Things to Consider
What to consider when buying a beach house
Imagine waking up with the sun glimmering through your bay windows on an early summer morning. The bright light reflects off the ocean below as seagulls chirp and gentle waves crash. The warm temperatures and gorgeous scenery make breakfast on the deck a delicious way to start the day.
Sounds heavenly, right? The benefits of buying a beach house are as plain as day, but before you take the plunge, it's important to evaluate the whole picture from a cost, maintenance and potential loss perspective.
Here are four main factors to consider before purchasing a beach house:
They're usually top dollar
There aren't many beachfront properties from which to choose. This fact alone makes them pricey. Beachfront properties cost significantly more than the typical house, even when they're considerably smaller in square footage and boast fewer attractive interior features.
Rental income not a sure thing
Perhaps you're looking to buy a beach house as a second home and to rent it out when it's not in use. This can make a lot of sense and defray some of the costs associated with taking out a first or second mortgage. But as real estate expert Kay Walten explained to Realtor.com, banking on renters could be a recipe for disaster if the market turns sour.
"We see people look at their dream place on the sand ... and they're confident they can keep it 'full' only to realize they can't," Walten explained.
In short, rental income isn't a guarantee, so you should have a plan B that you can turn to if plan A doesn't pan out during rental season.
Maintenance is often demanding
Keeping up with repairs is an ongoing chore, no matter where you live. However, it's particularly demanding as the owner of a beach house, with damage caused by erosion, heavy wind gusts and pounding surf. Plus, there's an increased risk of experiencing the ill effects of hurricanes along the Atlantic and Gulf of Mexico.
According to a report from CoreLogic, nearly 7 million homes are in the crosshairs of storm surge emanating from hurricane activity, with reconstruction costs topping $1.6 trillion. Perhaps unsurprisingly, property owners in Texas, Louisiana and Florida are the most susceptible to hurricane storm surge damage than any other.
High home insurance rates
Given they're more likely to be impacted by weather-related catastrophes, home insurance premiums tend to be more expensive than inland properties. Depending on where you buy, you may be required to obtain certain policies, such as flood insurance.
Scared away? That's not the intent. A beachfront property can be heaven on Earth. But it's also important to enter into beachfront ownership with your eyes open and backup plans in place for those days when it isn't all sunshine and blue skies. If you want to take a realistic look at the numbers, get your mortgage Loan Officer on the phone and have a quick strategy talk.
With a little planning and preparation, that sunlit breakfast on the deck could be your reality.
The most important list to get you through the holidays
The season of holidays has begun. Lists are forming so details get remembered. Gatherings, shopping, decorating, cooking, winterizing, it seems like the world speeds up for a couple of months.
Here is a self-care list that, hopefully, will help you better enjoy the holiday season knowing you took steps to provide for your safety and well-being:
Replace batteries in smoke and carbon monoxide detectors
Any medical check-ups needing to be scheduled before those insurance deductibles start over for the new year?
Replace water filters
Here are a few more ideas to consider:
Have your fire extinguishers serviced
Replace the pillows on your bed
Rotate your mattress
Replace your toothbrush
- Is it flea treatment time?
- If you’re in an area that gets snow and your pet goes outside, remember to check their paws for salt & sand from the treated snowy roads
These small actions can combine to have a great impact on your overall safety and welfare. Wishing you a safe and healthy holiday season!
Mortgage Rates are up: Here's why buyers shouldn't worry
If you've been thinking about buying a house over the last few years, you've probably noticed something about mortgage rates: They're starting to rise.
According to the most recent data from Freddie Mac, 30-year fixed-rate home loans now average approximately 4.8 percent. That's up from around 4 percent back in January.
Fifteen-year FRMs, meanwhile, are following a similar path. In November 2018, they averaged 4.2 percent — nearly a full percentage point higher compared to when the year first began.
Given the climbing trend, this might suggest that it's a bad time to be in the market.
Deciding whether or not to buy is a personal decision that needs to be made in consultation with your loved ones and real estate agent. But if the direction of mortgage rates is serving as your barometer, some historical perspective may be in order.
Mortgage rates are a lot like the temperatures: They rise and fall over time. Similarly, they're influenced by multiple factors. For rates, they can include the pace of home buying, how the economy is functioning and actions taken by the Federal Reserve.
Mortgage rates were exorbitant in the 1980s
With 30-year fixed rate mortgages up from around 3.6 percent in 2012, it would seem that affordability conditions are worsening. However, if you go back to 1980, mortgage rates were much higher — considerably so, in fact.
Case in point: In 1982, borrowers paid approximately 16.9 percent (you read that right) on a 30-year fixed loan, according to archived data from Freddie Mac. That's more than three times higher compared to where rates stand today.
Real estate expert Kris Lindahl told KARE-TV that context is crucial regarding home loans and when a prospective buyer tries to determine when rates are deemed affordable.
"Historically, rates are still really low," Lindahl explained.
Lindahl added that millennials seem to be particularly cognizant of this fact, given that many are opting to buy higher-priced homes instead of entry-level houses "because they want to lock in that lower interest rate for the life of their loan."
Homeownership is gaining ground
It's these same 18- to 35-year-olds who are fueling robust growth in homeownership.
Using data from the U.S. Census Bureau, The Wall Street Journal reported that the share of Americans who own a residence reached 64.4 percent in the third quarter. However, among millennials, in particular, the homeownership rate climbed to 37 percent — a strong uptick from 2017, when long-term fixed mortgage rates averaged 3.8 percent.
"The recovery is now at this point driven by first-time home buyers and not older generations," real estate expert and economist Skylar Olsen told the Journal.
Historically low mortgage rates have helped make homeownership possible for millions of Americans, and they're clearly taking advantage while they remain in affordable territory.
What does the future rate climate look like? In short, it pays to buy now. In Freddie Mac's most recent forecast, they're projected to average in the low-5-percent range in 2019 and likely to rise to the mid-5s come 2020.
Now may be as good a time as ever to take advantage of the cost-cutting environment while you still can. Having said that, even in 2020, should rates rise further, what you'll spend in interest is minimal compared to yesteryear.
Who you'll meet on your mortgage application journey
If you're planning on buying a new home, it's hard to say for certain how many places you'll look at before finding the one that fits you and your budget. For some people, it's a mere handful; for others, it may be in the double digits.
The mortgage process is a bit more straightforward, as there are a specific set of individuals who are there to guide you through the entire homebuying journey. Here are the key mortgage professionals you'll come across during the process of applying for a mortgage.
The two main contacts you'll have perform largely the same functions, but in slightly different capacities: Loan Officer and Loan Officer Assistant.
The loan officer is typically the first person you’ll speak with during the loan process. He or she will review your personal homeownership goals and help determine what type of loan best fits your needs. They’ll assist you with completing the loan application, review your credit and can also provide you with a pre-qualification letter.
Loan Officer Assistant
The loan officer assistant works closely with the loan officer in a helping capacity. They gather and review additional documents that may be needed to complete your loan application. They can also answer any questions you may have if your loan officer is not available.
Loan processors generally come into the picture further along in the application chain of events. What they do is organize all the relevant documents so that the mortgage lender has what it needs for final approval. They also proofread, checking to see if anything is missing.
Mortgage underwriters are primarily charged with determining if you have the appropriate qualifications to borrow. Some of the factors taken into account include your annual salary, your employment history, debts - both the type and how much - as well as available assets, such as checking and savings accounts.
As detailed by The Truth About Mortgage, the underwriter will render one of three decisions: approval, denial or suspended status. This last one means that you may need to provide more documentation for the mortgage process to move to the next step.
You've probably heard the term "closing" as it pertains to buying a house. The closer is the point person for this last step. Closers prepare and assemble the documents necessary for closing to take place. They also coordinate with other professionals involved, such as lawyers (if necessary), agents and vendors.
Now that you're armed with a brief synopsis on who you'll meet during the homebuying process, the rest of the story is yours to determine.
Find a Loan Officer today to get started.