of love that don’t belong”

“Nations dropping bombs
Chemical gases filling lungs of little ones
With ongoing suffering as the youth die young
So ask yourself is the lovin’ really gone
So I can ask myself really what is going wrong”

“In this world that we live in
People keep on giving in
Making wrong decisions only visions of the dividend
Not respecting each other
Deny thy brother
A war’s going on, but the reasons undercover
The truth is kept secret
It’s swept under the rug
If you never know truth then you never know love”

“I feel the weight of the world on my shoulder
As I’m getting’ older
Y’all people gets colder
Most of us only care about money makin’
Selfishness got us following the wrong direction
Wrong information always shown by the media
Negative images is the main criteria
Infecting the young minds faster than bacteria
Kids want to act like what they see in the cinemas”

“Whatever happened to the values of humanity
Whatever happened to the fairness and equality
Instead of spreading love
We spreading animosity
Lack of understanding
Leading us away from unity”

It takes 2 minutes tops to share this!

PLEASE PLEASE PLEASE SHARE!!!

Modern Living | The Millennial Guide to Living on Your Own

“For whatever you want, rid yourself of any conception of how you’ll get it.” – Mike Dooley

 

Upon popular request, here it is – a guide to living on your own for all of us at that have found ourselves at this awkward age (Millennials) stuck between not giving a f*** and also trying to get our life together. Pay attention.

Okay so as you may or may not have realized already, moving out is a lot harder than we initially perceive it to be. We had this idea of ourselves going to school, graduating, getting a place on our own, and never looking back. However, unfortunately, most of us find ourselves exactly that, back. Back to the same place we left 4 years prior. So how do we now move forward, how do we take the next step in life? Living on our own…

STEP 1:  Figuring Out Your Finances

Unless you majored in finance, and even if you did, you may have trouble keeping track of your personal finances. I mean, I’m sure you know what you have to pay, when you have to pay it, and how much you’re making. But do you add up your expenses, subtract your expenses from your income and decide what you have left over every month? This is CRITICAL for deciding whether you can live on your own or not. Lucky for you I have attached a simple Google Sheets spreadsheet to this blog that you can download and fill in. You need to know if you can truly afford to live on your own. You’re welcome.

>> Access spreadsheet here.  <<

The other critical part of this step is having a job. Having a job in your field of study isn’t as important as having a job that consistently pays. If you have a job in the service industry, this can be a little tricky because what we make isn’t always consistent. What I have found to be helpful is taking the average of your tips for a month. To do this you must:

  • Track how much you make every night (I’ve used apps like TipSheet and TipTraqPro)
  • Add up all your tips/ shift
  • Divide that number by how many shifts you work
  • Now you know, on average, how much you make per night.
  • Multiply that number by how many shifts you work per week
  • Multiply that number by 4 (4 weeks in a month)
  • Now that number is how much, on average, you make per month.
  • [MY SUGGESTION] Do this for a few months (I would say 3) and then take the average of that number to really know how much, on average, you make per month.

You will also need a couple thousand dollars to enter into a lease so if you don’t have any savings, your first step into this process is to save! Most apartments require first month, last month, and a security deposit to enter into a lease. If your place to rent is $1500/ month, that means you will need $4500 to move in (if you have roommates, you will usually be able to split this cost.)

[Side Note]

Room mates will make it easier for you to move out. Find some friends that are serious about moving out or go on websites like Roommates.com and Roomster.com to be matched with someone who is similar and will fit into your life. Craigslist is okay but you just really don’t know what you are getting into. If an apartment is $1500 for 2 bedrooms, now you pay $750/month in rent and pay $2250 to move in – way more do-able if you ask me.

STEP 2: Figuring Out Your Projected Expenses

Here is a list of thing you will now have to pay for living on your own: (Price estimates based on Waltham, MA 2 bed, 2 baths, 1300 SF apartment | Prices also represent cost for entire apartment, not separated between roommates)

  • Rent ~$2600
  • Cable & Wifi ~$160
  • Netflix ~$8
  • Electricity ~$80
  • Heat ~$80
  • Water & Sewer ~$100

Keep in mind you will also now have to buy groceries for yourself. If you don’t have a washer and dryer in your unit you will have to pay for that as well. You may also need to pay for parking depending on where you are.

STEP 3: Figure Out WHERE You Can Afford to Live

Now, this is tough. Where you want to live has to do with mainly 2 things; where you work, and where you like to hang out. If you answered “the city” to both of these questions then that increases your rent prices dramatically. If you would rather choose to stay close to your hometown on the outskirt of the city then rent will be more affordable. Essentially the further you are from the city, the less you are going to pay in rent. Also, the cost of living is going to cheaper as well. You may even want to consider moving somewhere where the cost of living is cheaper but you will get paid close to the same for your line of work. Do some research. I wrote a post about the cost of living in different areas not too long ago, click here to view it.

STEP 4: Asking For Help To Find the Right Place for You

Sure you can look on Zillow and Craigslist for the place that you want to live, and you will most likely find one, eventually. Another option is asking for help from a real estate agent. People think that real estate agents only deal with home buyers and sellers but we can help with finding apartments too. Working with a real estate agent makes the process easier. They will be able to help you gather your paperwork, get a credit check, and fill out your tenant application the best way possible in order to be accepted for the place you want. They will walk you through the process step by step so it is less for you to stress about. If you need help finding an apartment, click here to contact me directly. I promise you won’t be disappointed.

STEP 5: Deciding That You Are Ready to Live on Your Own

This is BY FAR the most important step of the process. You need to convince yourself that you are ready to live on your own. That you are ready to cut the cord from mom and dad and take on the world by yourself. It’s okay if you’re not ready. The worst thing you can do to yourself is to pretend you’re ready when you’re not. Take some time to really consider all the pros and cons of living on your own and truly decide that you are ready for that kind of responsibility. This article from the Huffington Post had some really good points about things you don’t learn until you live on your own. You need to picture yourself there. You need to believe in yourself and know that you will make it work. Trust that things will fall into place the way they should. Once you decide, you need to then take action. You need to do at least one thing, every single day, that is getting you closer to your end result, moving out. Whether it’s putting your extra cash in a separate account for a down payment or doing research to see where you want to live. Every little action counts, you just have to do it. 

I hope this was helpful to my fellow millennials and if you have any questions about anything, please reach out! 

Pro’s & Con’s of a High Real Estate Market

Without a doubt, we are currently experiencing a “high” real estate market. A high market represents that housing values are up and/ or expected to increase. Now, most people see that as a positive, which it can be. The economy is rising, homes will continue to appreciate, and everything is great and dandy! Although a high market may be a good thing for your local real estate agents, closing attorneys and mortgage brokers, is it the best thing for you, a hardworking citizen, looking to buy their first home?

I’m here to give you both sides to the story and a little insight to how good and bad our current real estate market is.

First, let’s talk about mortgage rates and being approved for a loan.

PRO:  Low-Interest Rates 

According to Forbes.com and Bankrate, we hit record lows for mortgage interest rates in 2016 with an average 30-year loan holding an interest rate below 4%.  As expected, after the election of Donald Trump interest rates rose to above 4% for the first time in 2 years. Now, mid-2017 we see an average interest rate of 4.12%  compared to a 3.37% rates we saw in July 2016. Now don’t get me wrong, 4% is still a low rate, therefore still making it a good time to buy in the eyes of many people.

CON: Higher Home Values

In response to low-interest rates, there is a higher demand for inventory.  If there is a high demand and a low supply, this makes the values skyrocket. This is true for any market you look at, not just real estate. If home values are rising then you may not be able to afford your dream home, which may have been in your budget 5 years ago. Ultimately, I’m saying you may end up paying way more than a home is truly worth strictly because the way the market is when your choosing to buy. The real estate market fluctuates so dramatically and quickly that it is essentially impossible for inflation to keep up.

Speaking of inventory;

PRO: Influx of Inventory 

Now I am not saying that there is a lot of inventory on the market right now because there simply is not. I am saying that there is a higher turnover rate for real estate inventory. Considering the high demand for homes that all these newly approved buyers are looking for; builders, developers, and sellers are all in a great spot. Properties sell quickly and for a higher price.  Properties don’t stay on the market for long, so if you’re looking to buy and your dream home is gone in a day, don’t worry, chances are another couple dream homes will become available soon, just don’t wait too long to act.

CON: More Competition 

Because inventory is short, competition on the “good” homes is extremely high. By “good” home I mean a newly renovated, entry level, suburban home. This is what the majority of people are buying. Everybody wants that 3 bed 2 bath acre lot on the corner of a cul-de-sac road and they will go to great lengths to get it. People are emotional when buying a home and sometimes nothing will get in the way of them getting that house. Not $50,000 above asking price, not a home inspection, nothing. People are bidding up homes by offering way above asking price and winning bid wars by waving their home inspections. Yes, this is really happening. My advice: don’t conform to this behavior.

Now let’s talk about what a seller’s market is.

PRO: Selling your home 

As you may be able to conclude by now, selling your house right now will be worth it financially. Your home is probably worth more now than it will be in the near future and more than has been in the past. By selling now, given the property is in good condition, (if it is not in good condition and you want to sell click here to see how I can help you) you will most likely be making money on your investment. They say “sell high buy low” right? Well, you will surely be able to sell high but….. well that brings us to the next section.

CON: Buying a new home 

Unfortunately, if you plan on selling and buying in the same market, you will not be able to buy low. You will be selling high and then wrapping all that equity you earned on the sale into another overpriced property. My advice: don’t do this. Sell your property, liquidate your asset, save that cash, and rent until the market goes back down. That way you can truly “sell high and buy low.” To answer the argument of “renting is a waste of money” – yes you may be paying rent to someone else’s mortgage but I personally would rather do that then pay a mortgage on an overpriced property for 30 years and also you can save yourself a few years of mowing the lawn, caring for the pool, and shoveling snow.

Next, I want to talk about real estate professionals and receiving genuine help with real estate. 

PRO: Real estate help is VERY easy to find 

When the real estate market is high, everybody likes to get involved. This is wonderful because everywhere you turn, you can find a real estate agent, mortgage broker, etc. Everybody knows somebody in real estate and they will be more than happy to refer you to them!

CON: Real estate professionals are more eager to make a sale

Disclaimer: this is not a personal characterization of anybody but simply a general observation. As there are more real estate professionals, there is more competition within the field. This makes real estate professionals more eager to make a sale or land a client. Make sure you are interviewing your real estate professionals and are sure that they are in it for your best interest and not because they have to close this deal to make their rent payment. This is also true for any industry. There’s a lot of greed out there these days so look for genuine souls to work with.

Please reach out with any questions, comments, concerns regarding any information in the article or any real estate topic in general.

“When making a decision of minor [or major] improtance, I have always found it advantageous to consider all the pros and cons.” – Sigmund Freud

 

 

Understanding Today’s Real Estate Bubble

Full Disclosure: This article is mostly written from my opinion mixed with some facts. I would like to think I am using an “educated” opinion to elaborate on my thoughts. I do encourage debate and would love to hear your opinion. After all, none of us know what will happen in the future so let’s respect each other’s thoughts. (:

At this point, everyone in my generation (ages 20-30) can collectively agree that the housing market, as well as the economy, crashed in 2008. I think it is also safe to add that we had absolutely nothing to do with it. With that being said, life goes on, the markets got better and here we are today. The scary part: we still don’t know what the f***k is going on! Here we are growing up, expected to do “adult” things like GET A JOB and BUY A HOUSE with pretty much no education or guidance on how or when to do so. (Mind you, all of our adult mentors who should be advising us on how and when to buy a house, most likely had a part in the housing disaster of 2008.) So how do we do this whole “adulting” thing without following the path of our elders? What do we do differently that will stop another disaster from happening? Well, that’s not what this article is about, although I still will share my thoughts on how to do so at the end. All I can do is give you the facts that I know and what I think and how I got to that thought. SO here we go.

Side note: Despite what other generations might think, the way we “youngins” live our lives & think about growing up is not our faults. It’s a series of careless actions from powerful, political, figures (in the older generations) that has made all the difference. 

How the crash happened

So if you’ve seen the movie “The Big Short” you could have a good idea as to what happened 10 years ago. Or you could be just as confused about it than you were before. If you haven’t seen it and are interested in what happened, watch it. It’s on Netflix. I’m going to try to simplify things a little bit for you even more than they did in the movie. Before 1970’s-ish, when you got a mortgage from a bank for you home, that bank basically owned your home until you paid them back. Around the 80’s and 90’s big banks were buying mortgages from smaller banks and grouping them and rating them based on how “good” (unlikely they are to go to foreclosure) they are. 2000’s hit and now investment banks are buying these groups of mortgages and trading them as public stocks based on the ratings they were given. In 2005-2007 there was a craze in the mortgage world and it was in the form of subprime loans. A subprime loan is a loan given to an underqualified borrower. Basically, mortgage brokers were giving loans to people who could not afford them and making tons of money off doing so. It doesn’t end there. Now the small banks were selling these subprime loans to big banks. The big banks were grouping them together and giving them A+ ratings (labeling them as non-risky investments) and investment banks were trading them. Long story short, a lot of these subprime loans eventually defaulted because the borrower was unqualified to pay it back to begin with. This caused a domino effect of devastation leading to the crash of 2008.

Market trends: What they are & how they work

A market trend is a perceived tendency of financial markets to move in a particular direction over time.

Any and every market has trends. The housing market, the stock market, iPhone market, coffee shop market, etc. Usually, all markets have one shape in common and it looks like this. It goes up and down while simultaneously and continually going up in a volatile manner. Think of the picture below as a representation of the housing market from 1950 to now.  There are ups and downs while the line is steadily moving up. It is important to first know that we are currently on an upswing. Now, it’s hard to grasp because time moves slowly and we can’t picture ourselves on this chart through our everyday lives, but we are there. Ask any economist, in reference to markets and they will tell you – what goes up MUST come down. How and why these markets move the way they do unique to each market. So I will fill you in on the factors of the real estate market.

When the housing market is going up, there are multiple factors that are all relative.

  1. Money is cheap. The government controls the interest rates and when they are low, people are approved for higher amounts of money.
  2. Because money is cheap, there are more people able to borrow.
  3. Because there are more borrowers, there are more buyers (higher demand)
  4. Because there is a higher demand, prices go up
  5. When prices go up the market goes up, people think they will continue to go up so they want to buy real estate before it gets too expensive
  6. Because so many people are buying, more people are selling at higher and higher prices.
  7. This process continues until the government intervenes and heightens interest rates.

When the government heightens interest rates, the cycle starts to come down. 

  1. Interest rates start to get higher, money is expensive and people borrow less.
  2. There are fewer borrowers, which means there are fewer buyers.
  3. When there are fewer buyers, there is less of a demand and more of a supply.
  4. To get rid of the excess supply, builders and investors sell their properties for less.
  5. When higher end properties sell for less, it makes all other properties sell for less because the market is based on comparable sales.
  6. When properties sell for less, people that bought their house in a high mortgage are now upside down. Meaning they owe the bank more than their home is currently worth on the market.
  7. When people are upside down on their mortgage, the default on their loan. Otherwise known as foreclosure.
  8. When a home goes into foreclosure, the bank now owns it and sells it for way less than it’s worth. Again, making other homes sell for less because of comparable sales.
  9. This cycle continues until the government intervenes and lowers interest rates again.


The term “real estate bubble” comes from the action of the market going up. It’s inflating. When the bubble “pops” the market will fall down. So on the graph to the left, picture a bubble in the open space below the red and blue lines.

 

My prediction with our current real estate bubble

With factors such as low-interest rates and a high demand of buyers with large loan amounts, it is safe to say that we are in a high real estate market. As we discussed in the paragraphs above, I think it is also safe to assume that we are in a real estate bubble which will surely pop at some point in the future. When and how is the biggest question. Here are my thoughts on when and how I think it will happen. I am 23, and the majority of my peers have just recently graduated college. They have set out to find their careers and hopefully, have some sort of job security. Sadly, it is hard to find nowadays. People are easily replaced in Corporate America by the next generation of cheap, entry level employees. Job security is slowly becoming extinct. So what are all us young adults supposed to do if we cannot keep a job and we also most likely have a heavy burden of student debt on our backs? And now we are also expected to be the next generation to buy real estate? How will we possibly be able to get a mortgage if we can’t pay off our student debt which is affecting our “debt-income ratio” (our income compared to the amount of credit we are currently using)? Also, most of our loans are unforgivable meaning we can’t even look to bankruptcy to eventually be wiped clean of student debt and start fresh.  Our credit score is sunk and we are renting, living paycheck to paycheck to barely survive. As the younger generations graduate college and enter the workforce, I see the debt amounts and cost of living increasing and the job security and entry level salaries staying stagnant. This is where the demand of home buyers will slowly diminish and the supply of homes will outway. As explained above this will cause house prices to drop.

How do we stop this from happening? Stop pushing young adults to take on MASSIVE debts in order to get a degree that will have a slim chance of giving them a reliable career. NOW – I am not saying all degrees are trash and that college and higher education is bad. It is not. Just know what you’re going to do with that degree. Use that degree as a tool, not an answer. Have a plan and set forth looking at all possible paths before choosing one. I said this in the beginning but I will say it again. This is my opinion. Will this happen? Maybe, maybe not. But I have spent the last 3 years studying real estate from all angles and having fresh eyes on the situation, this is my prediction. I would love to hear an opposing idea or opinion simply because I love to learn new things so if there is something I am missing or if you simply disagree, please share. My goal is to simply help educate those who are lost or confused about the subject of real estate at a young age.

Thanks for reading.

 

It’s Not About the Money $$$

Post inspired by “It’s Not About the Money” Audio-book by Bob Proctor. 

 

 

WHAT DO YOU WORK FOR??

Ask yourself these questions and answer them in a comment! I want to know what your heart beats for. 

Why do you work?

Do you like your work?

Are you working towards a career, what and why?

Do you have a passion? What is it?

What does an ideal day look like to you?

What does your future look like?

Why do you want success or wealth?

What does success mean to you?

What does wealth mean to you?

If you acquired a large amount of money, what would you do with it? Why?

What are your hobbies?

Would you rather have things or experiences?

Would you rather have time or cash in the bank?

 

I want to know the answers to these questions simply because I am curious about why people live. I want to know what peoples passions are and I want to help people connect with their passions. In today’s world we don’t give a lot of focus to these very important factors. We sift through life because we have to, not because we want to. When we do this, we build up a lot of negative energy inside of us that is waiting to explode. We get bitter towards the world and the people around us because our life didn’t turn out the way we expected. We develop this victim mentality because we feel like we have no control. We need to know why we live. If all I can do to help you find that answer is write a silly blog post and ask you to answer some simple questions, not for me but for yourself, I feel like that’s a pretty decent ripple to start.

This blog post is inspired by an audio-book I recently purchased. I bought it because I have felt really caught up in life the past few weeks and I felt like I wasn’t giving myself enough time to focus on my me, my mind, my heart, and my soul. After all, the best investment you can make, is an investment in yourself.

This audio-book is called “It’s Not About the Money” by Bob Proctor. I chose this specific book because as a real estate agent/investor, I do not get paid on a regular bases. I am a bartender on Moody St in Waltham part-time to make ends meet financially. I also make traveling a priority at this time in my life (because money will never be an excuse for me to miss out on an opportunity). So as you can imagine, money get’s tight sometimes. People may say, why do you work at your office full time if you aren’t getting paid? Why don’t you get a full time job and do real estate part time? My answer: it’s not about the money. Although money was one of the motivations to get involved in real estate, I have come to realize that the fulfillment I get when I see a home go from old and outdated to new, when I find someone their dream home, or give an investor an opportunity to make money, that is enough for me. I know that by rendering my services to society and becoming the best I can at my service, I will succeed. So, why do you do what you do? Does your work fulfill you are you solely working for money? Do you just want cash or do you want all the things that cash can bring you?

Bob Proctor talks about adapting a “wealthy mindset.” This means taking your mind out of the normal mindset of making money (getting a job, trading time for dollars, working long hours to be productive, etc) and changing it to a mindset of the wealthy.

Here are 5 steps to take to adapt a wealthy mindset: 

  1. Dispose of all limiting beliefs about money.  

    Think about the general attitude towards money. People say things like “money is the root if all evil,” “money isn’t everything,” “the rich are greedy,” etc. In some situations this is true. Money tends to bring out your personality more. If you are a greedy stingy person, more money will make you more greedy. BUT if you are a generous, compassionate person, money will only escalate that personality. Write down you limiting beliefs about money and then write down all the good things you would do if money wasn’t a factor. 

  2. Decide you want to be wealthy and justify why.

    One of the corollary of the Law of Abundance states “People are poor because they have not yet decided to be rich”.

    Your why is your biggest motivation. It is the reason why you want to be wealthy. I can almost guarantee you don’t just want to stare at a 7 digit bank account or bath in a tub of gold. You want all the things that money can buy. You want the freedom of not having the responsibility of a job. You want to not worry about money ever again. Whatever it is, know your why and focus on it. Write down all the reasons why you want to be wealthy. Think deep. 

  3. Determine how much you want 

    So obviously we can’t pin point the exact amount of money we need to live a financially free life, right? Well we can start with rough numbers. How much do you live off now? How much more do you need to be comfortable in your life now? Maybe an extra $2-3,000/ month, maybe an extra $200-300,000/ month. Who knows, all you have to do is figure it out and write it down. 

  4. Brainstorm on how to get there

    There are so many angles you can take to being wealthy. The best thing you can do is start multiple sources of income. So what if you wanted to get from point A to point B? There probably multiple routes to get there. When you’re planning your route, your mind starts considering all the options and may cause you to act on one. During that time, your wealthy mindset may attract different opportunities, encouraging you to change course and go through a unique and exciting situation. Write down all your ideas on how you can start to earn money, ideas for a new business, services you can provide, etc.

  5. Imagine as if you already have it

    Imagination is one of the most powerful tools we have as humans. We are also the only species on Earth that has an imagination. People may think that this only something we use when we are young. Wealthy people use their imagination ALL the time. They first saw their life the way wanted it in their imagination before it was reality. Bob Proctor always says “believing is seeing.” When you can believe something, only then can it become a reality. Visualization puts your emotional wavelengths on a level that will attract you thoughts into reality. Believe or don’t, you life will reflect accordingly. Make a vision board and, putting a collection together of pictures reflecting the life you want to live and look at it every day until you can close your eyes and imagine yourself already living there. 

Whatever you do, just remember; IT’S NOT ABOUT THE MONEY. 

The Power of Personal Development

What is “Personal Development” per say and how do you do it? Well, the term itself is pretty self-explanatory.

Personal development covers activities that improve awareness and identity, develop talents and potential, build human capital and facilitate employability, enhance the quality of life and contribute to the realization of dreams and aspirations.

With this definition, doesn’t it seem like everyone should personally develop at least at one point in their lives? It does to me. So why aren’t we taught this? Why isn’t there a personal development class in high school? Or even college? Why are that these small things that make dramatic changes in our lives left unsaid? I don’t have the answer to those questions. All I can do is share the videos and mentors that I have been shown and who have helped me develop a mindset for success.

Here ya go.

  1. Bob Proctor

2. Robert Kiyosaki

3. Jim Rohn

 

I hope this helps anyone who is feeling lost, confused, overwhelmed with life, etc. Life isn’t supposed to be stressful. It’s supposed to be beautiful. So how do we make it beautiful? Develop yourself into a beautiful person.