When Should You Walk Away From a Home Purchase?

Finally, after months of looking and making offers, you've found a house and are in contract. But even when you are in contract, there are things that could pop up and make the house seem less appealing.

Below are 5 things that should serve as red flags, warning you that maybe you should reconsider.

1. The appraisal comes in below contract price
Though this is not uncommon in active markets, some buyers won't have any additional funds to make up the difference. You can try getting a second appraisal from another lender or renegotiating with the sellers for a lower price (though if there were multiple offers, that's probably not realistic.) But, if you've talked it over with your agent and it doesn't feel right, you might be wise to let this house go.

2. The inspections discover a multitude of issues
Inspections often uncover serious repairs, like foundation issues, major plumbing or electrical problems. If the list is longer than you expected or want to deal with, or if the repairs will cost much more time and money than you have, talk to your Realtor. They may counsel your to renegotiate with the sellers or even to walk away.

3. You feel like you're settling 
Before you began your home search, you created a list of the things you need and those you want. But in this crazy market, buyers can lose sight of their requirements just to make a deal work. So, you'll have a house but it doesn't meet any of your criteria. If you don't think you'll be happy, it's time to break ties and keep looking.

4. You're at the very top of your price range
It's a seller's market and often buyers are faced with bidding wars. This can quickly get you to the peak of your price range. This can leave you feeling financially strapped, especially when you factor in property taxes, homeowner's insurance and all the other things a new home brings. If the cost is making you lose sleep for fear of overextending yourself financially, it might be time to walk away.

5. You're buying with another person who isn't 100% on board
Purchasing a home is a major financial decision and all parties involved must agree. Discuss your requirements in advance and prioritize them. If one or the other of you feels uncomfortable with a specific house, move on.

If you have a need for a real estate professional, please contact me. I would also appreciate your vote of confidence by passing my name to anyone you may know who would benefit from my services.

                            408.687.2026 |  Julie@JulieWyss.com | www.JulieWyss.com

Ranked #21 out of over 16,000 Realtors in Santa Clara County-2016

Do Neighbors Affect Property Values?

One of the best things about a home can be wonderful neighbors. But sometimes, neighbors can also be an issue.

Loud noises, unkempt yards and barking dogs can have an impact on property value. When you tour a home, make note of more than just the house, be sure to consider your potential neighbors as well.

The discussion about neighbors and the community is an important conversation to have with your real estate agent, whether you are buying a house or selling. As a buyer, make sure your agent understands your wants and needs so your agent can help you find the home and the neighborhood of your dreams. As a seller, enlist your agent's help to identify potential neighborhood challenges to address before your home goes on the market.


What Buyers Can Do

If you're thinking of buying in a certain area, your agent can do  research on the neighborhood. It also is beneficial for you to visit the neighborhood at different times of the day on your own or with your agent so you can see what kind of atmosphere exists at night, in the early morning and other times of the day. Walk around the neighborhood and if neighbors are outside, talk to them. This will help you gain some first hand knowledge of the neighbors themselves and how they enjoy living in the area.

What Sellers Can Do

If you're planning to sell your home, talk with the owners of neighboring properties. Let them know you are selling your home and want to present the neighborhood in the best possible light.

Don't conceal real problems or create a facade during showings. But working with your neighbors to help get the neighborhood ready to show along with your home is perfectly acceptable.

As you're packing up your  belongings and trashing collected junk, offer neighbors the use of your collection bin for free to dispose of their unwanted items, especially those items in front yards or driveways that are unsightly.

As you're working on your own landscaping, consider buying a nice outdoor potted plant for the neighbors to place on their doorstep. Or go a step further and offer to help them tend their yard.

General Neighbor Relationship Tips

Have you already moved in and then discover a problem?  Here are a few tips that can help diffuse and resolve issues with your new neighbors.

1. Let the neighbors know about the situation and how it is causing a disturbance. Be courteous in your approach. It could very well be that your neighbors don’t realize the issue. By giving them the benefit of the doubt, you will be kinder in your approach, as well as received on a good note.

2. If your neighbors are hard to contact by phone or won't answer their door, leave them a short, polite note.

3. Addressing the issue is the first step. As a priority, offer to compromise and also offer solutions. This shows that you have thought this through and understand that to peacefully co-exist, both parties must be willing to do some work.

4. Be informed. Know the ordinances and regulations on noise, trash and curfews that govern your homeowner's association, municipality, county and/or state. Often times, if a home is in an HOA managed community, the association can handle the issue.

5. Don't forget the golden rule. If you want good neighbors, you should be one as well. By approaching the issues with empathy and understanding, you are most likely to have a successful dialogue and solution.

If you have a need for a real estate professional, please contact me. I would also appreciate your vote of confidence by passing my name to anyone you may know who would benefit from my services.

                      408.687.2026 |  Julie@JulieWyss.com | www.JulieWyss.com 

Ranked #21 out of over 16,000 real estate agents in Santa Clara County.

Getting the Best Value for Your Home

A strategic sales plan, coupled with a smart buy in your new location will ensure that you recoup the maximum value for your home.

Plan Strategically
Consult with a local real estate agent to ensure your house is priced competitively and shows its best. There are three key factors to getting a home sold—location, price, and condition and only two are under your control: price and condition. Of the two, price is more significant. Remember that if a home is priced properly, it will compensate for poor condition, but whatever the condition, it will never overcome a incorrectly priced home.

The best price you’ll get in today’s market is the one you get now. Don’t worry about where the market has been, keep your focus on where it is going. The price your neighbor down the street got six months ago is not relevant in a market where your house is competing with others from all across town. A local, knowledgable real estate agent will be able to help you decide how to pinpoint your price with precision.

Buy Smart
Whether you are moving to an area where prices are in a downturn or have plans to move up to a nicer home in the same town, selling your house now can get you into the home of your dreams. Whether home prices are on the rise or on the decline, either presents a great opportunity for a savvy homeowner looking to move up. Even if your house price may be lower, the loss at sale can be made up by greater savings at purchase because generally, if home prices are declining, that tends to occur across the board.

By teaming with an experienced local agent who knows how to work with the current market and who can assist in showcasing your home, you'll will get the most from the sale of your home.

If you have a need for a real estate professional, please contact me. I would also appreciate your vote of confidence by passing my name to anyone you may know who would benefit from my services.

                      408.687.2026 |  Julie@JulieWyss.com | www.JulieWyss.com

8 Things To Do When You Move Into Your New Home

When you move into a new house, you’re excited about decorating and getting situated but there are a few important items you should address right away.


1. Change the locks

Before moving even one tiny piece of furniture into your new home, change the locks—or at least have them rekeyed. It’s not that you don’t trust the sellers but there are numerous people who've had contact with those keys over the years, any of whom could have copied the keys for some unsavory purpose.

2. Change the alarm batteries

Making sure your fire and carbon monoxide detectors have fresh batteries may not seem like a pressing issue while you’re in the middle of a stressful move, but it’s the kind of thing that gets ignored and then forgotten. Better to deal with it now, when the home is empty and you can make a quick sweep of the house—without lugging a ladder around furniture.

3. Review your home inspector’s report

Inspection reports are often filed with the escrow papers—but don’t wait until something goes wrong to pull them out. A good home inspector will outline the most important issues in their report, so use their expertise as a guide for your first few days of ownership. If they’ve marked anything as particularly pressing that wasn't addressed by the sellers, make sure to handle it before moving in.

4. Find the circuit breaker and water shut off

If you were there during inspection, you should know where your junction box is, but if you don’t, finding it should be top on your list.  During a move, when you’re plugging all sorts of electrical doodads into the wall, you don’t want to be lost in the dark hunting for that elusive metal box. Its a wise idea to also find the water shut-off, too.

Then, get familiar: If the panel is not already well-marked, have your spouse or another family member stand in different parts of the house while you flip different switches, and make a note of which ones handle different rooms.

5. Deal with any water problems
Deal with water-related issues immediately called out in the inspection report. These tend to be troublesome because they’re so easily ignored.  A leaky toilet might seem minor, but the steady drip can damage internal structural components.

Check your roof, too: If the rubber vent boots on your roof are leaking, you might not know it for a while.

6. Caulk everything

This one isn’t mandatory, but caulking is a whole lot easier if you do it when the house is empty, letting you see all the nooks and crannies that might need a little sealing—and don’t forget the exterior. Caulking issues occur in just about every home and while they might seem minor, it doesn’t take long before cracking gives way to leaks and even more water issues.

7. Plan your emergency exits

Before you begin bringing in furniture, walk through every room and decide how you would escape in an emergency. This can help you spot problem areas or rooms that need some adjustments—say, removing bars or adding egress windows to a basement.

8. Clean your gutters

Don’t let the dullness of this 'out of sight' task push you to procrastination: If the previous homeowners didn’t clean the gutters, you need to do so ASAP.

If you have a need for a real estate professional, please contact me. I would also appreciate your vote of confidence by passing my name to anyone you may know who would benefit from my services.

408.687.2026 |  Julie@JulieWyss.com | www.JulieWyss.com

The Wyss Report: What Buyers Want

The National Association of Home Builders conducted a nationwide survey on what home buyers are looking for when purchasing a new house. Both people who had recently bought a home as well as prospective purchasers were asked what they felt were the most important features.

• Buyers want a home with a median of 2,226 square feet
• Lot size was important to 75% of purchasers
• Close to half want 3 bedrooms while about 30% want 4 bedrooms
• 65% want either 2 or 2.5 baths
• 57% of buyers prefer a single story home
• Over half want a 2 car garage
• For 65% of buyers, the most critical characteristic is 'living space and the number of rooms that meet their needs'
• Buyers focus on quality and appearance for most home features
• 85% or more buyers are interested in energy efficiency and organization/storage
• 84% want a walk-in pantry, table space for eating and a double sink in the kitchen
• Over 80% of buyers ant both a tub and shower in the Master bath
• 65% of buyers would sacrifice space in the Master bath for a larger Master bedroom
• 90% of buyers consider outdoor lighting essential
• 50% would like to have a wireless security system in their new home
• 62% would choose a small home with high quality products and amenities VS a larger home without
• 67% of buyers want an environmentally friendly home but aren't willing to pay more for it

If you have a need for a real estate professional, please contact me. I would also appreciate your vote of confidence by passing my name to anyone you may know who would benefit from my services.

 

408.687.2026 |  Julie@JulieWyss.com | www.JulieWyss.com

Protecting Yourself With Contingencies

Think of a contingency clause as insurance. Once you find a home and make an offer, you hope everything will go smoothly; but in case it doesn’t, you have a contingency clause in place that allows you to back out of the contract without losing money.

Most agreements already have a few key contingency clauses in place to protect against the bigger things—such as a lower-than-anticipated home appraisal—but there are contingencies that go beyond the norm. If you’re about to make an offer, consider all of your options.

Standard contingencies

Some contingency clauses are commonly used when making an offer. Some examples:

Home inspection: This gives the buyer the right to order a professional home inspection and back out of the sale if major unreported damage is found.

Appraisal: The buyer won’t be obligated to buy the home if the appraisal value is lower than the asking price.

Mortgage availability: This gives the buyer time to find financing for the home. If the buyer can’t find financing, either party can cancel the deal. IN today's market, it is best to have all of your financing in place in advance.

Atypical contingencies

You don’t have to stick with the standard contingency clauses. Depending on your situation, it may make sense to add additional clauses to the agreement. Some examples:

HOA rules: If you’re considering an area with a homeowners association, it may be prudent to require a copy of the HOA guidelines before you buy. HOA fees vary and if the dues are high, your annual homeownership costs will go up. Many HOAs also have rules on parking, landscaping, paint colors, and even holiday decorations. If you aren’t happy with the HOA, you’ll want the option to back out of the deal.

Selling your current home: If you’re trying to sell your home before you buy another one, you may want to put a selling contingency in place. If you’re unable to sell your current home within a certain time frame, this contingency allows you to cancel your offer.

Moving furniture early: With this contingency, you and the seller agree to allow you to move personal property in (or move in entirely) earlier than the seller anticipated. You may have to agree to pay the seller rent if you move in before closing, but it will spare you from putting your belongings in storage and finding temporary lodging.

Adding contingency clauses

A basic offer won’t automatically contain any contingency clauses. While many Realtors® include some standard clauses in every offer, you should work with your agent to make sure you’re including contingencies for everything you can anticipate before you submit your offer.

Once you’ve submitted the offer, keep in mind that the seller may submit a counteroffer with his or her own contingency clauses as well.

If you have a need for a real estate professional, please contact me. I would also appreciate your vote of confidence by passing my name to anyone you may know who would benefit from my services.

                       408.687.2026 |  Julie@JulieWyss.com | www.JulieWyss.com

Get A Realtor to Ensure Home Buying Success

Buying and selling real estate is a complex matter. At first it might seem that by checking online sites you could quickly and easily find the right home at the right price.

But a basic rule in real estate is that all properties are unique. No two properties – even two identical models on the same street – are precisely and exactly alike. Homes differ and so do contract terms, financing options, inspection requirements and closing costs. Also, no two transactions are alike.

In this maze of forms, financing, inspections, marketing, pricing and negotiating, it makes sense to work with professionals who know the community and much more. Those professionals are the local REALTORS® who serve your area.

How Do You Choose a REALTOR®?

In every community you’re likely to find a number of realty brokerages. Because there is heated competition, local REALTORS® must fight hard to succeed in your community.

There are numerous places to find the right Realtor for you. Sources include open houses, local advertising, websites, referrals from other REALTORS®, recommendations from neighbors, and suggestions from lenders, attorneys, financial planners and CPAs. The experiences and recommendations of past clients can be invaluable.

In many cases buyers will interview several REALTORS® before selecting one professional to work with. These interviews represent a good opportunity to consider such issues as training, experience, representation and professional certifications as well as the personal rapport you have with each potential candidate.

What to Expect From a REALTOR®

Once you select a REALTOR® you will want to establish a proper business relationship. Some REALTORS® represent sellers while others represent buyers and some do both. Each REALTOR® will explain the options available, describe how he or she typically works with individuals and provide you with complete agency disclosures (the ins and outs of your relationship with the agent) as required in your state.

Once hired for the job, the REALTOR® will provide you with information detailing current market conditions, financing options and negotiating issues that might apply to a given situation.

Remember: Because market conditions can change and the strategies that apply in one negotiation may be inappropriate in another, this information should not be set in stone. During your time in the marketplace REALTORS® will keep you updated and alert you to each step in the transaction process.

If you have a need for a real estate professional, please contact me. I would also appreciate your vote of confidence by passing my name to anyone you may know who would benefit from my services.

                  408.687.2026 |  Julie@JulieWyss.com | www.JulieWyss.com

Are You Ready To Buy A Home?

While it may be acceptable to snap up a pair of shoes on an impulse, the choice to buy a home requires thoughtful planning and decision making.

Whether you’re becoming a homeowner for the first time or you’re a repeat buyer, buying a home is a financial and emotional decision that requires the experience and support of a team of reliable professionals including a REALTOR®, a lender, a lawyer and a range of other individuals.

Why Do You Want to Buy a Home?

The emotional part of the decision comes into play when you think about why you want to move. If you’re a first-time buyer, you need stability in your career and the desire to commit to living in the same community for five to seven years. You should want to establish roots in a neighborhood and look forward to decorating as you please without requiring a landlord’s permission.

Purchasing a home is a lifestyle choice that requires you to think about how you like to spend your time and the type of community where you want to live—such as a rural area without nearby neighbors, a high-rise building in a city or a home within a planned community with recreational amenities.

The more you understand your priorities for a home, the easier it will be for you to narrow your real estate decisions.

Homeownership can also be a powerful way to increase your personal wealth for you and your family, since you’ll be building equity in your home as you pay off your mortgage.

Are Your Finances Ready for Homeownership?

While your dream home may not be within your reach right away, you can take steps to become a homeowner the moment you earn your first paycheck.

In order to qualify for a mortgage to buy a home, you’ll need good credit, a pattern of paying your bills on time while still saving money and a maximum debt-to-income ratio—your gross monthly income compared to the minimum payments on all recurring debts—of 43% or less. Some lenders have stricter guidelines, so the lower your debt-to-income ratio, the better your chances of a loan approval.

While loan programs are available with low down payments of 3.5% to 5%—and a few programs offer no down payment at all—you’ll still need some savings to pay for closing costs, moving expenses and an earnest money deposit on a home. It also is very wise to have cash reserves on hand after you buy.

Saving money and preserving or improving your credit history are essential elements to homeownership.

What Can You Afford to Buy?

Housing prices and rents vary from one location to another, but you can use a Rent vs. Buy calculator to estimate the difference between your current rent and buying a home. In some markets, buying a home can cost the same or even less than renting.
       
Remember, when you’re a homeowner, you also need to include homeowners insurance, property taxes and homeowners association dues in your housing costs. You can use a home affordability calculator to help you estimate what you can pay for a home.

In addition, you should think about your plans for the future and how you spend your money—along with your comfort level with a mortgage payment. A lender will tell you how much you can borrow, but that lender won’t know how much you spend on travel or golf or your plans for potentially reducing your work hours when you have a family.

Once you’ve thought through the emotional and financial aspects of becoming a homeowner, your next steps should be to find a reliable, experienced REALTOR® to become your partner in the home-buying process and to meet with a reputable lender who can discuss your options for financing your purchase.

If you have a need for a real estate professional, please contact me. I would also appreciate your vote of confidence by passing my name to anyone you may know who would benefit from my services.

 

 

408.687.2026 |  Julie@JulieWyss.com | www.JulieWyss.com 

 

Analyzing Your Debt To Income Ratio

The ratio affects your buying power...

Your debt to income ratio is a simple way of showing what percentage of your income is available for a mortgage payment after all other continuing obligations are met. The ratio is one of the many things a lender considers before approving your home loan.

You may see conventional loan debt limits referred to as the 28/36 qualifying ratio. Those numbers refer to two percentages that are used to examine two aspects of your debt load.

The First Number, 28%
 
This number indicates the maximum percentage of your monthly gross income that the lender allows for housing expenses. The total includes payments on the loan principal and interest, private mortgage insurance, hazard insurance, property taxes, and homeowner's association dues. (Often referred to by the acronym PITI.) 

The Second Number, 36%
 
This number refers to the maximum percentage of your monthly gross income that the lender allows for housing expenses plus recurring debt.
Recurring debt includes credit card payments, child support, car loans, and other obligations that will not be paid off within a relatively short period of time (6-10 months). 

Debt to Income Example
 
Yearly Gross Income = $45,000 / Divided by 12 = $3,750 per month income
$3,750 Monthly Income x .28 = $1,050 allowed for housing expense
$3,750 Monthly Income x .36 = $1,350 allowed for housing expense plus recurring debt.

Not All Loans Are the Same
 
FHA loan ratios are typically 29/41, allowing a higher debt load for both housing expenses and recurring debt.

• For the above example, FHA would allow $1087 for housing and $1538 for housing plus recurring debt.
• For a VA loan, the debt to income ratio should not exceed 41% of your monthly gross income. 

Get Pre-Approved
 
Staying within the lender's debt to income ratio limits is only one part of qualifying for a home loan. 

If the overall picture looks good, a lender may allow you to carry more debt. It's always best to be pre-approved before you begin home shopping, so that you'll know exactly what price range (and loan payment) fits your budget.

If you have a need for a real estate professional, please contact me. I would also appreciate your vote of confidence by passing my name to anyone you may know who would benefit from my services.

                  www.JulieWyss.com   |   Julie@JulieWyss.com   |   408.687.2026

10 Things You Shouldn't Do When You're Buying A Home

Your home buying process is well underway. The sellers accepted your offer to purchase. The home is officially under contract and you're counting down the days to closing. The lender pre-approved you, so buying the house is a sure thing, right?

Not quite. Nothing is certain until the keys are in your hands. There are still major hurdles to get past before you close, and your actions between now and closing can create headaches, slowdowns, and even stop the transaction.
 
1. Don't Make a Major Purchase
You've just found out your credit is A+. That's great news, because a new car would look fantastic in the driveway of your new home. But hang on--if you are depending on a mortgage to move in, you'd best wait until after closing to buy the car.

An increase in your debt to income ratio reduces the amount of monthly income available for your mortgage payment.

If you tack on a higher car payment, the bank might decide you cannot afford the home.
Using cash to purchase the car could also create a problem, since banks consider cash reserves when approving your mortgage. If you must make a major purchase before closing, talk to your loan officer before you do it.

2. Don't Change Jobs Unless It's Necessary
Lenders like to see a consistent job history. They aren't usually as nervous if you change jobs within the same field, but it's better to stay put until the keys to the house are in your hand.

3. Don't Give an Earnest Money Deposit Directly to a 'For Sale By Owner' Seller
Your good faith deposit should go into a trust account. Some for sale by owner sellers don't understand that funds are to be applied to your expenses at closing.

I've heard many stories about sellers who spent the deposit money prior to closing. When the transactions didn't take place for valid reasons--such as financing or repair issues, the buyers had to fight for a refund.

Find an attorney or other neutral party who will hold the deposit for you until closing day and make sure your contract dictates what happens to the funds if the transaction doesn't close.

4. Don't Let Your Emotions Take Over
Keep a cool head during the entire home buying process, especially during and after an inspection. Be realistic. No home is perfect, especially older homes. It's not unusual for new owners to take care of some repairs themselves. Don't let the seller's refusal to do a small repair kill the deal on a home you truly love.

On the other hand, don't fall so much in love with the house that you'll buy it no matter what needs to be done--unless you're absolutely sure you can handle it emotionally and financially. Decide what type of repairs you can realistically tackle, and then stick with the decision.

5. Don't Forget to Switch Utilities
That sounds simple, but you'd be surprised how many people forget to apply for utility service at their new home. Call the utility companies as soon as you have a contract. Find out how many days lead time they need to switch the service, and then get back with them when you have a firm closing date. Don't forget to discontinue services at your old home.

6. Don't Wait to Line Up Your Hazard Insurance
A no-brainer, right? But it's another often-forgotten task that buyers scramble to take care of at the last minute. Before closing, your lender will want to see an insurance binder showing you have coverage for the new home. Get it as early as possible so that closing isn't delayed.

In some locations, additional types of insurance coverage might be necessary. Talk to your lender about insurance requirements well before the closing date.

7. Don't Become Best Friends with the Seller
I'll get some flack on this one. It's great to be friendly, but don't get into too many long discussions with the sellers, because personality conflicts often cloud judgments.

Remember, this is their home. You're no doubt excited about moving in, and if you didn't like the house you wouldn't have offered to buy it. But you'll make changes--everyone does. A casual statement about "ripping up that ugly carpet" might be hurtful enough to keep the seller from negotiating with you about repairs or other issues that crop up.

8. Don't Panic if the Appraisal Comes in Low
At least not at first. There are some things you (and your agent) can do to correct the problem. Study your options.

9. Don't Go It Alone
If you're working with an agent, it's the agent's duty to track many of the day to day details that involve the lender, the seller, or the seller's agent.

10. Don't Ignore Lender Requirements
Know what is expected of you and take care of it. For instance, a Certificate of Eligibility is required to move forward on a VA loan. That's something you must handle yourself. Answer lender questions and provide required paperwork as quickly as possible--your closing depends on it.

If you have a need for a real estate professional, please contact me. I would also appreciate your vote of confidence by passing my name to anyone you may know who would benefit from my services.

 

www.JulieWyss.com   |  Julie@JulieWyss.com   |   408.687.2026

Visiting Open Homes

An open house can be an opportunity for you to get information about homes and the housing market. Open houses are a common real estate practice because they give an agent the opportunity to market the home and to meet prospective buyers.

Here are some questions you may want to ask:
Are you the listing agent for this house? Busy agents sometimes arrange for a colleague or assistant to conduct the open house. Don’t assume the person showing the home is knowledgeable about the house or has met the sellers.

How long has the home been on the market? Well-priced homes in good condition generally sell in a short period of time. Unless the local market is weak, you will want to know why a particular home is not selling. Are there hidden defects? Is it overpriced? Are the sellers requiring something that may seem unreasonable as a condition of the sale?

Have the sellers received any offers? If the sellers rejected offers that were too low or had contingencies or conditions, you should find out before you experience the same.

Is any furniture or fixturing being sold with the house? If you’re thinking of buying the home, there is no better time to ask whether the seller would be interested in including the patio furniture or the dining room chandelier.

Are there any special costs attached to the property? Is there a homeowner’s association that has dues or fees? Are there particular tax assessments? Are there any natural hazard issues to be aware of? Are there any hidden costs of owning the home?

How does this house compare to others on this street? The local agent may be able to speak about recent sales in the neighborhood as well as some interior ideas seen in other homes.

If you have a need for a real estate professional, please contact me. I would also appreciate your vote of confidence by passing my name to anyone you may know who would benefit from my services.

408.687.2026 |  Julie@JulieWyss.com | www.JulieWyss.com

What Can I Afford?

There is a rule of thumb that says that if you have the capacity to repay the mortgage, you can afford a single-family house that costs up to two and one-half times your annual gross income. (Annual gross income is the amount you make before taxes are deducted.) Like other rules of thumb, this is a general idea of how large a mortgage you can afford. But, because it is so simple, it doesn't take into account all the information that will help you feel comfortable with your mortgage payments.

If you are buying a house with someone else (spouse, parent, adult child, partner/companion, brother or sister or other relative), you should consider your co-purchaser's earnings and existing debts as well. Remember, if you apply for a loan with somebody else, you and your coborrower are both legally responsible for repayment of the mortgage.

Your buying power depends on how much you have available for the down payment and how much a financial institution will agree to lend you.

Your down payment
If you are a first-time home buyer, the price you can afford to pay for a house may well be limited by your ability to come up with the required down payment and closing costs. If you haven't accumulated much savings, you may want to set aside funds for a down payment on a regular basis from your paycheck. Monies in your checking and savings accounts, mutual funds, stocks and bonds, the cash value of your life insurance policy, and gifts from parents or other relatives may all be suitable sources for a down payment.

Private Mortgage Insurance
Depending on the lender and loan type, you may be able to get a mortgage with as little as 3 percent or 5 percent down. However, putting less than 20 percent down often means you will be required to purchase private mortgage insurance. Private Mortgage Insurance (PMI) helps protect the lending institution in case you fail to make payments on your mortgage.

Avoiding PMI
It is possible to get financing with 0-10% down and not pay PMI (Private Mortgage Insurance). This is why 80-10-10 financing was created. It is called 80-10-10 because a lender provides a traditional 80% first mortgage, a 10% second mortgage, and makes a cash down payment equal to 10% of the home’s purchase price. The same principle applies if the borrower can only afford to make a 5% down payment: 80-15-5 financing is also available.

Your closing costs
In addition to the down payment, you will also need to consider closing costs. The closing is the final step during which ownership of the house is transferred to you. The purpose of the closing is to make sure the property is ready and able to be transferred from the seller to you.

Closing costs generally range from 3 percent to 6 percent of the amount of the mortgage. So, if you were to buy a $100,000 house with a 5 percent ($5,000) down payment, you could expect to pay between $2,850 and $5,700 on your $95,000 mortgage. Sometimes, you can negotiate with the seller of a property to pay some of your closing costs, which will reduce the amount of money you will need to bring to closing.

How much a financial institution will lend you
Apart from having available funds for a down payment and closing costs, the other major factor limiting how expensive a house you can buy will be how much you can borrow.

When you apply for a mortgage, the lender will consider both your earnings and your existing debts in determining the size of your loan. Lenders generally use the following two qualifying guidelines to determine what size mortgage you are eligible for:

The amount of money you owe for mortgage payments, property taxes, insurance, and condominium or co-op fee, if applicable, should total no more than 28 percent of your monthly gross (before-tax) income. This is called the Housing Expense Ratio. The amount of money you owe for the above items plus other long-term debts should total no more than 36 percent of your monthly gross income. This is called the total Debt-to-Income Ratio.

Basically, lenders are saying that a household should spend no more than about one-fourth of its income (up to 28 percent) on housing and no more than about one-third of its income (up to 36 percent) on total indebtedness (housing plus other debts). Lenders feel that if they follow these guidelines, homeowners will be able to pay off their mortgages fairly comfortably.

These lender ratios are flexible guidelines. If you have a consistent record of paying rent that is very close in amount to your proposed monthly mortgage payments or if you make a large down payment, you may be able to use somewhat higher ratios. Some lenders offer special loans for low- and moderate-income home buyers that allow them to use as much as 33 percent of their gross monthly income for housing expenses and 38 percent for total debt.

Don’t Despair, There is a Loan For You
When you go to apply for a mortgage, the lender will use all the relevant data -- your income, your existing debts, the purchase price of the house, your down payment, the interest rate on the loan, and the cost of property taxes and insurance -- and calculate whether you qualify to borrow the amount of money you need to buy the house.

If you have a need for a real estate professional, please contact me. I would also appreciate your vote of confidence by passing my name to anyone you may know who would benefit from my services.

408.687.2026 |  Julie@JulieWyss.com | www.JulieWyss.com

Is it a buyer’s market, seller’s market or neutral?

by Julie Wyss, Broker Associate

Originally published at DeadlineNews.com on August 1, 2012.

If you are considering buying or selling a home in Silicon Valley, you are likely trying to take the pulse of the housing market to determine if this is the right time to make a move.

Even the most savvy investor can find the timing aspect of buying or selling daunting and timing can be a stressful ordeal after watching so many friends and family members stuck with mortgages that are larger than their homes are worth.

Here’s a quick formula to help you zero on the right time to buy, sell or stay put.

The calculations can be used in any sized market, by ZIP Code, by city or by county.

Calculating market conditions

• Buyer’s Market – There is more than a six-month supply of homes for sale. The market is loose. This puts the buyer in a better negotiating position, making it a great time to buy.

• Seller’s Market – There is less than a three-month supply of homes for sale. The market is tight. This puts the seller in a better negotiating position, making it a great time to sell.

• Neutral Market – There is a three- to six-month supply of homes for sale. This puts the buyer and seller on a relatively equal negotiating footing. The seller has an edge as supplies move nearer to three-month supply. The buyer calls more of the shots when supplies tip toward the six-month supply level.

In your area, calculate the supply of homes for sale by dividing the number of homes for sale by the number of homes sold in a given month.

Additional factors also can tip the scales one way or the other, including economic distress or growth, levels of appreciation, falling or rising prices and an imbalance between buyers and sellers.

Sellers rule

• It’s a solid seller’s market. Absolutely. All-cash buyers have snatched up a large chunk of lower priced properties. Distressed properties are down. And many equity-poor homeowners are waiting, 

hoping that prices will come up more so they can squeeze another $50,000 or so out before they list.

• It’s not a buyer’s market. Record low interest rates along isn’t enough to give them an edge in terms of a stronger negotiating edge. Inventories are also near record lows so buyers face stiff competition from multiple offers as they struggle to find the right property.

• Affordability is being offset by low inventories and that’s keeping the market out of neutral territory.

Still a good time to buy

As is often the case, Silicon Valley’s market experienced a swift transition from the buyer’s market of last year to the current seller’s market. That’s because home buyers and sellers typically move in unison – on or off the market – as soon as they see the market moving in and against their favor. That makes the neutral market the most fleeting of the three.

In a seller’s market as tough as this one, even well-trained professionals are left scratching their heads trying to get an offer accepted.

Prices are rising, record-low interest rates are sending buyers to market. It’s a great time to sell compared to a year ago.

With prices still affordable, it’s also an amazing time for existing homeowners to buy up and move to a bigger and better home.

If you have a need for a real estate professional, please contact me. I would also appreciate your vote of confidence by passing my name to anyone you may know who would benefit from my services.

Julie@JulieWyss.com  |  www.JulieWyss.com  |  408.687.2026

What Can I Afford?

There is a rule of thumb that says that if you have the capacity to repay the mortgage, you can afford a single-family house that costs up to two and one-half times your annual gross income. (Annual gross income is the amount you make before taxes are deducted.) Like other rules of thumb, this is a general idea of how large a mortgage you can afford. But, because it is so simple, it doesn't take into account all the information that will help you feel comfortable with your mortgage payments.

If you are buying a house with someone else (spouse, parent, adult child, partner/companion, brother or sister or other relative), you should consider your co-purchaser's earnings and existing debts as well. Remember, if you apply for a loan with somebody else, you and your coborrower are both legally responsible for repayment of the mortgage.

Your buying power depends on how much you have available for the down payment and how much a financial institution will agree to lend you.

Your down payment

If you are a first-time home buyer, the price you can afford to pay for a house may well be limited by your ability to come up with the required down payment and closing costs. If you haven't accumulated much savings, you may want to set aside funds for a down payment on a regular basis from your paycheck. Monies in your checking and savings accounts, mutual funds, stocks and bonds, the cash value of your life insurance policy, and gifts from parents or other relatives may all be suitable sources for a down payment.

Private Mortgage Insurance

Depending on the lender and loan type, you may be able to get a mortgage with as little as 3 percent or 5 percent down. However, putting less than 20 percent down often means you will be required to purchase private mortgage insurance. Private Mortgage Insurance (PMI) helps protect the lending institution in case you fail to make payments on your mortgage.

Avoiding PMI

It is possible to get financing with 0-10% down and not pay PMI (Private Mortgage Insurance). This is why 80-10-10 financing was created. It is called 80-10-10 because a lender provides a traditional 80% first mortgage, a 10% second mortgage, and makes a cash down payment equal to 10% of the home’s purchase price. The same principle applies if the borrower can only afford to make a 5% down payment: 80-15-5 financing is also available.

Your closing costs

In addition to the down payment, you will also need to consider closing costs. The closing is the final step during which ownership of the house is transferred to you. The purpose of the closing is to make sure the property is ready and able to be transferred from the seller to you.

Closing costs generally range from 3 percent to 6 percent of the amount of the mortgage. So, if you were to buy a $100,000 house with a 5 percent ($5,000) down payment, you could expect to pay between $2,850 and $5,700 on your $95,000 mortgage. Sometimes, you can negotiate with the seller of a property to pay some of your closing costs, which will reduce the amount of money you will need to bring to closing.

How much a financial institution will lend you

Apart from having available funds for a down payment and closing costs, the other major factor limiting how expensive a house you can buy will be how much you can borrow.

When you apply for a mortgage, the lender will consider both your earnings and your existing debts in determining the size of your loan. Lenders generally use the following two qualifying guidelines to determine what size mortgage you are eligible for:

The amount of money you owe for mortgage payments, property taxes, insurance, and condominium or co-op fee, if applicable, should total no more than 28 percent of your monthly gross (before-tax) income. This is called the Housing Expense Ratio. The amount of money you owe for the above items plus other long-term debts should total no more than 36 percent of your monthly gross income. This is called the total Debt-to-Income Ratio.

Basically, lenders are saying that a household should spend no more than about one-fourth of its income (up to 28 percent) on housing and no more than about one-third of its income (up to 36 percent) on total indebtedness (housing plus other debts). Lenders feel that if they follow these guidelines, homeowners will be able to pay off their mortgages fairly comfortably.

These lender ratios are flexible guidelines. If you have a consistent record of paying rent that is very close in amount to your proposed monthly mortgage payments or if you make a large down payment, you may be able to use somewhat higher ratios. Some lenders offer special loans for low- and moderate-income home buyers that allow them to use as much as 33 percent of their gross monthly income for housing expenses and 38 percent for total debt.

Don’t Despair, There is a Loan For You

When you go to apply for a mortgage, the lender will use all the relevant data -- your income, your existing debts, the purchase price of the house, your down payment, the interest rate on the loan, and the cost of property taxes and insurance -- and calculate whether you qualify to borrow the amount of money you need to buy the house.

If you have a need for a real estate professional, please contact me.  I would also appreciate your vote of confidence in my service by passing my name to anyone you may know who would benefit from my services.