What is the better deal renting or buying?

The age old debate of buying vs renting is as alive as it ever was. 

Does it make more sense to rent or buy, this is a question many have asked. As with anything there are many prevailing opinions on the subject. As a real estate agent I see both sides of it and as a consumer I have been on both sides of it. There is not going to be one right answer that fits every person but I will cover a few common things that may help you decide. The key is to think of things in the long term or big picture.

To start with you want to consider your individual situation.
What are your plans long term, do you plan on staying in the city or area you are living/moving to? If the plan is to stay long term than I believe it makes sense to put down some roots and buy a house. I have many clients that move in from out of town and want to rent for a year before buying. This is a logical step in the process, you get to try before you buy in a sense. Many people also rent because they can't qualify for a mortgage due to credit score or job situation. 

Fixed mortgage rates do not go up, rent prices do.
While there is nothing wrong with renting long term, the reality is that you have very little stability or control of the situation. With a mortgage your payment is fixed every month (assuming you got a fixed rate mortgage). If you are a long term renter your payment will almost certainly go up with on an annual or semiannual basis. This could be a small increase or if you live in a booming city like San Antonio, Texas than I have seen $50-100 increases annually. Rent works off the age old supply and demand model, the shorter the supply the more money landlords can demand. Unlike renting with a mortgage you are unaffected by the supply demand model unless you are buying or selling. 

Renting has no return on investment.
Again long term renting does not build any equity while long term home ownership does. The standard mortgage is either 15 or 30 years depending. This means that at the end of that term you own the home free and clear. If you rent for 15 or 30 years you have nothing to show for it and you don't pay your rent you don't have a place to live. 

Summery

While you don't have things like repairs and maintenance costs with a rental you also don't have the ability to make the house your own. All else aside, historically speaking property has always risen in value which makes it a wise investment. It may not always rise continually but it has always bounced back which means that the only way you lose is by selling it when the market is down. So look at it like an investment that you get to live in and build equity with every payment. 

Mortgage interst rates and why you should buy or sell now.

If you own a home or are thinking of buying you may know that interest rates have remained very low. This is important for anyone that is considering buying or selling a home. You may not think that interest rates matter if you are selling a home but this is not the case. I will give you a couple reasons why you need to pay attention regardless of buying or selling. 

History Repeats itself-

Historically interest rates do not stay low forever (wouldn’t it be nice if they did though). Interest rates have been below 4% for most of 2015 and look to be holding steady through the end of the year. In 2013 and 2014 interest rates spent a majority of the year over 4%. Go back to 2011 and interest rates spent a majority of the year just below 5%. The interest rates are not likely to change dramatically unless we have another housing bubble. While they may not change dramatically the difference between 3.75% and 4.75% will make a dramatic difference on your payment. 

If you're paying 4.75% interest on a $200,000 loan for 30 years you will pay roughly $133,000 in interest over the life of the loan. If you take that same $200,000 loan and drop the interest rate to 3.75% you will pay $176,000 in interest over the life of the loan. So that 1% that doesn't seem like such a big deal will save you roughly $43,000. This is not including the principal amount that you will be paying, factor that in and your $200,000 house cost you either $333,000 or $376,000. Now I don't know about you but I don't care to pay almost as much in interest as I do for the house itself. 

Time is of the essence-

So if you are considering buying or selling now is the time to do it. I don't know what interest rates will do in the coming months or next year but I do know they are as low as they are likely to get. This means that the only place for them to go is up. This affects sellers as well as buyers. For most people selling their home they will turn around and purchase another home. That combined with the fact that you are likely to get top dollar for your home in most parts of the country make it a great time to sell. This may mean more competition when you go to purchase but it also means you get to take advantage of the lowest possible interest rates. The more interest rates go up the less enticing it is for new buyers to enter the market which means your home values may drop. 

One last thought-

To sum it up, nobody knows what the future hold but history has a way of repeating itself. So whether you are looking to upsize, downsize or just get into a different area you have to ask yourself "will their be a better time than now"? So it is up to you, roll the dice and see where the interest rates land when you're ready to move or take the sure thing and move now. 

Dont be house poor, three things to consider before you buy

You may or may not have heard of the term house poor, not to be confused with the poor house. It has a meaning just as it sounds, having a house that is making you poor. Along with your mortgage payment you should consider how, taxes, utilities and Home Owner Associations as well when looking for a home. Don't roll the dice on your future, have a plan.

Firstly you want to consider taxes, because unlike your mortgage payment interest rate taxes don't remain fixed. 

• For example, if you live in a big city like San Antonio, Texas that is rapidly growing then you have likely noticed home prices climbing. While on the surface this may seem like a good thing, along with the climbing home prices are climbing property values. 
• Why does this matter you might be thinking, it is an important factor to keep in mind because as your property value goes up so does your property taxes. In San Antonio, Texas taxes increase by as much as $200 a month in a single tax year for a average priced house. This means that your formerly affordable payment is no longer so affordable. 

The next thing to consider is the price of utilities and any extras that may be involved. For example does the home have a pool, hot tub or water softener? 

• If so what are your cost going to be to maintain said equipment. If it is a pool, you will have to pay to have it cleaned, there will be equipment repairs and the extra electricity usage for the pumps and equipment. 
• The average cost of owning a pool is $256 a month, this adds $256 to your monthly expenses. Water softeners will use electricity but more importantly many systems run on salt which has to be regularly replenished. There is also the consideration of whether the system is rented or owned. If it is rented then what is the cost associated with transferring ownership over. 

The final thing to consider also has the potential to cost you the most. Carefully consider the HOA (home owners association) before you sign on the dotted line. 

• While this may not seem like a significant deal but if you have a mandatory HOA then there can be significant expense associated in the form of dues. But beyond that the HOA has the authority to enforce any and all the bylaws. This can cover anything from the height of your grass, to exterior paint color and even the breed of you dog. 
• Depending on the laws of your state many HOA's have the ability/authority to foreclose on your home or sue you for things like unpaid dues or fines. It can get extreme and sounds a bit crazy but I have seen it happen, people lose everything over a dispute with the HOA that they legal may not be able to win. 
• This being said your realtor should ensure that you get all the deed restrictions and information related to the HOA. Make sure that your realtor does a mandatory HOA addendum to protect you as the buyer. 

How to avoid paying mortgage insurance on your next home

If we are being honest most of us could use a little more money. If you happen to be one of the few that doesn't need more money then you likely got to that point by having an eye for a deal. In either case I have a simple tip that anyone can use to potentially save them 20% on their next home purchase. That is potentially tens of thousands of dollars of market value. The reason 20% is important is that this is the point that you can stop paying mortgage insurance or PMI on your home with certain loans*.  I am going to summarize the main points you need to know in a few questions and answers.

What is mortgage insurance?

• Mortgage insurance is that pesky payment that does nothing for you, I repeat you get NO benefit out of mortgage insurance. You not only get no benefit from it, but most people cannot get a loan without it unless they are putting 20% down. If you are thinking what is this mortgage insurance you speak of? Simply put it is there to protect the investment of the lender in case you default on the loan. You pay every month to ensure the investment of the lender and it never lowers the amount you owe, now does it afford you any more protection it is solely to protect the bank.

What is the tip?

The tip is simple, mail all the houses in the neighborhood a letter. This sounds incredibly simple and it is, but the last time I used it I saved my client almost $200,000 on the purchase of their home (market value was $1,720,000 and we got it for $1,550,000). 

• So a couple questions that often come up, first where do I get a list of addresses and what should the letter say?
• The list of addresses is public information and should be available through the county of where the house is located, alternately you could ask a realtor that you know/trust to get it for you. 
• The letter should be short and to the point because people will not read it if it is lengthy. It should simply state what you want to do, namely buy a home in their neighborhood and list the reasons why they should consider selling.

The Envelope

• The most important thing you can do is avoid using a standard sized envelope. This is the most likely to be discarded since that's what bills and everything else comes in. Use a stationary or any square type envelope to increase your chances that they will open your letter. If you can hand address it or use a handwritten type font so much the better, the idea is that you want it to stand out from the rest of the mail. 

You can try the open market but that is where everyone is so the odds of finding a deal are slim. Your best bet is to think outside the box and do something few or no other people are doing. If you are working with a realtor then run this idea by him/her, it may not work for everyone but if you are looking in a specific area then it could work very well.

What you need to know about Homes in 78249

As a resident of the zip code 78249 and a San Antonio REALTOR, I felt it was time to get a little more personal and bring things home. What few people know is that I was born and spent many of my childhood years living in this very zip code. So when I say, “bring things home” I mean it quite literally, for as fate would have it I ended up back here almost 30 years later. That being said, I have some history as a resident and some expertise as a San Antonio Realtor that I would like to impart to those who are curious to learn a bit about the zip code that is 78249.

As many people do, my wife and I wanted to move from the side of town we were living on to be closer to our jobs. The goal was to get into a central location and into an area/neighborhood that we would feel comfortable raising a family in, but that would not break the bank. Our search led us to look at a variety of homes in 78249 and surrounding zip codes, however we were attracted to 78249 homes specifically because of their diversity and character.

The appealing thing about 78249 is that it is in the center of the city with easy access to three major highways, UTSA, The Rim shopping center and a straight shot to the South Texas Medical Center. The homes in this zip are generally all homes in well-established neighborhoods that range from the low $100's, to multi-million mansions. You will find everything from the traditional starter homes, garden homes and Villas to multi-million dollar homes. Interested in a brand new 78249 home? We got that as well, with a brand new subdivision of 78249 homes being built, you can get your new home starting at around 200k. If new is not your thing then there are many different and unique neighborhoods that are well established with mature trees, quiet streets and friendly neighbors.

In closing, I want to share the numbers i.e. median home prices. According to Realtor Property Resource the median home price for 78249 homes is $194,500 (at the time of this writing), which reflects home prices/values having risen by 7.7% over the last 12 months. The median days on the market for 78249 homes was 51 days, which is three weeks below the median for Bexar County as a whole. What this means for those of you who are considering a move into a 78249 home, the longer you wait the more you are likely to have to pay and the greater your risk of losing the home you want. The real estate market in this zip, as in most of the city, is active and showing no signs of slowing down so don't miss the opportunity to own a piece of this pie. As your San Antonio Realtor I am here to answer any questions you may have and to handle all your real estate needs, so call today! 

What you need to know about flipping houses in San Antonio

If any of you are like me, you have probably come across one of the seemingly hundreds of do it yourself (DIY) or house flipping TV shows that seem to have popped up overnight. The question is why do people get into growing trend; is it for the money or do they get some thrill out of the experience? A common theme in many of these shows is that if you find the right home you can make a hefty sum of money seemingly overnight. Let's be honest though, they are filming this entire process that takes weeks if, not months and are cutting it down to mere 30 or 60 minute segments. I am not saying that they do not make decent money on some of those properties, however if they are paying cash for it then they are in a situation many are not. If they are, on the other hand, not paying cash and using debt to finance it they are playing a dangerous game in which they could lose everything. So what's an ordinary person supposed to do in this situation? When one cannot afford to pay cash for a home and repairs but also isn't willing to finance an investment property? As your San Antonio Realtor I would offer you some alternatives; there is the obvious solution of don't do it and leave it to the pros, but then what fun is that. Maybe you could find some willing and able investor to front the money, but unless you are going to do all the work yourself then the said investor does not have much use for you. The safest alternative would be to go against the urge that screams "I want instant satisfaction" and start at your house. What better place than your home to try your handyman skills out and see if you are ready for the big flip. It can be a win-win of you select the right projects that will add value to your home. As a San Antonio Realtor I can give you ideas that will not only gain you equity but also experience, both of which will have the potential to pay off in the log run. The beauty of it is that there are plenty of resources for those willing to go to it alone, Home Depot offers classes, there are literally hundreds of blogs and then there is YouTube. With a little skill, the right tools and some determination you really can make a world of difference in your current home. There is a wealth of knowledge out there that is at your fingertips all you have to do is "search". Start on pinterest, you can literally find thousands of ideas with the click of a mouse. If you are serious about breaking into the real estate investment world then I would start reading on bigger pockets, it has a vast amount of information on the subject.  As always if you need a free consultation with a San Antonio Realtor I offer that as a service to homeowners with no obligation. photo credit

Want the power back? Learn how with these credit score basics

There is so much stress put on the credit score and what that means to your ability to qualify for a mortgage. Some people are even led to believe they can't buy without a particular credit score. As a San Antonio Realtor there are three things I suggest my clients think about when considering if their credit score will qualify them for a mortgage. What is the industry standard for a credit score, what is my bad score due to and what do I do if I have a bad score due to lack of credit history?

• Firstly, what is the industry standard when it comes to a mortgage worthy credit score? The industry standard for a typical credit score is 620 or better. However, this number changes based off the type of loan you are trying to qualify for as well as the individual lenders. What this score means is that you are or are not worth the risk that the bank is going to be taking by giving you a mortgage. Every lender is different but if your score is below 600 then there is a slim chance you will get a loan.

• The second thing to consider is why your credit score is bad? Is it due to a lack of history or a history of late payments, missed payments and/or collections? If your score is low due to negative marks against your credit, then you will need to get it above the mark for the loan your trying to get. Some simple things to do if you're trying to get your score up. Paying your credit cards down to below 50% of the available balance will help. If your balance is zero and stays zero, it doesn't improve your score, so put a tank of gas or charge something small every month. Don't immediately pay it off though, wait till you get your bill then pay it off and keep doing this every month...but don't be late! 

• Finally, we come to the hidden gem of this post, what to do if your score is low due to lack of history. There is a process out there that is built just for you and its called Manual underwriting. It is likely a term that you have never heard and what it means is that your ability to get a mortgage will be determined by a person. They will manually screen you on the list of factors other than credit score. This means coming up with at least four alternatives to prove your worthiness. These options could include something as simple as the history of paying your rent on time. If you have an electric bill, water bill, phone bill or insurance bills and can prove that you have paid them on time for a period of 12 months then they may qualify as substitutes. It is likely to be a more time-consuming process than merely getting qualified off of a credit score however, it is still a very viable possibility.

So whether you are attempting to qualify off your credit score or an alternative, there are options for you. If your credit score is low and you are trying to get it up, doing some of the things on this list may help you. If you have a lack of credit history then find a lender that does manual underwriting and tell them, you want to qualify without a credit score. If they don’t know what that is or tell you it is impossible then they are not the company for you.

As a San Antonio Realtor and not a mortgage professional nothing in this blog is intended as statement of fact. All content is for informational purposes only, consult a mortgage professional for the details of your particular situation.

How to get a home with bad credit!

There is so much stress put on the credit score and what that means to your ability to qualify for a mortgage. Some people believe they can't buy without a particular credit score. There are three things to think about when considering whether your credit score will qualify you for a mortgage. What is the industry standard for a credit score, what is my bad score due to and what to do if I have a bad score due to lack of credit history.

• Firstly, what is the industry standard when it comes to a mortgage worthy credit score? The industry standard for a typical credit score is 640 or better. However, this number changes based off the type of loan you are trying to qualify for as well as the individual lenders. What this score means is that you are or are not worth the risk that the bank is going to be taking by giving you a mortgage.

• The second thing to consider is why your credit score is bad? Is it due to a lack of history or a history of late payments, missed payments and/or collections? If your score is low due to negative marks against your credit then, you will need to get it above the mark for the loan your trying to get. There are simple things to do if you're trying to get your score up, such as paying your credit cards down to below 50% of the available balance. If your balance is zero and stays zero, it doesn't improve your score, so put a tank of gas or charge something small every month. Don't immediately pay it off though, wait till you get your bill then pay it off and keep doing this every month.

• Finally, we come to the hidden gem of this post, what to do if your score is due to a lack of history. There is a process designed specifically for this situation, which is called Manual underwriting. It is likely a term that you have never heard of but it simply means that your ability to get a mortgage will be determined by a person. They will manually screen you on a list of factors; other than credit score. This means coming up with at least four alternatives to prove your worthiness. These options can include something as simple as a history of paying your rent on time. If you have an electric bill, water bill, phone bill or insurance bills and can prove that you have paid them on time for a period of 12 months, then they may qualify as substitutes. It is likely to be a more time-consuming process than merely getting qualified off of a credit score however, it is still a very viable possibility.

Michael Mershon REALTOR