3 Reasons to Sell Your House Today! (Part II)

Part II – Housing Supply is Low

Homes for Sale

A seller’s ability to sell their home in today’s real estate market will be determined by both the supply of homes for sale and the demand for that housing. In real estate, supply is represented by the current month’s supply of homes for sale (the number of homes for sale divided by the number of homes sold in the previous month).

While there is no steadfast rule that will apply to pricing in every category of housing, here is a great guideline:

  • 1-4 months’ supply creates a sellers’ market where there are not enough homes to satisfy buyer demand. Appreciation is guaranteed.
  • 5-6 months’ supply creates a balanced market. Historically home values appreciate at a rate a little greater than inflation.
  • 7-8 months’ supply creates a buyers’ market where the number of homes for sale exceeds the demand. Depreciation follows.

What is happening across the country right now?

In most parts of the country, supply is dropping like a rock. According to the National Association of Realtors, total housing inventory is below a five months’ supply. This is almost 20% below inventory numbers of just a year ago and at levels we haven’t seen since 2005.

Based on the table above, we can see that the supply/demand ratio is showing a sellers’ market where prices appreciate. This has created positive movement in housing values in most parts of the country.

Sellers have a great opportunity right now. Historically, inventory increases dramatically as we approach summer. Selling now while demand is high and supply is low may garner you your best price.

FSBOing: This Time It Was Embarrassing

With the housing market beginning to heat up, we are afraid some sellers may consider trying to sell their house as a For Sale By Owner (FSBO). This week we will  post the reasons that we believe trying to sell on your own may be a mistake. Here is an article we have run before which sellers should consider. – KCM Crew

embarrassed

This blog prides itself on the quality of real estate information we deliver each and every day. We try to gather empirical evidence to validate the positions we take. We do not use just an anecdotal story to make a point. We also do not get caught up in the sensationalism. However, today will be different.

We can’t resist commenting on the story which appeared in the Wall Street Journal a while back regarding Colby Sambrotto, the founder and former CEO of forsalebyowner.com. It seems the founding father and lifelong evangelist of the concept of selling your home without a real estate agent was forced to hire a broker to sell his home after failing at what he preaches others should do.

After failing to sell his NYC apartment on his own as a For Sale By Owner (FSBO), Sambrotto hired a broker and paid a 6% commission in order to get the job done. His personal experience helps refute some of the myths Sambrotto has been espousing for over a decade. Let’s look at two of those myths:

Myth #1 – You Will Pocket More Money Selling on Your Own

Most FSBO sites say you can save the commission by selling on your own. What happened in Sambrotto’s sale?

From the WSJ article:

“The broker, Jesse Buckler, said he told Mr. Sambrotto the apartment in the Lion’s Head building on West 19th Street near Sixth Avenue was priced too low and wasn’t drawing the right buyers.

By May, it went into contract, he said, after attracting multiple offers. It closed in the last few days for $150,000 more than the original asking price.”

Myth #2 – The Internet Alone Can Sell Your Home

Many have said that, with the introduction of home search on the internet, hiring an agent is no longer a necessity. What happened to the FSBO guru when he attempted to only depend on the internet?

From the WSJ article:

“Looking to move his family to the suburbs, [Mr. Sambrotto] said he carefully staged his apartment for sale himself, and put it on the market. But after using a mix of websites to publicize his apartment, he said he had only ‘middling success’ and switched to a broker because many buyers were so reliant on brokers.”

Bottom Line

There is a reason the real estate industry has been around for centuries: it performs a valuable service.

3 Reasons to Sell Your House Today! (Part I)

Part I – Demand for Real Estate is Much Stronger This Year

HouseKeysBlue

When selling anything, owners can only hope there is a strong demand for that which they are selling. The great news for today’s home sellers is that the current housing market is experiencing a stronger demand than we have seen in some time.

The  spring housing market of 2013 is projected to be one of the best in years.

Home Sales

The National Association of Realtors(NAR) reports monthly on both pending sales (houses going into contract) andexisting home sales (actual closed sales).

In the first quarter of 2013, pending sales have consistently outperformed the numbers reported in 2012. Contract activity has been above year-ago levels for the past 22 months. Before this year, the last time the index showed a higher reading was in April 2010, shortly before the deadline for the home buyer tax credit.

NAR also revealed that closed home sales have been above year-ago levels for 20 consecutive months and sales are at the highest level since the tax credit period of 2009-2010.

Impact on Sellers

This increase in demand has created bidding wars for properly priced homes across the country. This has resulted in two favorable changes for home sellers:

  1. They are receiving offers closer to (if not greater than) the list price.
  2. The average days it takes to sell a home has dropped by over 20% from last year.

If you are thinking about selling your home, don’t miss out on the strong demand that exists in the current spring market.

A for Accessible

When purchasing a home there are many considerations – space requirements, number of bedrooms and bathrooms, location, proximity to work and services. Additionally, there are the aesthetics, the style of the home, its condition, and price. However, there are other important considerations that many people overlook – and these fall into the realm of Accessibility.

The term Accessibility is often used in relation to public buildings and public transportation, and we know about it largely because of a piece of important legislation called “The Americans with Disabilities Act”, or ADA. The ADA provides the framework that ensures that public structures are able to be used by a wide population, including people in wheelchairs and those who have other physical challenges, to ensure their success in a wide range of “major life activities”.

If you have ever tried to go somewhere or reach something that was essential to your well-being, but beyond your grasp, you know the frustration and helplessness that this can evoke. Imagine facing this time and again, in your own home. Whether you are facing a physical challenge due to an accident, or aging and can no longer move and achieve as you used to, your home should be a place where you can live, work and play in a way that is easy for you. Sometimes this means that issues of “accessibility” are at play.

Accessibility can also come into focus when you have a visitor to your home that uses a wheelchair or walker, is blind, or cannot use stairs for some reason. Aged or injured guests benefit from a home that is thoughtfully designed with accessibility as a focus.

While it is possible to retrofit or remodel a home to make it more accessible, this can be an expensive and time-consuming process. Some of the principles of accessibility to consider when purchasing a home include:

  • Can everyone, of all ages and abilities, use the home equally well?
  • Are the rooms “flexible” – can they be used for a variety of activities?
  • Are items in the house simple and intuitive to use?
  • Is it easy to see where you are in the house?
  • Do the entrances make sense?
  • Is storage easy to find and use? Are closets in the right places?
  • Is it a safe place?
  • Are there railings and places to hold on to, at heights good for all ages?
  • Do stairs, windows, and hallways make sense? Are bathrooms where you expect them to be?
  • How much physical effort is required for day-to-day activities?
  • Has effort been made to make it easy to see and get to all features?

When a home is designed and built, it should meet the needs of people despite their age or ability. The ability for it to be flexible and adaptable is an important factor, so that as needs change the home does not create obstacles for the inhabitants or guests. Modern architecture began following the adage, “Form follows function” early in the 20th century, and home buyers are advised to evaluate homes in light of functionality as well as style.

Difficulties arise when homes present barriers to the people who live in or visit them. If the owner ages significantly and loses abilities that made living in the home possible, then something must change. If babies or children enter the scene who might be hurt by stairs or other hazards, those dangers must be addressed. Accidents or other medical issues can result in sudden changes in mobility or self-sufficiency requiring adjustments to improve accessibility. In short, it might be prudent to consider accessibility when buying, building, or remodeling a home.

Looking at a building’s “bones” enables you to understand right away where barriers might occur. Pay attention to hallways, doorways and stairs – even when there are just one or two steps, as each of these elements can be an obstacle to someone who has mobility or sight issues. While doorways can be widened, hallways are more difficult to modify. Additionally, hallways can be dark areas and “wasted” space. Is there a good place for a lift-chair or elevator should someone in a wheel chair have to go up stairs? How easy will it be to control the light, reach counters and cabinets, enjoy the grounds, live daily life?

Cabinets, doors, faucets and switches can be difficult to operate, but easy if you think clearly while choosing these options. As you move around your home, look at these features and how it would feel to use each of these should your hands become stiff or painful. Traditional doorknobs can be replaced by lever-style “knobs” that could even be operated with an elbow or chin in an emergency. Faucets that operate with levers are also useful, as are switch-plates that operate with a simple touch – but beware that they are intuitive to use.

When you are buying a home that might require “adjustments” to afford the accessibility that you desire, consider the spaces and structure of the home. Is there enough property to create ramps to the entrance? Is it feasible to enjoy the best areas of the home and property if mobility is impaired? Are there steep inclines on the property or is the property exposed to extreme weather conditions that could increase hazards seasonally? Look at the approach to the property and how close you might bring a car to the entrance. Are the walkways easy to traverse?

Understanding the more challenging issues around a home or property might not rule it out, but will give you insight into the cost of overcoming these potential obstacles. Pay close attention to bathrooms and stairwells to ensure that you would have the space you need to adjust bathtubs and showers, or to install lifts. Is there a bedroom or office on a lower floor? In the event that it is needed, having an option to create single-level living arrangements could be a boon to your family.

Homes are designed to shelter people and their possessions, provide space for cooking and eating, hygiene, and sleeping. Entertaining in your home is a luxury for some, and a necessity for others. In each function, age and physical ability must come into play, and so architects and builders who consider accessibility up front will usually build more adaptable homes. If you believe that accessibility could be an issue for you or members of your family, consider taking the time to have an expert evaluate a property that you would like to buy. There is a list of professionals in the area of accessibility through the National Council on Aging In Place (NAICP.org). Going in with your eyes open will result in long-term satisfaction and a plan for the house and people alike.

Eight Tax Breaks for Homeowners

Taxes are due April 15, which means it’s time to start gathering your W2s, 1099s, child care receipts and bank statements.

But before you sit down with your accountant, it’s important for you to know that merely owning a home could mean you qualify for tax breaks. In most cases, you need to itemize your taxes in order to take advantage of these deductions. Yes, it makes the tax-filing process seem impenetrable, but the benefits may outweigh the complications.

Here are a few of the tax breaks you’ll want to investigate:

Mortgage interest paid at settlement

Take a look at your closing statement; one item that’s generally listed there is home mortgage interest. On a mortgage of up to $1 million, you can deduct the interest that you pay at settlement if you itemize your deductions on Schedule A (Form 1040). This amount should be included in the mortgage interest statement provided by your lender.

Points

Did you pay points in order to obtain your home mortgage? These fees are included on the income tax deductions list and can be deducted as long as they are associated with the purchase of a home. If you refinanced your home, these points are still deductible, but it must be done over the life of the mortgage.

Taxes are due April 15, which means it’s time to start gathering your W2s, 1099s, child care receipts and bank statements.

But before you sit down with your accountant, it’s important for you to know that merely owning a home could mean you qualify for tax breaks. In most cases, you need to itemize your taxes in order to take advantage of these deductions. Yes, it makes the tax-filing process seem impenetrable, but the benefits may outweigh the complications.

Here are a few of the tax breaks you’ll want to investigate:

Mortgage interest paid at settlement

Take a look at your closing statement; one item that’s generally listed there is home mortgage interest. On a mortgage of up to $1 million, you can deduct the interest that you pay at settlement if you itemize your deductions on Schedule A (Form 1040). This amount should be included in the mortgage interest statement provided by your lender.

Points

Did you pay points in order to obtain your home mortgage? These fees are included on the income tax deductions list and can be deducted as long as they are associated with the purchase of a home. If you refinanced your home, these points are still deductible, but it must be done over the life of the mortgage.

Property taxes

As long as they are based on the assessed value of the real property, you can deduct your state and local property taxes. However, if your money is being held in escrow for the purpose of paying property taxes, you cannot claim this deduction until the money is actually taken out of escrow and paid. If you do this, check your Form 1098 for the amount you may deduct. Be aware that if you receive a partial refund of your property tax, the amount of the deduction you can claim will be reduced.

Selling costs

If you sold a home in the past year, you may be able to reduce your income tax by the amount of your selling costs. These costs can include things such as repairs, title insurance, advertising expenses and broker’s fees. The IRS only allows the deduction of repair costs associated with selling if the repairs were made within 90 days of the sale. It’s also crucial that the repairs were made with the intent of improving your home’s marketability. Selling costs are deducted from your gain on the sale.

Home office

If you use a portion of your home exclusively for the purpose of an office for your small business, you may be able to claim a deduction on your taxes for costs related to insurance, repairs and depreciation. You may only claim this deduction if the space within your home is used exclusively and regularly as either your principal place of business or a place where you meet and deal with customers or patients. You may also be able to take advantage of this deduction if a portion of your home routinely is used for storing items (product samples, inventory, etc.) used in your business.

In tax year 2010 (the most recent year for which figures are available) nearly 3.4 million taxpayers claimed the home office deduction.

Mortgage insurance premiums

You may be able to deduct the premiums paid for private mortgage insurance for your principal residence and for a non-rental second home.

The deduction begins to phase out once your adjusted gross income reaches $100,000 ($50,000 for married filing separately). In general, you can deduct the premiums paid for the current tax year only. A qualified tax adviser can provide information about rules for mortgage insurance provided by the Federal Housing Administration, Department of Veterans Affairs and Rural Housing Service.

Home improvement loan interest

If you’ve taken out a loan to make improvements on your home, you may be able to deduct the interest on this loan. Qualifying loans are those taken out to add “capital improvements” to your home, meaning the improvement must increase your home’s value, adapt it to new uses or extend its life. New carpeting or painting are not considered capital improvements, while adding a garage, installing a water heater or building a deck are all examples of capital improvements.

Construction loan interest

If you take out a construction loan to build a home, you may qualify to deduct the interest. The IRS only allows a deduction for mortgage interest if the loan relates to a “qualified” home, which means it must either be your principal residence or a vacation home that you will use for personal purposes. You can only use this deduction for the first 24 months of the loan, even if the actual construction takes longer.

Tax codes can be confusing. You may want to consult the IRS website for information concerning deductions and credits. Additionally, consider meeting with a professional to ensure you’re not missing any deductions for which you’re eligible.

As long as they are based on the assessed value of the real property, you can deduct your state and local property taxes. However, if your money is being held in escrow for the purpose of paying property taxes, you cannot claim this deduction until the money is actually taken out of escrow and paid. If you do this, check your Form 1098 for the amount you may deduct. Be aware that if you receive a partial refund of your property tax, the amount of the deduction you can claim will be reduced.

Selling costs

If you sold a home in the past year, you may be able to reduce your income tax by the amount of your selling costs. These costs can include things such as repairs, title insurance, advertising expenses and broker’s fees. The IRS only allows the deduction of repair costs associated with selling if the repairs were made within 90 days of the sale. It’s also crucial that the repairs were made with the intent of improving your home’s marketability. Selling costs are deducted from your gain on the sale.

Home office

If you use a portion of your home exclusively for the purpose of an office for your small business, you may be able to claim a deduction on your taxes for costs related to insurance, repairs and depreciation. You may only claim this deduction if the space within your home is used exclusively and regularly as either your principal place of business or a place where you meet and deal with customers or patients. You may also be able to take advantage of this deduction if a portion of your home routinely is used for storing items (product samples, inventory, etc.) used in your business.

In tax year 2010 (the most recent year for which figures are available) nearly 3.4 million taxpayers claimed the home office deduction.

Mortgage insurance premiums

You may be able to deduct the premiums paid for private mortgage insurance for your principal residence and for a non-rental second home.

The deduction begins to phase out once your adjusted gross income reaches $100,000 ($50,000 for married filing separately). In general, you can deduct the premiums paid for the current tax year only. A qualified tax adviser can provide information about rules for mortgage insurance provided by the Federal Housing Administration, Department of Veterans Affairs and Rural Housing Service.

Home improvement loan interest

If you’ve taken out a loan to make improvements on your home, you may be able to deduct the interest on this loan. Qualifying loans are those taken out to add “capital improvements” to your home, meaning the improvement must increase your home’s value, adapt it to new uses or extend its life. New carpeting or painting are not considered capital improvements, while adding a garage, installing a water heater or building a deck are all examples of capital improvements.

Construction loan interest

If you take out a construction loan to build a home, you may qualify to deduct the interest. The IRS only allows a deduction for mortgage interest if the loan relates to a “qualified” home, which means it must either be your principal residence or a vacation home that you will use for personal purposes. You can only use this deduction for the first 24 months of the loan, even if the actual construction takes longer.

Tax codes can be confusing. You may want to consult the IRS website for information concerning deductions and credits. Additionally, consider meeting with a professional to ensure you’re not missing any deductions for which you’re eligible.

Top Tips to buy a Bank Owned Property (also called REO or Foreclosure

  Include a Pre-Approval (NOT Pre-Qualification) letter or proof of funds with your offer. Failing to do so will often lead to rejection or lost time while they have to ask you to provide it as another offer gets accepted while yours was delayed.

  Do NOT add contingencies to your offer more than needed as banks prefer offers with least contingencies possible. The lesser the contingencies, the more are your chances of offer getting accepted by the bank.

  If you are applying for a FHA mortgage, check before making your offer if the home can even get a FHA mortgage in it based on its condition. You can easily get a list of what is acceptable to check if the home meets the criteria or not.

  When making an offer, you should not base your offer on deducting a specific percentage off the Listing price. You do not know if that listing price is market value, priced above market value or already priced at a great discount below market value. Assess what the home is worth in today’s market and deduct for repairs.

  Do not include time limits for the bank answering your offer, Banks work at their own pace. Be prepared to wait for an answer and signed documents. Putting deadlines for answering your offer will simply get it rejected or ignored.

  Get a Home Inspection done by a Certified Home Inspector. Do not assume everything is in working order without testing it BEFORE you make an offer. Virtually all homes are sold ‘As Is” where the BANK will not renegotiate after a home inspection or fix anything not asked for in your initial offer.

  Do not assume the bank will just grant you an extension if you are not ready to close. Cash offers and conventional loans are expected to close within 30 days and FHA and USDA loans are expected to close within 45 days.

  Do not assume all Listing Agents of Bank Owned Homes are the same. There are a few very good ones and MOST are very bad ones. The sale also only goes as well as the listing agent is attentive to their listings and uploading and updating offers.

Tips For First-Time Landlords

For any REALTOR®, working with an investor is a dream. We get repeat business and we both have developed a comfort level over a period of time. Since the recession however, more and more homeowners are turning into landlords because

1. They couldn’t sell their home or

2. They didn’t want to sell their home.

3. The cost of owning another home < Income you could get for renting your existing home.

We here in the Washington DC Metro area have had double digits rise in housing prices year over year and right now is the best time to sell. However, it could take years to get back to the 2005-2006 prices.

The deal can even work if the home you move to costs the same as or even more than your current housing costs, provided your new housing costs are sufficiently offset by the rental income from your existing home.

Do the math

In the best of all worlds, the rent should cover not only your existing home’s mortgage, but property taxes, insurance, upkeep and other costs of owning a home. If not, you’ll have to make up the difference.

In today’s skyrocketing rents market, you likely can swing the rental income you need.

However, you face a greater obstacle than making the deal pencil.

Hiring a property manager could cut into your rental income, but being a landlord, especially for first-timers, is not a piece of cake.

8 Kitchen Trends to Watch in 2013

Modern style:

Kitchens are getting more modern in style, boasting simplified lines and offering up big, open spaces perfect for entertaining.

 

Tucked-away appliances:

Appliances designed to blend in with the rest of the kitchen, like with the same wood of the cabinets, are becoming more popular. Also, some appliances, like undercounter or mini refrigerators or trash compactors, are being tucked away into a kitchen island.

 

Lots of lights:

Great lighting in the kitchen is becoming more important, with lighting being layered with a mixture of task lighting and ambient lighting. Under-cabinet LED lights are becoming more commonplace.

 

Supersized kitchen islands: 

“2013 kitchen design trends are moving away from dining rooms and toward eating, drinking, and interacting in the kitchen itself, and a large kitchen island complete with bar stools is the perfect way to make this happen,” according to HomeThangs.com. this helps to create “a nice open-air feeling – especially if one can be used to bridge kitchen and living areas, another major 2013 kitchen design trend.”

 

Neutral color schemes: 

The use of neutral colors in the kitchen is on the rise, particularly in shades of grays and greens and a variety of wood tones. Bright colors are being reserved for only small accents in the kitchen.

 

Fancy appliances:

Professional gas ranges and induction cooktops are popular kitchen appliances for making a more gourmet kitchen.

 

Decorative range hoods:

Trends are moving away from a conventional stainless steel trapezoid-shaped hood to more decorative range hoods. These hoods may have built-in LED lights and are even serving almost like a decorative chandelier for a kitchen island.

 

Glass backsplashes: 

High gloss is “in” for cabinets, appliances, and backsplashes. A single-sheet, back-painted glass blacksplash is growing in popularity, which are also known for being easy to clean. These glass backsplashes are also reflective, adding a polished decorative touch to kitchens. Glass mosaic tile sheets are also increasing in popularity.

Understanding FHA Loans

Here’s what you need to know about the government program

Federal Housing Administration (FHA) loans often confuse people because the FHA does not make loans. Instead, it insures the loans made by lenders it has approved. This means if the borrower defaults, the FHA, which is a government program, will cover the losses.
Historically, the FHA allows some of the most liberal lending standards in the market and is often a good fit for first-time buyers, those with small down payments and those with less-than-perfect credit. But anyone is eligible to apply.
The FHA is also not a product for everyone and not all lenders offer FHA loans. But many do and you can find FHA lenders at its
Here’s a look at the pros and cons of FHA insured loans:Pros

  • Down payment. The minimum down payment is 3 percent and the FHA allows the money to come from a family member, charitable organization or even an employer. Most conventional loans require the borrower to prove he has the down payment amount.
  • Interest rate. FHA loans usually offer a lower interest rate because it allows a smaller down payment and lower credit scores. Lenders of conventional loans see more risk in a comparable loan and, so, have a higher interest rate.
  • Weak credit: Those with credit problems, even a bankruptcy, may be able to qualify for an FHA loan. The FHA puts more emphasis on income, length of employment and job security than do lenders of conventional loans.
  • Higher ratios. The FHA allows a ratio of 29 percent — of mortgage payment to income (divide the mortgage payment by gross monthly income.) –- or 41 percent -– of all monthly debt to income (divide all your monthly debt such as auto loans and credit card payments by gross monthly income.) Conventional loans usually only allow 28 percent and 36 percent, respectively.
  • No prepayment penalty. The FHA does not allow prepayment penalties, which some conventional loans require if you pay off the loan early. This penalty is charged because lenders are trying to keep people from habitually refinancing. Usually, lenders waive the penalty if the home is sold.
  • Loans for multi-unit properties. FHA loans are not just for single-family homes and condos. They are also available for 2- to 4-unit multi-family complexes. There is also a special loan program for buying a fixer (203k) that includes amounts to make the needed repairs.
  • Closing costs. The FHA allows closing costs to be included in the loan as long as the borrower qualifies for the higher amount. Most conventional loans require that closing costs be paid for at the close of escrow and not be part of the amount loaned.
  • Canceling MIP. The FHA has specific requirements that when met will allow you to cancel you Mortgage Insurance Premium. It is usually more difficult to cancel the Private Mortgage Insurance that is charged under conventional loans with a less than 20 percent down payment.

Cons

  • Higher mortgage insurance. FHA loans require a Mortgage Insurance Premium (MIP), which is similar to the Private Mortgage Insurance charged in conventional loans with less than a 20 percent down payment. The FHA MIP requires paying 1.5 percent of the loan amount up front and .50 percent of the amount owed annually, but paid monthly. (i.e.: A $100,000 loan balance will cost $500 the first year or $41.67 per month). PMI on conventional loans is usually less expensive.
  • Loan limits. The FHA has limits on the amount that can be borrowed because the program is designed for low- to moderate-income buyers. These limits are based on where the house is located. These limits can be changed at any time, so it’s best to check the FHA Web site for the latest information on your area.
  • Must be owner-occupied. An FHA loan requires the home, or one unit in a multi-family complex, be occupied by an owner. So, this program is not for investors looking to buy property to rent out.
  • Limits lender fees. The FHA sets limits it will allow lenders to charge. If the lender charges more, the seller has to agree to pay the additional costs. This can make a prospective buyer with an FHA loan less attractive.
  • Takes more time. FHA loans require more time to complete. In hot markets or in the case of multiple offers, an offer from a buyer wanting an FHA loan may not be considered as strong as an offer from a buyer with a conventional loan.

The Power of Assumability

One of the rarely touted advantages of people taking FHA mortgages today is the fact that they are assumable. What that means is, when the FHA home buyer of today is looking to sell his home, a qualified purchaser can “take over” their loan.

Most people believe that interest rates will return to a “normal” range (around 7%) in a couple of years. When you assume a mortgage, the terms remain the same. This means that a buyer five years from now can enjoy a 3.5% mortgage by assumption rather than the 7% mortgage they would get without it. Since most people buy homes based on how the monthly payment fits into their personal monthly budget, this is extremely impactful.

As an example, a $500,000 loan at 3.5% today carries with it a $2,250.00 mortgage payment on a 30 year fixed mortgage. If offered for sale in five years, the purchaser could assume the $448,485.36 balance with the same $2,250.00 payment and remaining term of 25 years. The total payments over the 25 years would be $675,000.

Compare that to a new $450,000 loan at 7% for 25 years, which would carry a monthly payment of $2997.00 (over $750 more a month than the assumption and more than $225,000 more over the 25 year term).

At 7% for 25 years, to wind up with the same payment as the assumed mortgage, our borrowers would only be getting $338,000…$162,000 LESS!

The point here is that, when rates go up, homes with assumable mortgages will have more value and will sell at higher prices because they are more affordable. As an additional bonus, the closing costs on assumable mortgages are significantly less.

The borrowers must be credit-worthy of course (have good credit, qualifying income,  & necessary assets to close), but they would have to be credit-worthy to get a new mortgage too!

Besides the multiple other reasons to obtain an FHA mortgage (low down payment requirements, extended income ratios, lower credit scores, and easier sourcing of funds), there is another perk. In the future, there is a good chance that you may be able to sell your home for more money because of the FHA loan’s assumability.