First, Let’s Talk About Recessions

A recent survey by Realtor.com targeted people currently looking to buy a home and asked them about their thoughts on an impending recession. The survey revealed that 42 percent thought a recession would occur this year or next. Some pushed that date back to 2021. Survey respondents (59 percent) also stated that if there were another recession, they felt the housing market would fare the same as in 2008 — the worst recession in decades that saw a full-blown housing market crash.

This wasn’t the first survey to address this question of an impending recession, either. A few more surveys asked the same thing, with 70 percent of their respondents believing a recession is coming soon. However, recent data from CoreLogic (a provider of consumer, financial, and property data and analytics) pointed out that a potential recession is no reason to panic and completely throw off plans in the housing market is instead “cooling” — and nowhere near a crash.

The data cites the past few recessions and connects them with home values. The 2008 recession was actually assisted by declining home values, which was largely due to mortgage lenders (among other things) issuing loans to people that a) couldn’t reasonably be repaid and b) eventually caused their properties to go underwater, meaning that the owners owed more on their loans than their homes were worth.

The previous four recessions, with the exception of one, actually saw an increase in home values ranging from 3 percent to 6 percent. And in 1991 (the exception), home values declined minimally — a figure that is often on par with an average decline.

• 1980: +6.1 percent
• 1981: +3.5 percent
• 1991: -1.9 percent
• 2001: +6.6 percent
• 2008: -19.7 percent

Even if 2019, 2020, or 2021 were to bring about a recession, CoreLogic argues that such a recession does not indicate a crash. Rather that it indicates a “cooling” of the housing market, and that there is no need to worry. But the surveys and research were all focused nationally — what about the North Central Ohio housing market?

Why the North Central Ohio Housing Market is Doing OK

There Isn’t an Overabundance of Inventory

Inventory logically makes an impact on home values because it’s a matter of supply and demand. When the 2007–2008 recession occurred, there was a significant amount of homes for sale on the market. Right now, home inventories are lower nationwide. In North Central Ohio, inventory is stable. For 2016–2018 in fact, the number of properties sold has stood around the 3,200 mark. From 2012 to 2015, inventory ranged from 2,300 to 2,900. The difference isn’t so significant as to indicate an “overabundance,” however. In 2008, the national inventory average almost doubled.

Mortgage Rates are Lowering

Mortgage rates have been higher for the past while. When this happens, you naturally see fewer people taking out loans to buy houses. Now that rates are starting to stabilize, more people will be taking out mortgages to buy the homes they want. While the impact here hasn’t been significant, it should start to move the needle upward. Learn more about how mortgage interest rates and the housing market work together here.

Policy and Timing

This a broader topic that includes a few relevant factors. First, a lot of people tried to cram in their home purchase at the end of 2017 to be grandfathered into the mortgage interest deduction, leading to a spike in sales. At the end of 2018, there was no similar rush, which led to price decreases. Again, North Central Ohio home sales have maintained a consistent level around 3,200 over the past couple years despite price increases.

Work With Experts — Not Expectations

When it comes time for you to purchase a home, don’t allow yourself to be concerned with expected trends or industry opinions. Trust the experts that have lived and breathed the North Central Ohio housing market since 1936. Work with CENTURY 21 Bolte Real Estate for your home purchase or sale. Contact us today for a free market analysis.

Your Down Payment is One of the Key Factors That’ll Determine How Much You’ll Pay Each Month for Your Home

If you’re getting ready to purchase a home soon, you’re probably going to have to take out a mortgage. Most people have to go through this process in order to buy a home, but the financial details can get a little tricky — especially with how much money you want to put down. The amount you choose will affect your payment amount, whether you’ll need mortgage insurance, and more — so what is the typical down payment on a house?

For a “typical” number, most people will tell you 20 percent down is the way to go. This has been the benchmark for years, but depending on the type of mortgage you get, 20 percent isn’t necessarily a requirement. Your down payment is a portion of the cost of your home sale that is paid up front to the lender that helps them balance the risk involved in the transaction. Down payments are usually expressed as percentages, and how much you have to pay per month depends on the mortgage you choose or are qualified to get.

The reason that 20 percent down is the most common choice is that by paying that amount, you don’t have to pay mortgage insurance. Just as it sounds, mortgage insurance is an additional fee that you have to pay for making a lower-than-normal down payment. While down payments lower than 20 percent are available for certain programs, you may have to pay mortgage insurance in some form.

However, current trends have also shown that 20 percent down might not be as strong a rule of thumb as it has been. Many homebuyers, especially young people, are putting down less than 20 percent in order to obtain the home they want. In fact, 55 percent of people put down six percent or less in 2018. The down payment is often the greatest barrier to homeownership, so more and more lenders are lowering their down payment requirements to help more people buy homes.

So, how do you know what down payment is right for you? That depends on the amount of money you have available to spend (and want to spend), and the type of mortgage you’re considering. Let’s dig into the differences.

Down Payment Requirements for Different Mortgage Types

Conventional Mortgages

Conventional mortgages are one of the most common types of home loans and are backed by government-sponsored enterprises — Freddie Mac and Fannie Mae — that purchase mortgages from lenders. These loans typically require you to put 20 percent down, but they’re now able to lower the minimum to as little as three percent. Conventional lenders have lowered their rate in order to compete with other low down payment programs and to provide greater access to homeownership.

However, if you put less than 20 percent down, you’re going to have to pay private mortgage insurance (PMI) on top of your monthly payment. PMI can be up to one percent of your total loan value each month — the amount depends on your credit score, the cost of your loan, and the amount that you’re putting down. It’s easy for this to become expensive, which is why it’s important that you pay attention to these details. Note that some lenders offer lender-paid mortgage insurance (LPMI), but your rate will increase to help the lender cover that cost.

In terms of rates, conventional mortgages are available as either fixed or adjustable. A fixed-rate mortgage means that your rate will never change — but it’ll be slightly higher. Adjustable-rate mortgages (ARMs) will have lower rates, but you run the risk of your rate increasing unexpectedly after the initial fixed period. This period can be anywhere from 3 to 10 years, depending on the loan you choose. ARMs do provide “caps,” which are limits to the amount the rate can change, but these must be determined during the loan process.

With conventional mortgages, you can also choose how long the loan term will be. These loans are available for a wide variety of terms, you can choose anywhere from 10 to 30 years, but 15 and 30 are typically the most common choices. Others include 10, 20, and 25. The shorter the term that you choose, the more that you’ll end up paying each month.

Conventional mortgages also allow up to nine percent in seller concessions. This means that you can negotiate with the people selling your home to pay up to nine percent of the home’s sale price toward closing costs. This is great for buyers who may be cash poor as it still allows you to buy, but it’s important to understand that this will require negotiation. Essentially, you’re asking the seller to give up some of their proceeds (and not an insignificant amount, either) to help you out. It’s not guaranteed that they will agree.

You’ll also want to note that with a conventional mortgage, a down payment won’t be the only thing you’re responsible for paying. Conventional mortgages also require origination fees, underwriting fees, a home inspection fee, appraisal fees, and other fees based on your county and title company. This means that conventional mortgages can (and tend to) cost more than other types of mortgages that are available.

FHA Loans

Federal Housing Administration (FHA) loans are designed for low- or middle-class families and are also great for first-time homebuyers. They can also be beneficial for individuals with lower credit scores or have experienced financial setbacks in the past. The purpose of these loans is to make home buying more accessible by relaxing the standards around lending by lowering down payments and offering competitive rates.

While FHA loans don’t require PMI, they do require mortgage insurance. This is essentially the same thing as PMI, but it’s charged as protection for the mortgage company in the event that you weren’t able to pay your mortgage. With an FHA loan, you’ll need to pay a one-time fee for mortgage insurance along with the premium that will be paid on top of your monthly payments. As for the cost, all FHA borrowers pay a set amount based on their down payment and term of their loan.

FHA loans also allow a slightly lower percentage of seller concessions than conventional mortgages, with only a six percent max. Like we mentioned before, the minimum down payment for an FHA loan is 3.5 percent, but since you’re putting down a significantly lower amount of money, your monthly payments will be higher.

VA Loans

A VA loan is specifically designed for veterans and other qualifying service members. VA loans have a zero percent down payment requirement. Typically, the only cost for a borrower is often the VA funding fee. Along with that, closing costs are limited by the VA. If you’ve served, a VA loan is a great option due to its flexibility, and the VA benefit used for the loan can be reused for another home purchase.

If you’re in need of additional assistance with your home purchase, both FHA and VA loans can be complemented with other housing assistance programs. All three loan programs also offer refinancing options with specific benefits, so you have the ability to save on your mortgage down the road should the market or your situation change.

What’s the Right Down Payment for You?

So, depending on what you’re financial standing is, 20 percent down is still the best option for a down payment due to your ability to avoid additional fees. However, recent trends in home buying have shown that many people are opting to put less money down in order to get the home they want with less out-of-pocket costs, and thankfully, mortgage loans are being adjusted to meet the needs of people who might need more financial assistance.

If you’re not sure what path to take for your upcoming home purchase, the experts at CENTURY 21 Bolte Real Estate can help you work within your means for your next home purchase. Buying a home is a large undertaking, but our team can help you find the perfect home in North Central Ohio that matches what you can afford, show you additional options that you might not have been able to find on your own, and discover homes in your price range before they even come on the market.

Interested in learning more about how we can help you succeed in your home search? Reach out to us today.

Escrow Accounts Help Keep Real Estate Transactions Neat and Tidy

If you’re a first-time homebuyer, escrow can seem like another confusing term on an already overwhelming list of new words. What does escrow mean, and how does it work? Having money “in escrow” can almost sound like a bad thing — but it’s actually a method of protection for your money. Let’s dig into how escrow works.

In real estate, escrow can be applied to a few different situations. For example, during the deal process, escrow means that a third party is holding on to the buyer’s money until the deal is finalized so that a) the seller can’t hold it hostage and use it as a bargaining chip, and b) the buyer can’t receive the deed without paying for it first. The money is usually held in an escrow account by an escrow officer until the deal is closed, and it essentially makes sure that everyone gets what they’re entitled to at the same time.

When it comes to your mortgage, you’ll hear escrow come up again — and a lot more often. Once you move into your home, your mortgage lender can use your escrow account to cover the cost of your homeowner’s insurance and property taxes on your behalf. They’re still using your money to pay these bills; it’s just money collected through your mortgage.

Mortgage lenders prefer this process because it prevents the property from missing payments on both ends and keeps both the homeowner and the mortgage lender out of trouble. Although it’s not being financially covered for you, these are bills that you won’t have to worry about paying yourself, so it saves you the time and hassle in the long run because it’s just fewer bills you have to think about.

Are There Cons to Having Money in an Escrow Account?

One important thing to know about escrow fees is that they aren’t static. Homeowners insurance and property taxes fluctuate annually, which means that your escrow fees will fluctuate as well to make sure you’re able to cover your payments. This is your lender’s responsibility to manage, so at least once a year your lender will perform an escrow analysis on your account. With this analysis, they’ll typically look at things such as:

• The amount of your property taxes and homeowners insurance
• The current balance of your escrow account, amount of your monthly payment, and minimum required payment
• The recent payments that have been made with your escrowed funds

Once this analysis is complete, they’ll send you a report telling you how your fees will change based on your taxes or insurance charges going up or down. The analysis also anticipates how much money you’ll need to cover future payments, and could show that you have a shortage or a surplus.

A shortage means that your lender believes you will need more money in your account due to fees going up, so you’ll need to add more money to your account, as well as pay higher fees in the future. While this isn’t the greatest news to receive, it doesn’t mean you’ve done anything wrong, and it doesn’t reflect poorly on your credit. Unfortunately, shortages are common, but they just mean your fees have gone up since the last review of your account. Shortages can come out of the blue, though, and you’ll be expected to hand over the money before the account runs out.

Surpluses are a sign that your fees have gone down, and there’s actually more money in your account than needed to cover future bills. If the amount is high enough, you’ll receive a check with your report for the difference.

Another issue that could come up with escrow accounts is that they’re not entirely in your control. The lender is responsible for ensuring your payments are made on time, and while they’re responsible for any penalties incurred from late payments, it can still be stressful because there’s nothing you can do to alleviate them. You might also run into a problem with interest. Whether your lender is required to pay interest to your account depends on the state you live in, few do, so most escrow accounts are not paid interest. This can be considered lost money in the long run, but on the other hand, if your lender does pay interest, they hold onto the money. If that money is lost, it’s lost.

While there are negatives to having an escrow account, it can be extremely helpful in ensuring that your finances are protected and in order before, during, and after your home sale. Whether you’re a first-time homebuyer or searching for your forever home, it’s easy for a home purchase to get complicated quickly.

CENTURY 21 Bolte Real Estate agents can provide expert recommendations to North Central Ohio residents in every step of the homebuying process. Whether you’re buying your first home, are looking for an investment property, or are downsizing or upsizing, we’ll be your partner throughout the entire journey.

Contact us today to learn more and start your home search.

It Was Almost Perfect…

You found the perfect Realtor, did your homework, and found an amazing house in a great location. Even better, the price was within your budget. You’d already been pre-approved for financing, and the property wasn’t pending sale. You didn’t lose a second and immediately worked with your Realtor to get your offer ready. Your agent presented the offer to the listing agent, and you waited patiently — albeit anxiously — for a response.

Then, it happens. Your agent gives you a call, “Just heard back from the listing agent. An offer came in last night. She texted me just as I was emailing you back and told me another just came in, too. I’m not sure where they stand, but they’re considering them all. I’ll keep you posted.”

Unfortunately, you’re now in a multiple offer situation. Your heart sinks as the perfect home slips further and further away in your mind. You were so close. You replay the conversation in your head, processing what the agent said, and you quickly find yourself getting mad.

Sure, an offer came in before yours, but what about the other offer? They couldn’t possibly be considering it, right? Yours came in first! And that second offer — did the listing agent tell another buyer what your offer was, and they one-upped you just a few minutes later? Your mind is racing through all these possibilities, and you’re getting more and more frustrated.

Slow down (more importantly, calm down). There are some things you should know about being in a multiple offer situation. While you might think or feel that you deserve a spot in line or a “first dibs” on the seller’s consideration, that unfortunately isn’t the case.

There May Be Offers You Don’t Know About

The listing agent was kind enough to tell your agent that other offers came in, but she didn’t have to. It’s not an obligation or legal requirement, though sellers can allow their agents to disclose the existence of a multiple offer situation. How would you have felt if there was no communication, and you lost the home without knowing about the multiple offer situation?

Order of Receipt Doesn’t Mean Order of Importance

In a multiple offer situation, sellers and listing agents can consider any offer received at any time. There’s no requirement obligating them to consider an offer received a day earlier. The seller doesn’t have to counter you or even give you the right to increase your offer if someone else outbids you. If a competing offer came in, and the seller simply wanted to accept that offer instead of yours, they’re within their right to do so.

The same goes for full-price offers. If you offer full price, but the seller still rejects it, understand that this might be due to an offer coming in over asking price. Or, the seller may simply decide to sell the home to a friend or family member simply because they want to. The only time this might get a seller in trouble is if you’re a member of a protected class, and the seller deliberately chose a competing offer instead of yours out of discrimination.

It’s Not an Agreement Unless It’s in Writing

Let’s say your agent submitted your offer, and the seller and their listing agent agreed to it verbally while the agents were on the phone. Unfortunately, that’s not a binding contract. If another written offer comes in that’s better than yours and is accepted, you may be out of luck. That’s why it’s important to get everything in writing.

When the seller agrees to your offer, the next step will be to execute a purchase contract, in which both parties sign the offer. This and this alone can prevent a multiple offer situation from occurring, as the property would be listed as contingent and could only accept another primary offer if your contract falls through.

Competing Offer Terms Don’t Have to Be Disclosed

You remember that when your agent called back with the bad news, he didn’t know what the competing offers were. Sure, you’d probably want to know how much you were outbid by — you might want to offer more, after all. But in this instance, the seller’s agent didn’t say. She just said other offers came in. And that’s OK. It may be that the seller doesn’t want to endure a lengthy bidding war and needs to get the property sold.

Conversely, the seller could have told your agent what the offer was in hopes of getting you to counter. This can pose a challenge for some. Sure, sellers want to get the most for their homes, but when does it become a matter of greed? As a buyer, know your limit in terms of how high you’re willing to go above your original offer. Don’t allow yourself to be pressured or maneuvered into a bidding situation you’re not comfortable with.

Be Careful With Countering

Let’s say you offered $10,000 below asking price for a home. The seller counters to $2,000 below asking. You counter again at $8,000 below. If the seller outright rejects your counter without making a counteroffer again, you can’t go back and accept their $2,000 below-asking price. That’s because you as the buyer terminated the seller’s counteroffer by countering again. It can’t be accepted again unless — due to circumstances that arise — the seller decides to reinstate their original counter.

Lean On Your Agent For Guidance

If you find yourself in a multiple offer situation, discuss it with your Realtor. They’re there to advise you and work in your best interest. If counteroffers are driving the price of the home you want beyond what you can afford (or what you’re pre-approved for), recognize that you may need to walk away. While it may be disappointing, remember that other homes are for sale, and your Realtor will be there to help you find another that fits your wants and needs.