Buying homes may become more expensive after real estate brokers’ commissions are cut
The National Association of Realtors has agreed to lower brokerage commissions. The change will make buying and selling homes more expensive.
Interest rates are high and housing supply is low, making the housing market difficult but not impossible to navigate, experts say.
There are still plenty of ways to maximize your budget if you’re a buyer or secure the highest price and minimize costs if you’re a seller. Strategies include knowing which fees might be negotiable, which home features to invest in, what type of lender to look for, what types of mortgages are available and the tax benefits of selling and buying another home, experts say.
Can I still get a 3% mortgage rate?
Yes, if the seller has what is called a convertible mortgage at a lower rate, you can take it over.
An affordable mortgage is generally a mortgage that is insured by the Federal Housing Administration (FHA) or backed by the Department of Veterans Affairs (VA) or the U.S. Department of Agriculture (USDA).
on 12 million, or 23% of active mortgage is redeemableAccording to data and technology firm Intercontinental Exchange, 7.2 million, or 14%, of those loans could be purchased at interest rates below 4%, potentially saving buyers thousands of dollars and generating more bids for sellers. Current loan rates are around 6-7%.
On a $400,000 loan at 7%, your total monthly principal and interest payment is about $2,660. At 3%, that payment drops to $1,686. That’s a difference of about $1,000 in your monthly housing costs.
These deals also do not require an appraisal, which can save buyers hundreds of dollars.
What are the disadvantages of a convertible mortgage?
- Convertible mortgages aren’t easy to find. Only a few ads advertise them, says Chris Burke, vice president of mortgage insights at Veterans United Home Loans.
If you are looking in Arizona, Georgia, Colorado, Florida, Illinois and Texas, you can check out the listings site. roamingwhich was launched last September.
You may have to make a large down payment. For example, if someone has $350,000 left on their loan and sells their home for $450,000, the person assuming the loan would need to pay the homeowner $100,000 at closing for the assumption to make sense. Experts say this is significant for most people.
Roam can also help buyers secure secondary financing to cover the down payment, which is typically the difference between the sales price and the mortgage in these deals.
- These deals can be tough to close. Roam founder and CEO Raunak Singh says the company promises sellers they can close within 45 days, or they’ll pay the seller’s mortgage until the deal closes.
- For veterans, their rights to buy the home will remain there until the loan is paid in full, Burke said. The right is the amount the VA guarantees to repay lenders, typically $36,000 or 25% of the loan amount, in the event the borrower defaults and helps determine how much a veteran can borrow before needing a down payment. Burke said that means if a veteran has to buy a replacement home, the rights to that purchase will be curtailed because of what’s pending on the first property. If the mortgage is foreclosed on or sold short after the assumption, veterans will lose all of their rights.
What are the negotiable fees when buying and selling a home?
Fees that may be negotiable with the lender include:
- Application fees
- Origination fees cover the costs of underwriting your loan, which may include processing your loan application, preparing loan documents and reviewing your credit file.
- Fees associated with rate locks that guarantee your interest rate during the loan process or purchase points to lower your interest rate.
- Real Estate Agents Commissions. If you are a seller and do not want to negotiate your own agent commissions, list wisely This site will connect you with agents willing to work on an incentive-based commission, rather than the current flat-rate structure. Essentially, agents agree with you on a minimum price they think they can get for your home. If the sale price goes above that, agents get 0.75% of the final price plus a 20% incentive for every dollar above the agreed-upon price. Founder Nick Johnson said the approach “focuses attention on what matters most, which is getting the best price for your home.”
- State and local government registration fees, which are usually paid by the buyer or seller.
To get the best rates, experts recommend comparing lenders’ rates.
“Get estimates and see the variance,” said Darren Tully, chief loan officer at Cornerstone Financial Services. “It gives you some knowledge and a basis to say, ‘I’ve gotten quotes from other lenders, will you work with me?’”
What type of lender should I hire?
“Look for a lender that has a variety of loan products and can coach you on getting the most out of your financing through credit improvement, cheaper PMI (private mortgage insurance) options depending on your down payment, or payment points or temporary down payments,” Tully said.
PMI may be required for a purchase if your down payment is less than 20% of the purchase price, and points are a form of prepaid interest that you can choose to pay up front in exchange for a lower interest rate and monthly payments.
The buy-downs are a prepaid interest that allows you to get a lower interest rate for a short period of time. “It was a way to help bridge the gap (before rates drop),” he said. “People can afford a 5-6% loan even if it’s for a year or two (and then refinance it).”
Find a lender: Best Mortgage Providers June 2024
What are the tax benefits of buying and selling a home?
- If you sell your primary residence, you can exclude up to $250,000 of the gain as an individual or $500,000 as a married couple filing jointly from your federal income tax return. This applies if you’ve lived there for at least two of the past five years and haven’t sold another home in the past two years. The IRS said.
State tax rules vary, so you’ll need to check your local laws, said Mike Zovistowski, a partner at UHY, a professional services firm.
He said that since home prices have risen so much over the past five years, many people who sell their homes may benefit from this exemption. And if you are thinking of downsizing, you can sell your home and buy a smaller, less expensive home in cash and pocket any difference without paying tax on it.
Also, if you detail it, you can mortgage interest deduction You paid off the first $750,000 of your mortgage debt during the tax year. If you’re married and filing separately, the limit drops to $375,000, according to the IRS.
What increases the value of your home?
Anything that adds appeal, Tully said.
“Landscaping is one of the biggest returns, dollar for dollar, whether it’s from the inside or through decluttering, fresh paint or touch-ups,” he said.
Solar and energy efficiency steps, for which you can get tax credits, can also add value, Zovistowski said.
Realtors say renovated kitchens and bathrooms are also highly regarded.
What are the types of mortgage?
The main types of mortgage are:
- Conventional loans, which are usually used by people with good credit
- Government-backed loans, best for those with low credit scores and smaller down payments
- Jumbo loans, usually for those with good credit who want to buy expensive homes.
- Fixed interest rate loans with fixed monthly payments
- Adjustable rate loans have interest rates that move periodically in line with changes in a specified benchmark.
Medora Lee is a USA TODAY money, markets and personal finance reporter. You can reach her at [email protected] and Subscribe to our free daily newsletter For personal finance tips and business news every Monday through Friday morning.
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