Housing Statistics for the South Shore for the month of June

Sales of single family homes and condos – down 9.72% (from 494 sold in June 2010 to 446 sold in June 2011)

Prices – Median price of single family homes and condos sold down 7.51% (from $353,750 in June 2010 to $327,200 in June 2011)

Inventory – up 6.04% (from 3,195 on June 30, 2010 to 3,388 on June 30, 2011)

Supply – At the end of June 2010 there was 6.5 months supply at the current rate of sale. At the end of June 2011, there was 7.6 months supply at the current rate of sale. The market is considered balanced when there is between 7.5 and 8.5 months of supply.

Days on Market – The average days on market for single family homes and condos decreased from 156 days at the end of June 2010 to 153 days at the end of June 2011.

Pending - The number of single family homes and condos put under agreement in June of 2011 was up 6.5% over the same time the previous year (from 417 in June 2010 to 444 in June 2011).


*Based on information provided and compiled by MLS Property Information Network, Inc., covering the periods June 1, 2010 through June 30, 2010 and June 1, 2011 through June 30, 2011.


Joshua Boulay
REALTOR
Gropman Realty Group
774-451-1419
joshboulay@gmail.com
www.facebook.com/joshboulay

Housing Statistics for the South Shore for the month of March

Sales of single family homes and condos – down 20% (from 291 sold in March 2010 to 234 sold in March 2011)

Prices – Median price of single family homes and condos sold down 6.4% (from $315,000 in March 2010 to $295,000 in March 2011)

Inventory – down 1% (from 2,790 on March 31, 2010 to 2,762 on March 31, 2011)

Supply – At the end of March 2010 there was 9.6 months supply at the current rate of sale. At the end of March 2011, there was 11.8 months supply at the current rate of sale. The market is considered balanced when there is between 7.5 and 8.5 months of supply.

Days on Market – The average days on market for single family homes and condos increased from 173 days at the end of March 2010 to 180 days at the end of March 2011.

Pending - The number of single family homes and condos put under agreement in March of 2011 was down 13.6% over the same time the previous year (from 428 in March 2010 to 370 in March 2011).

*Based on information provided and compiled by MLS Property Information Network, Inc., covering the periods March 1, 2010 through March 31, 2010 and March 1, 2011 through March 31, 2011.

Joshua Boulay
REALTOR
Gropman Realty Group
774-451-1419
joshboulay@gmail.com
http://www.JoshBoulay.com
www.facebook.com/joshboulay

South Shore Housing Market Statistics Feb 2011 Summary

Sales of single family homes and condos – up 1% (from 193 sold in February 2010 to 195 sold in February 2011)

Prices –  Median price of single family homes and condos sold up 2% (from $285,000 in February 2010 to $289,900 in February 2011) Inventory – down 1% (from 2,438 on February 28, 2010 to 2,402 on February 28, 2011)

Supply – At the end of February 2010 there was 12.6 months supply at the current rate of sale. At the end of February 2011, there was 12.3 months supply at the current rate of sale. The market is considered balanced when there is between 7.5 and 8.5 months of supply.

Days on Market – The average days on market for single family homes and condos increased from 196 days at the end of February 2010 to 203 days at the end of February 2011.

Pending - The number of single family homes and condos put under agreement in February of 2011 was down 8% over the same time the previous year (from 312 in February 2010 to 286 in February 2011).

*Based on information provided and compiled by MLS Property Information Network, Inc., covering the periods February 1, 2010 through February 28, 2010 and February 1, 2011 through February 28, 2011.

Joshua Boulay
REALTOR
Gropman Realty Group
774-451-1419
joshboulay@gmail.com
www.JoshBoulay.com
www.facebook.com/joshboulay

Tips on making an offer during a Buyer's Market

Simply put, buyers' markets exist when there are a lot of homes on the market and very few buyers. If inventory--the number of homes on the market in your neighborhood--has been rising, it's likely that the days on market have been increasing. Couple that with declining sales figures over previous months, and home buyers are in an enviable position to negotiate. Here is how you can write a buyer's offer to your advantage.

1. Request E-Mail Listings & Updates

Almost 80% of home buyers today start a home search online. However, many buyers are unaware that the data they are viewing could be dated. Many Web sites reboot every 24 hours. On other sites, agents sometimes leave expired and sold listings as active, hoping for ad calls. To avoid wasting your time, ask your agent to register your e-mail address so you can receive daily MLS changes of reduced prices and new listings. This is one way to gain access to the same data agents receive.

2. Tour Price Reductions

If you're like most buyers, you will want to offer less than asking price. It's just human nature. But if you plan to low-ball, you'll probably be unsuccessful at getting that type of offer accepted if the home was just listed. Instead, tour homes that have had recent price reductions or have been on the market for at least 30 days or more. These sellers are more likely to be receptive to a low-ball offer.

3. Obtain Comparable Sales

When you find a home you want to buy, ask your real estate agent to print out a list of similar homes in the same neighborhood over the last six months sorted by:

• Active Listings
• Pending Sales
• Sold

The list should contain the following specifics:

• Property Address
• Age
• Square Footage
• Lot size
• Bedrooms & Baths
• Sales Price

Compare this data with online home value sites such as Zillow and RealEstateABC, and you'll see first-hand why the data your agent gives you will be more accurate.

4. Request Contingencies

In a buyers' market, you're in control. Write your offer contingent upon the property appraising at the agreed upon sales price and on obtaining your loan. Check with your lawyer to find out if you can ask for a loan contingency that will protect you all the way to closing. Ask for a reasonable period to conduct inspections and to approve title, geological and pest reports. Ordinarily, during contingency periods, buyers can back out without risking a good faith deposit.

5. Ask for an Allowance or Credit

If you find the perfect home but you don't like the color or condition of the carpet, for example, ask the seller to give you a carpeting allowance in your offer. Check with your lender before you write the offer to find out how to word a credit clause that is acceptable to the lender. You can ask for more than it will cost to repair or replace an item to cover your "hassle" factor. Many lenders let borrowers receive up to 6% of the sales price as a cash credit against closing costs.

6. Reduce Your Closing Costs

Depending on your local area, there may be fees associated with closing that are customarily paid by the buyer such as title insurance, property taxes, recording fees or escrow. In a buyers' market, you can ask the seller to pay those closing costs. Typically, those costs can add up to one or two percent of the sales price and are often paid out-of-pocket by buyers. Ask your agent if these fees are negotiable. Then ask the seller to pay them.

7. Renegotiate After Home Inspections

All buyers should obtain a home inspection. Most contracts give buyers the right to cancel a contract if the home inspection reveals repairs or defects that are unacceptable to a buyer. However, if the repairs are minor, you might want to renegotiate the sales price or ask for a credit against your closing costs. Caution: don't ask for a price reduction if the repairs were evident when you first saw the home or the seller might not be willing to negotiate with you.

8. Request Extras

Sellers realize that in buyers' markets, often they have to give a little something extra to the buyers to entice a sale. Don't be afraid to ask for a home warranty protection plan that covers you in the event an appliance breaks down or the plumbing or heating malfunctions. Normally these plans protect you for one full year from the date of closing.

9. Ask for an Item You Don't Want

Did you like the sellers' dining room table? China cabinet? Fish tank? Ask for it in your offer and use it as a negotiating tool. Often this draws the sellers' thoughts away from price and directs those thoughts toward the personal property. If the listing stated the washer and dryer are not included in the sales price, ask for them. If the sellers balk, tell your agent to say, "OK, if we leave the washer & dryer, are you then ready to sign the offer?"

10. Shorten Acceptance Period

There often is no reason to give a seller more than 24 hours to make a decision about your offer. If your agent is presenting the offer in person, she may ask for a decision upon presentation. But don't give them days to talk to Uncle Harry, their neighbor down the street or the coworker who knows everything about real estate. There are a lot more homes on the market and you deserve a fast answer.

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Joshua Boulay
Real Estate Agent
Gropman Realty Group
774-451-1419
joshboulay@gmail.com
www.facebook.com/joshboulay

10 Reasons to hire a professional Real Estate Agent

With so much information readily available online, clients sometimes ask me, "Why should we hire a real estate agent?" They wonder, and rightfully so, if they couldn't buy or sell a home through the Internet or through regular marketing and advertising channels without representation, without a a real estate agent. Some do OK, many don't. So if you've wondered the same thing, here are 10 reasons why you might want to consider hiring a professional real estate agent.

1. Education & Experience

You don't need to know everything about buying and selling real estate if you hire a real estate professional who does. Henry Ford once said that when you hire people who are smarter than you are, it proves you are smarter than they are. The trick is to find the right person. For the most part, they all cost about the same. Why not hire a person with more education and experience than you? We're all looking for more precious time in our lives, and hiring pros gives us that time.

2. Agents are Buffers

Agents take the spam out of your property showings and visits. If you're a buyer of new homes, your agent will whip out her sword and keep the builder's agents at bay, preventing them from biting or nipping at your heels. If you're a seller, your agent will filter all those phone calls that lead to nowhere from lookie loos and try to induce serious buyers to immediately write an offer.

3. Neighborhood Knowledge

Agents either possess intimate knowledge or they know where to find the industry buzz about your neighborhood. They can identify comparable sales and hand these facts to you, in addition to pointing you in the direction where you can find more data on schools, crime or demographics. For example, you may know that a home down the street was on the market for $350,000, but an agent will know it had upgrades and sold at $285,000 after 65 days on the market and after twice falling out of escrow.

4. Price Guidance

Contrary to what some people believe, agents do not select prices for sellers or buyers. However, an agent will help to guide clients to make the right choices for themselves. If a listing is at 7%, for example, an agent has a 7% vested interest in the sale, but the client has a 93% interest. Selling agents will ask buyers to weigh all the data supplied to them and to choose a price. Then based on market supply, demand and the conditions, the agent will devise a negotiation strategy.

5. Market Conditions Information

Real estate agents can disclose market conditions, which will govern your selling or buying process. Many factors determine how you will proceed. Data such as the average per square foot cost of similar homes, median and average sales prices, average days on market and ratios of list-to-sold prices, among other criteria, will have a huge bearing on what you ultimately decide to do.

6. Professional Networking

Real estate agents network with other professionals, many of whom provide services that you will need to buy or sell. Due to legal liability, many agents will hesitate to recommend a certain individual or company over another, but they do know which vendors have a reputation for efficiency, competency and competitive pricing. Agents can, however, give you a list of references with whom they have worked and provide background information to help you make a wise selection.

7. Negotiation Skills & Confidentiality

Top producing agents negotiate well because, unlike most buyers and sellers, they can remove themselves from the emotional aspects of the transaction and because they are skilled. It's part of their job description. Good agents are not messengers, delivering buyer's offers to sellers and vice versa. They are professionals who are trained to present their client's case in the best light and agree to hold client information confidential from competing interests.

8. Handling Volumes of Paperwork

One-page deposit receipts were prevalent in the early 1970s. Today's purchase agreements run 10 pages or more. That does not include the federal- and state-mandated disclosures nor disclosures dictated by local custom. Most real estate files average thicknesses from one to three inches of paper. One tiny mistake or omission could land you in court or cost you thousands. In some states, lawyers handle the disclosures, thank goodness!

9. Answer Questions After Closing

Even the smoothest transactions that close without complications can come back to haunt. For example, taxing authorities that collect property tax assessments, doc stamps or transfer tax can fall months behind and mix up invoices, but one call to your agent can straighten out the confusion. Many questions can pop up that were overlooked in the excitement of closing. Good agents stand by ready to assist. Worthy and honest agents don't leave you in the dust to fend for yourself.

10. Develop Relationships for Future Business

The basis for an agent's success and continued career in real estate is referrals. Few agents would survive if their livelihood was dependent on consistently drumming up new business. This emphasis gives agents strong incentives to make certain clients are happy and satisfied. It also means that an agent who stays in the business will be there for you when you need to hire an agent again. Many will periodically mail market updates to you to keep you informed and to stay in touch.

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Joshua Boulay
Real Estate Agent
Gropman Realty Group
774-451-1419
joshboulay@gmail.com
www.facebook.com/joshboulay

Reasons to buy a home

If you're like most first-time home buyers, you've probably listened to friends', family's and coworkers' advice, many of whom are encouraging you to buy a home. However, you may still wonder if buying a home is the right thing to do. Relax. Having reservations is normal. The more you know about why you should buy a home, the less scary the entire process will appear to you. Here are eight good reasons why you should buy a home.

Pride of Ownership

Pride of ownership is the number one reason why people yearn to own their home. It means you can paint the walls any color you desire, turn up the volume on your CD player, attach permanent fixtures and decorate your home according to your own taste. Home ownership gives you and your family a sense of stability and security. It's making an investment in your future.

Appreciation

Although real estate moves in cycles, sometimes up, sometimes down, over the years, real estate has consistently appreciated. The Office of Federal Housing Enterprise Oversight tracks the movements of single family home values across the country. Its House Price Index breaks down the changes by region and metropolitan area. Many people view their home investment as a hedge against inflation.

Mortgage Interest Deductions

Home ownership is a superb tax shelter and our tax rates favor homeowners. As long as your mortgage balance is smaller than the price of your home, mortgage interest is fully deductible on your tax return. Interest is the largest component of your mortgage payment.

Property Tax Deductions

IRS Publication 530 contains tax information for first-time home buyers. Real estate property taxes paid for a first home and a vacation home are fully deductible for income tax purposes. In California, the passage of Proposition 13 in 1978 established the amount of assessed value after property changes hands and limited property tax increases to 2% per year or the rate of inflation, whichever is less.

Capital Gain Exclusion

As long as you have lived in your home for two of the past five years, you can exclude up to $250,000 for an individual or $500,000 for a married couple of profit from capital gains. You do not have to buy a replacement home or move up. There is no age restriction, and the "over-55" rule does not apply. You can exclude the above thresholds from taxes every 24 months, which means you could sell every two years and pocket your profit--subject to limitation--free from taxation.

Preferential Tax Treatment

If you receive more profit than the allowable exclusion upon sale of your home, that profit will be considered a capital asset as long as you owned your home for more than one year. Capital assets receive preferential tax treatment.

Morgage Reduction Builds Equity

Each month, part of your monthly payment is applied to the principal balance of your loan, which reduces your obligation. The way amortization works, the principal portion of your principal and interest payment increases slightly every month. It is lowest on your first payment and highest on your last payment. On average, each $100,000 of a mortgage will reduce in balance the first year by about $500 in principal, bringing that balance at the end of your first 12 months to $99,500.

 

Equity Loans

Consumers who carry credit card balances cannot deduct the interest paid, which can cost as much as 18% to 22%. Equity loan interest is often much less and it is deductible. For many home owners, it makes sense to pay off this kind of debt with a home equity loan. Consumers can borrow against a home's equity for a variety of reasons such as home improvement, college, medical or starting a new business. Some state laws restrict home equity loans.

 

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Joshua Boulay
Real Estate Agent
Gropman Realty Group
774-451-1419
joshboulay@gmail.com
www.facebook.com/joshboulay

Contact Me



Joshua Boulay with his finance and daughters.


Looking to sell, buy, or rent in Massachusetts? Looking for a knowledgeable agent that will work for you and your best interests? Then please don't hesitate to call or email me.

Joshua Boulay

Real Estate Agent

Gropman Realty Group

774-451-1419

joshboulay@gmail.com

www.facebook.com/joshboulay

Sellers: What is the right offer for your home?

It finally happened. You received an offer on your home! But is it the right offer? Should you accept it or should you tell the potential buyer to go fly a kite? What is your best strategy? To help answer these questions let's take a look at how experienced negotiators handle a negotiation.

First, savvy deal makers establish a decision touchstone as a guide to a successful negotiation. In ancient times, a touchstone was a literal stone, such as jasper or basalt that was often used to test the quality of gold or silver. Likewise, today your decision touchstone can test the quality of a buyer's offer.

To build your own decision touchstone, first identify what housing goals you wish to accomplish as a result of your home sale. For instance let's look at Susans goals, she has three:

1. Net $30,000 - $50,000 from the sale of the home.
2. Relocate to her new job by no later than June 30th.
3. Have the fewest headaches possible. (A cash sale would be great.)

Susan knows what she wants and has taken the time to think about what her most important priorities are before she receives an offer. Her number one goal is to net $30,000-$50,000 dollars from the sale of her home. Notice that she hasn't named a specific number. Why? Sellers who set a price in concrete often face disappointment and frustration by not giving themselves the opportunity to flex on other issues. For instance, what if a buyer rolled in who offered cash (fewer headaches), would agree to close by June 1, but would only agree to pay her enough to net $42,000 from the sale. Susan has wisely discovered that expert negotiators look at each offer in the context of their entire priority list rather than just according to one item.

So even when you revisit your decision touchstone, what if you're still left scratching your head? What then? Reject the offer? Not yet. The next step is to ask your self - What if? For instance, a wise seller might ask themselves: What if I don't sell my home to this buyer - what is the next best possible outcome? And the reverse: What if I don't sell my home to this buyer - what is the worst possible outcome? In today's market, real estate offers are a rare commodity and assuming that another one is just around the corner is a dangerous mindset to adopt. Because of this savvy sellers resist the urge assume a strong negotiating position when in reality they are in a very weak position. In addition to these fundamentals, wise sellers often look for five essential elements within the offer itself to help make their decision.

1. A substantial earnest money deposit

   The larger the deposit a buyer makes, the more serious and committed the buyer is and the better you should feel. On the other hand a small deposit, or worse, a promissory note, may indicate a buyer's unwillingness to fully commit. Decide in advance what you feel is an appropriate earnest money deposit relative to the price of your home. In many markets, this may be 1%-2% of the sale price, but it can also be much, much more.

2. A pre-approved loan

   A letter of pre-approval states that the buyer has been qualified to purchase the home based on the information they have provided the lender at the time of the loan application. This doesn't mean they are fully approved, as the lender still has to verify assets and liabilities, run a credit report, and verify income, employment, and residency, but it does provide a sense that the buyer is a legitimate prospect.

3. Time-limits for condition and contingency removal

   A condition or contingency that has not been satisfied means that the buyer still has an opportunity to back out of the sale, potentially without penalty, all the way until the day of closing. The trouble is a buyer who has open ended condition, and one that they can use as an excuse to exit the sale without penalty, may decide during a sudden panic attack that they should bail out of the sale. To prevent this, wise sellers require that conditions and contingencies be removed as quickly as possible.

4. Clearly understood terms of sale

   The first question to ask yourself while studying the offer is this: Could someone not in the real estate business understand this agreement? A poorly written sale agreement allows room for interpretation. Successful sellers reduce the risk of an offer failing by working with a highly qualified real estate agent or real estate attorney to create agreements that are clearly understood by all parties in the transaction.

5. Progress benchmarks

   In a real estate transaction how do you know that the sale is progressing forward? If you're using a poorly written real estate contract you might not know if the sale is moving forward, backward, or sideways. What you're missing are benchmarks, beacons of hope that signal that your transaction is flying in the right direction and that you are on course for a successful landing. Thankfully, many standard real estate agreements have built in benchmarks, like requiring the buyer to submit an application by a specific deadline, or requiring the buyer to approve the preliminary title report by a certain deadline.

Successful negotiators are those people that understand and embrace the simple but powerful techniques that can enable anyone to create a successful sale - the fundamentals.

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Joshua Boulay
Real Estate Agent
Gropman Realty Group
774-451-1419
joshboulay@gmail.com
www.facebook.com/joshboulay

The Closing Process

Closing consists of all the necessary final steps involved in sealing the deal on a home purchase. It includes:

The offer to purchase

There's no foolproof way to make an offer that's guaranteed to be accepted by the seller. But once you find your perfect house, it's wise to move fast. A good rule of thumb is to make an offer that's eight to 10 percent below the asking price, though that might not work in some areas based on trends in the market. This gives you some room to negotiate, but don't top what you've predetermined to be the highest price you can afford.

The deposit

Also known as earnest money, this is a demonstration of good faith and commitment by the buyer to the seller. It is usually 1 percent of the home's purchase price and is included in an offer to purchase. Either the real estate agent or the seller's lawyer holds the deposit in trust until the deal closes. If you decide not to close on a deal once your offer has been accepted, you may lose your deposit and be sued for damages. If the seller does not accept your offer, your deposit will be returned. If the sale proceeds, your deposit is usually applied to your down payment.

Contingencies

These are certain requirements specified in a contract that need to be met before the buyer is required to close. Typical among them: the buyer's securing of financing and an acceptable house inspection. Generally speaking, an inspection contingency covers a 10-to-14-day period from the acceptance of the contract, and financing contingencies run for 30 days. But in a seller's market, buyers may be asked to fulfill their contingency requirements in shorter time frames.

Home inspection

In a home inspection, a professional conducts a thorough examination of a property to assess its structural and mechanical condition. The idea here is that a trained home inspector will be able to catch potential problems that a buyer might not detect.

The contract

This follows the acceptance of an offer by the seller, and it is a legal and binding obligation, on the part of the buyer, to purchase the property if any contingencies are met. It outlines the details of the transaction, including: a description of the property, the selling price, the date of closing, the possession date and any applicable contingencies.

Settlement sheet

Also called a "closing statement" or a "settlement statement," this is a document that the Department of Housing and Urban Development requires to account for all financial aspects surrounding the sale and purchase of a home. It provides an enumerated list of the funds that were paid at closing. Items on the statement include real estate commissions and initial escrow amounts (money or securities deposited with a neutral third party - the escrow agent - to be delivered upon fulfillment of certain conditions). The Real Estate Settlement Procedures Act requires that a copy of the settlement sheet be distributed to both parties at least one day prior to settlement.

Closing documentation

Before you can close on a house, some paperwork must be completed. This includes a title search to make sure the title is clear, title insurance to protect the buyer and the lender from an oversight regarding a claim on some aspect of the property and an application for homeowner's insurance (necessary for securing a mortgage).

Closing costs

The total amount of closing costs varies, but may include: a loan origination fee, an appraisal fee, the cost of a credit report, a lender's inspection fee, the cost of title insurance, a mortgage broker fee, taxes and a fee for document preparation. Your lender is required to give you prior notice of fees associated with your loan.

Final arrangements

Before the deal is closed and you take possession, you must make some practical arrangements regarding utility service and first mortgage payment.

Settlement

Settlement describes the payment of the balance of the purchase price the buyer owes on the property, and the transfer of the title. It takes place on the possession date specified in the agreement.

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Joshua Boulay
Real Estate Agent
Gropman Realty Group
774-451-1419
joshboulay@gmail.com
www.facebook.com/joshboulay

Increasing Seller's Property Value

Understand first of all that there IS a difference between price and value. Price is the amount you are asking for the property. Value is buyer perceived, and this perception of value is influenced by many factors such as location, features, condition, comparison to other purchase option, etc. By attending to details that can have a positive impact on the value, sellers can significantly increase their chance of attracting qualified buyers willing to pay the asking price.

Some tips to achieve a positive impact on value are:

1. Perceived size impacts value, even more so than actual square footage. Open floor plans make a room feel bigger than larger spaces with smaller rooms. Showing property that is furniture free, or at reduced clutter, helps to make the space feel bigger.
2. Vacancy increases sale-ability. Property is easier to show and easier to sell, and quicker to take possession of when it is vacant at the time it is offered for sale. Evidence of problems to take possession of the property -- such as encroachments, or tenants who wont allow buyer tours -- negatively impact value. Vacancy also helps the buyer walk through the property imagining ownership. Sellers should remove personal trinkets and family pictures as well as being conveniently absent during a buyer tour.
3. Cosmetics are important.
• Fresh paint will always add more value than it costs.
• Clean or new carpet/flooring adds more value than it costs.
• Landscaping adds more value than it costs. At the very minimum, make the entrance area neat.
• If you can, add some colorful flowers and new sod.
4. Take care of the obvious! The spot on the ceiling from the roof leak takes thousands of dollars from the perceived value and the offer price.
5. Condition affects value. Do a seller's home inspection to identify and fix the problem BEFORE closing. No point holding up your check a few extra days; plus a failed buyer's inspection could cost you the sale. Buyers will often bargain down your asking price to accomodate for property condition and repairs.
6. If you can, remodel/update the kitchen and master bathroom. These two areas have a big impact on home buying decisions.
7. Strategic renovations impact value and your bottom line. Don't spend more money to renovate the place than you can recapture in value on the sales price.

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Joshua Boulay
Real Estate Agent
Gropman Realty Group
774-451-1419
joshboulay@gmail.com
www.facebook.com/joshboulay

How Does Escrow Work?

If you've ever made an informal bet with a friend, you may have asked a third person to hold the money until the wager was resolved. When you take out a mortgage to buy a home, you're doing something similar by opening an escrow account.

How it works

When you put money in escrow it is held by a neutral third party (called an escrow agent) who works for both the lender and the borrower. The agent's role is to carry out the instructions agreed upon by both parties. The money is released when all the terms of the agreement are met. Escrow can be involved in anything from multimillion-dollar building projects to purchases made on online auction sites.

When it's used

When your mortgage closes, your lender will usually require you to open an escrow account to cover property taxes and homeowner's insurance. You'll make an initial deposit, followed by payments to the account every month. (Usually these are added to your regular mortgage payment.) The escrow agent will then release these funds as your taxes and insurance premiums come due.

Its purpose

The idea is to protect the lender by ensuring that you pay your taxes and insurance on time. If you default on your property tax, for example, your municipality can put a lien on the house, which would make it difficult to sell. Or if your house burns down and you've neglected to pay the insurance, the lender would be left with no collateral.

How you benefit

Escrow can benefit borrowers by helping them spread insurance and tax expenses evenly over 12 payments. For example, assume your yearly property taxes are two payments of $1,000 each, and your insurance is $400 annually. If you paid these directly, it would mean three large payments a year; your escrow costs, however, would be a manageable $200 a month.

Escrow payments

Your escrow account will have a built-in cushion -- if you miss a payment, the lender must still be able to pay your accounts on time. However, federal law prohibits lenders from requiring more than two months. expenses in escrow. And because your tax and insurance costs will change slightly from year to year, the lender will review and adjust your escrow payments annually.

When escrow may be waived

In most states, the money you place in an escrow account earns no interest for you. For that reason, many borrowers prefer to pay their taxes and insurance directly. Lenders may agree to this if your down payment is more than 20 percent, although some will raise your interest rate slightly to compensate. Once you agree to putting funds into an escrow account, however, it is difficult to cancel it, so make sure you fully understand the arrangement before your mortgage closes.

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Joshua Boulay
Real Estate Agent
Gropman Realty Group
774-451-1419
joshboulay@gmail.com
www.facebook.com/joshboulay

How much can you afford?

If you're like many first-time homebuyers, chances are you've been spending your weekends driving around visiting open houses and new model homes. This is a great way to get a feel for what you want. The problem is that what you want isn't always what you should get.
Before you start touring homes for sale, it's important to start off with a budget so you know how much you can afford to spend. Knowing what mortgage payment you can handle will also help you narrow the field so you don't waste precious time touring homes that are out of your reach.

Where to begin

The key factor in figuring how much home you can afford is your debt-to-income ratio. This is the figure lenders use to determine how much mortgage debt you can handle, and thus the maximum loan amount you will be offered. The ratio is based on how much personal debt you are carrying in relation to how much you earn, and it's expressed as a percentage.

The ideal ratio

Mortgage lenders generally use a ratio of 36 percent as the guideline for how high your debt-to-income ratio should be. A ratio above 36 percent is seen as risky, and the lender will likely either deny the loan or charge a higher interest rate. Another good guideline is that no more than 28 percent of your gross monthly income goes to housing expenses.

Doing the math

First, figure out how much total debt you (and your spouse, if applicable) can carry with a 36 percent ratio. To do this, multiply your monthly gross income (your total income before taxes and other expenses such as health care) by .36. For example, if your gross income is $6,500:

	$6,500	(Gross monthly income)
x	.36	(Debt-to-income ratio)
=	$2,340	(Total allowable monthly debt payments)

Next, add up all your family's fixed monthly debt expenses, such as car payments, your minimum credit card payments, student loans and any other regular debt payments. (Include monthly child support, but not bills such as groceries or utilities.)

	Minimum monthly credit card payments*:	____________
+	Monthly car loan payments:	____________
+	Other monthly debt payments:	____________
=	Total monthly debt payments:	____________

*Your minimum credit card payment is not your total balance every month. It is your required minimum payment -- usually between two and three percent of the outstanding balance.
To continue with the above example, let's assume your total monthly debt payments come to $750. You would then subtract $750 from your total allowable monthly debt payments to calculate your maximum monthly mortgage payment:

	$2,340	(Total allowable monthly debt payments)
-	$750	(Total monthly debt payments other than mortgage)
=	$1,590	(Maximum mortgage payment)

In this example, the most you could afford for a home would be $1,590 per month. And keep in mind that this number includes private mortgage insurance, homeowner's insurance and property taxes. To determine the price of home you can afford based on this amount, use a home affordability calculator.

Exceptions to the 36 percent rule

In regions with higher home prices, it may be hard to stay within the 36 percent guideline. There are lenders that allow a debt-to-income ratio as high as 45 percent. In addition, some mortgage programs, such as Federal Housing Authority mortgages and Veterans Administration mortgages, allow a ratio higher than 36 percent. But keep in mind that a higher ratio may increase your interest rate, so you may be better off in the long run with a less expensive home. It's also important to try to pay down as much debt as possible before you begin looking for a mortgage, as that can help lower your debt-to-income ratio.

Content provided by: Lending Tree and Yahoo

Joshua Boulay
Real Estate Agent
Gropman Realty Group
774-451-1419
joshboulay@gmail.com
www.facebook.com/joshboulay

Buying Your First Home

Finding the right first home starts with a price range and a short list of desirable neighborhoods. But there are many other factors you'll need to consider before investing in what may be your biggest asset.

Before You Start:

• Grab your current household budget so you can consider your financial situation and your ability to make mortgage payments.
• Ask family and friends if they can recommend experts, like a lawyer and an inspector, who can help with the home buying process.
• Think about your lifestyle and how it might affect your choice of home and neighborhood.
• Do a little research on current home prices in the neighborhoods you plan to target.

Buying Your First Home

Home ownership is the cornerstone of the American Dream. But before you start looking, there are a number of things you need to consider. First, you should determine what your needs are and whether owning your own home will meet those needs. Do you picture yourself mowing the lawn on Saturday, or leaving your urban condo for the beach? The best advice is to look at buying a home as a lifestyle investment, and only secondly as a financial investment.
Even if housing prices don't continue to increase at the torrid pace seen in recent years in many areas, buying a home can be a good financial investment. Making mortgage payments forces you to save, and after 15 to 30 years you will own a substantial asset that can be converted into cash to help fund retirement or a child's education. There are also tax benefits.
Like many other investments, however, real estate prices can fluctuate considerably. If you aren't ready to settle down in one spot for a few years, you probably should defer buying a home until you are. If you are ready to take the plunge, you'll need to determine how much you can spend and where you want to live.

How Much Mortgage Can You Afford?

Many mortgages today are being resold in the secondary markets. The Federal National Mortgage Association (Fannie Mae) is a government-sponsored organization that purchases mortgages from lenders and sells them to investors. Mortgages that conform to Fannie Mae's standards may carry lower interest rates or smaller down payments. To qualify, the mortgage borrower needs to meet two ratio requirements that are industry standards.
The housing expense ratio compares basic monthly housing costs to the buyer's gross (before taxes and other deductions) monthly income. Basic costs include monthly mortgage, insurance, and property taxes. Income includes any steady cash flow, including salary, self-employment income, pensions, child support, or alimony payments. For a conventional loan, your monthly housing cost should not exceed 28 percent of your monthly gross income.
The total obligations to income ratio is the percentage of all income required to service your total monthly payments. Monthly payments on student loans, installment loans, and credit card balances older than 10 months are added to basic housing costs and then divided by gross income. Your total monthly debt payments, including basic housing costs, should not exceed 36 percent.
Many home buyers choose to arrange financing before shopping for a home and most lenders will "pre-qualify" you for a certain amount. Prequalification helps you focus on homes you can afford. It also makes you a more attractive buyer and can help you negotiate a lower purchase price. Nothing is more disheartening for buyers or sellers than a deal that falls through due to a lack of financing.
In addition to qualifying for a mortgage, you will probably need a down payment. The 28 percent to 36 percent debt ratios assume a 10 percent down payment. In practice, down payment requirements vary from more than 20 percent to as low as 0 percent for some Veterans Administration (VA) loans. Down payments greater than 20 percent generally buy a better rate. Lowering the down payment increases leverage (the opportunity to make a profit using borrowed money) but also increases monthly payments.

How Much Home Can You Afford?

Bob and Janet's combined income is $50,000 a year, or $4,166 a month. Their housing expense ratio of 28 percent yields a monthly maximum of $1,166 for mortgage, insurance, and taxes ($4,166 x 0.28 = $1,166).
Their total debt ceiling of 36 percent is $1,583 (4,166 x 0.36 = $1,500). Their monthly debt payments include a $200 car payment, credit card payments of $100, and student loan payments of $200. Subtracting this total of $500 from the $1,500 permitted leaves $1,000 in monthly housing payments.

Costs of Buying a Home

Many home buyers are surprised (shocked might be a better word) to find that a down payment is not the only cash requirement. A home inspection can cost $200 or more. Closing costs may include loan origination fees, up-front "points" (prepaid interest), application fees, appraisal fee, survey, title search and title insurance, first month's homeowners insurance, recording fees and attorney's fees. In many locales, transfer taxes are assessed. Finally, adjustments for heating oil or property taxes already paid by the sellers will be included in your final costs. All this will probably add up to be between 3 percent and 8 percent of your purchase price.

Ongoing Costs

In addition to mortgage payments, there are other costs associated with home ownership. Utilities, heat, property taxes, repairs, insurance, services such as trash or snow removal, landscaping, assessments, and replacement of appliances are the major costs incurred. Make sure you understand how much you are willing and able to spend on such items.
Condominiums may not have the same costs as a house, but they do have association fees. Older homes are often less expensive to buy, but repairs may be greater than those in a newer home. When looking for a home, be sure to check the actual expenses of the previous owners, or expenses for a comparable home in the neighborhood.

Choosing a Neighborhood

Before you start looking at homes, look at neighborhoods. Schools and other services play a large part in making a neighborhood attractive. Even if you don't have children, your future buyer may. Crime rates, taxes, transportation, and town services are other things to look at. Finally, learn the local zoning laws. A new pizza shop next door might alter your property's future value. On the other hand, you may want to run a business out of your home.
Look for a neighborhood where prices are increasing. As the prices of the better homes increase, values of the lesser homes may rise as well. If you find a less expensive home in a good neighborhood, make sure you factor in the cost of repairs or upgrades that such a house may need.

Finding a Broker

If you are a first-time home buyer, you will probably want to work with a broker. Brokers know the market and can be a valuable source of information concerning the home buying process. Ask lots of questions, but remember that most brokers are working for the seller, and in the end, their primary obligation is to the seller and not to you. An alternative is a so-called buyer's broker. This individual does work for you, and therefore is paid by you. Seller's brokers are paid by the seller.
Make sure that the broker has access to the Multiple Listing Service (MLS). This service lists all the properties for sale by most major brokers across the country. Brokerage commissions average 5 percent to 7 percent and are split between the listing broker and the broker that eventually sells the home. Don't be surprised if your broker is eager to sell you their own listing since they would then earn the entire commission.

 

Once you've determined a price range and location, you're ready to look at individual homes. Remember that much of a home's value is derived from the values of those surrounding it. Since the average residency in a house is seven years, consider the qualities that will be attractive to future buyers as well as those attractive to you.

Although it can be difficult, try to remember that you will probably want to sell this home someday. The more research you do today, the better your decision will look in the years to come.

Summary:

• Buying a home can mean building significant value through the years.
• Think carefully about how much you can afford to spend and consider borrowing guidelines like those used by Fannie Mae.
• Pre-qualifying with your lender is a good way to determine how much house you can afford.
• You will need cash for a down payment and closing costs. Generally speaking, the higher the down payment, the lower the interest rate and monthly mortgage payment.
• In addition to your mortgage payments, you will also need to consider the other costs of home ownership.
• Schools, taxes, services, crime rates, transportation, and zoning are important considerations when selecting a neighborhood.
• Brokers usually represent the seller, but they can be valuable sources of information for buyers as well. A broker that belongs to the Multiple Listing Service will be able to offer a wider variety of homes to choose from.
• Remember to consider resale value when buying your home.

Content provided by Yahoo! Finance

Joshua Boulay
Real Estate Agent
Gropman Realty Group
774-451-1419
joshboulay@gmail.com
www.facebook.com/joshboulay

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