Owning a home isn’t all backyard cook-outs and roses. There are pros and cons of being both a homeowner and a renter. As with all major life decisions, making the move from renter to owner is highly personal and depends on myriad factors. Sometimes due to mortgage rates, the cost of rent versus a mortgage payment is a wash, but it’s the other factors that come into play. For example, if you rent an apartment and need a new water heater, the property owner should handle that, but if you’re a homeowner, the burden is on you. And there’s always a good chance that soon after you take ownership, something big will need repairing or replacing, so as you make your budget, pad for the unexpected.
In a tight housing market, with interest rates considerably higher than a year ago, demand for housing is still booming. “Regardless of interest rates, there are still a plethora of buyers,” says Dee Webster, a Coldwell Banker Realty real estate agent serving Providence and the surrounding areas. “The difference between 2023 and 2022 is that the homes are selling at or very close to list price when the home is priced correctly.”
In many desirable areas, the demand outweighs the supply. “It’s very clear that the lack of inventory is largely influenced by the fact that homeowners have exceptionally low interest rates and are less inclined to sell,” says Lindsay Pettinelli, a realtor at Churchill & Banks Residential in Providence. “Despite this, buyers shouldn’t be discouraged, but they need to be realistic and prepared. Offers and terms are generally very favorable to sellers. Be sure you are preapproved with a lender who is able to move quickly, and that you are working with a realtor that has experience as a buyer’s agent. My buyers and I are often thinking outside the box to accommodate seller wants in terms of closing timeline, potentially even allowing the purchase to be subject to seller finding suitable housing.”
“I’ve been involved in aspects of real estate for over 20 years,” says Chris Woodard of Keller Williams Coastal Realty in Middletown. “If there was ever a time to have an experienced realtor on your side whether you’re buying or selling, this is the time.”
“As there are many more buyers than sellers this spring, it’s key to be prepared and know what your limits are,” says Susan Kostas of Coldwell Banker/Realty in Barrington. “It’s easy to get swept up in the energy (and nerves!) of a multiple-offer situation, so know what your budget is. Keep in mind what you truly need in a home and what you can let go of. And make sure your team – your agent and lender – communicate clearly and swiftly because timeliness counts!”
Rising interest rates are another concern. “It’s important to keep perspective,” says Newport Realtor Teri Degnan, reassuring potential buyers. “The rates aren’t historically high, so while some buyers and sellers have hit the pause button, the reality is, people have to move, whether for job opportunities or personal reasons. Keep a level head, stay the course, and work with a professional who has a comprehensive understanding of the Rhode Island market.”
“Buyers are experiencing change in both inventory and interest rates, but from the title/closing company’s perspective, our biggest change to deal with is the high occurrence of wire fraud in the market,” explains Christopher Marovelli, director of Compliance and Affiliated Business at SKM Title & Closing Services, who handles cases in Massachusetts and Rhode Island. “We’ve set our sights on how to communicate with buyers and agents early and often about the dangers in the market and how to avoid having their funds stolen with fraudulent wiring instructions. While wires may remain a necessary evil in the closing process, buyers should always be wary about sending any wire and ensure that they verify any instructions directly with a source using a phone number they can trust.”
Unless you are minimalist and can fit all your stuff in a friend’s pick-up for the cost of pizza and beer, you probably need to hire movers. According to Consumer Affairs, hiring movers can cost anywhere between a few hundred dollars to several thousand, depending on how far you’re moving and how much work you’re willing to do yourself. The amount of personal property you’re transporting also affects the total cost. The average cost for a local move is $80 to $100 per hour for a team of two movers. The total cost you’ll pay for a local move is mostly a function of how long it takes the moving crew to load and unload the truck — meaning the more items you have, the more you’ll pay to move them. Movers will also pack for you, for a fee, and therefore are responsible for “accidents.”
After falling for the first house or visiting many, you have found “the” house and made an offer. Next steps are inspections and appraisals.
The inspection is for your own protection and is a step that should not be skipped. Ask your realtor or buyer’s agent to recommend a home inspector and make sure this person is reputable (check those creds). An inspector will examine the property inside and out, looking for serious flaws. According to the Consumer Financial Protection Bureau (CFPB), if your purchase contract is contingent on a satisfactory inspection, you should be able to cancel the sale without penalty. You can also then be in a position to negotiate with the seller for certain repairs, etc.
If you are applying for a mortgage, most banks will do a home appraisal. If the appraisal comes in lower than the purchase price – which can happen in an overheated market prone to bidding wars – you might need to make up the difference in cash or the homeowner will need to come down to match what the bank will lend. If the appraisal comes in higher than the purchase price, you’ve hit the real estate jackpot.
If you decide that homeownership is right for you, congrats! It’s exciting and scary, and the process is not always as glamorous as it looks on TV. In tandem with making your wishlist of half-baths and fireplaces, school systems and dog parks, get real about your financial situation and work to get your credit score in good standing, if needed. The Consumer Financial Protection Bureau offers this checklist and advice:
• Check your credit
• Assess your spending
• Budget for new or changed expenses
• Determine your down payment
• Decide how much you want to spend on a home
• Consider whether it’s the right time for you to buy
• Build a network of advisors
• Create a loan application packet
• Gather names of real estate professionals recommended by friends, relatives, and colleagues
Buyer’s agent: Assists and represents their clients through every step of the homebuying process, including finding the right home, negotiating an offer, recommending other professionals (e.g., mortgage brokers, real estate attorneys, settlement companies), and troubleshooting problems (e.g., home inspection or appraisal issues).
Listing agent: A real estate agent who represents a home seller and helps clients who are selling with a wide range of tasks, including pricing their home, recommending home improvements or staging, marketing their home, holding open houses, coordinating showings with home buyers, negotiating with buyers, and overseeing the home inspection process and closing procedures.
Real estate agent: Someone with a professional license to help people buy, sell, or rent all sorts of housing and real estate.
Real estate broker: Someone who has taken education beyond the agent level as required by state laws and passed a broker’s license exam.
Rental agent: Helps consumers find properties to rent.
Realtor: A licensed agent with the ability to use that widely respected title, an agent needs to be a member of the National Association of Realtors®. The Rhode Island Association of Realtors® is one of the largest trade organizations in Rhode Island with more than 6,000 members in approximately 900 offices.
Adjustable rate: Adjustable-rate mortgages (ARMs) offer less predictability but may be cheaper in the short term. Source: ConsumerFinance.gov
Fixed rate: Your interest rate and monthly principal and interest payment will stay the same, but your total monthly payment can still change – for example, your property taxes, homeowner’s insurance, or mortgage insurance might go up or down.
Interest-only: Interest-only (I-O mortgage) plans allow you to pay only the interest on the loan for a specified period. This means a lower monthly price gets you started. Once the I-O period ends, your monthly cost could rise significantly, since you are now paying principal and interest.
Long term: Lower monthly payment but you’ll pay more in interest.
Private Mortgage Insurance (PMI): An additional cost that will be required by your lender if you don’t put 20 percent down.
Short term: Higher monthly payment but you’ll pay less over time in interest.
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