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Georgetown Real Estate Law Blog

Why Americans have lost interest in buying homes

The U.S. home ownership rate is currently at 63.7, which is one of the lowest numbers in American history. It has become increasingly common for Delaware residents and others to rent instead of buy. According to a survey of 2,000 Americans, 71 percent said that this was because the process of buying a home was too complex. In some cases, getting a mortgage can take about a month whereas the process of renting a home or apartment may only take days.

Of those surveyed, 70 percent said that it was too hard to come up with a down payment. Many believed that they wouldn't be able to afford one until their late 30s. However, it may be possible to use an FHA loan that comes with a down payment of just 3.5 percent instead of the standard 20 percent. The average down payment for a first-time buyer is just 6 percent.

What to know about buying a home after age 50

In 2016, 30 percent of first-time home buyers were people between the ages of 52 and 70. Although it may be possible for older Delaware residents to buy a home, it may not necessarily be the best decision. First, older buyers need to make sure that the home they buy will fit their needs as they age. For instance, it may not be a good idea to buy a home with stairs if a person can't climb them.

It should also be in an area that fits a buyer's lifestyle. Ideally, a buyer will spend time in that area before acquiring a property to live in for the long term. Those who don't like to do a lot of maintenance may also want to look into the cost of having someone mow the lawn or take care of other tasks. As with anyone looking to buy a home, financial factors will also need to be considered.

Tips for first-time home buyers

Many Delaware residents are planning to buy their first home this year. However, as they approach this exciting milestone, there are several things that they should keep in mind to make sure things go as smoothly as possible.

The first thing people should do is calculate the real estate price they can comfortably afford. According to financial experts, housing costs should not exceed 30 percent of a buyer's income. In fact, some mortgage lenders recommend that loans do not exceed 28 percent of a buyer's income. Once a price range is established, people should work on saving for a down payment of 20 percent and an emergency fund that will cover at least three months of emergency repairs and other unexpected expenses. That down payment cushion will help to mitigate the chances of the buyer being upside down if home values drop.

Bill would allow use of alternative credit scores for mortgages

Although the change is unlikely to be immediate, in the years ahead, Delaware residents who are seeking a home mortgage may be able to do so with lenders who use alternatives to FICO in determining credit scores. The bill is cosponsored by a Republican and Democratic senator and would require Freddie Mac and Fannie Mae to consider such alternative credit scores as FICO ScoreXD or the VantageScore.

While the traditional FICO score looks at credit card payments, mortgages and other loans, these alternative credit scoring methods examine a larger variety of payments including those for rent, utilities and cell phones. This may make mortgages more accessible to people who have not built a credit history in the traditional way. There have been efforts to introduce similar measures for several years. According to the Consumer Financial Protection Bureau, 26 million people lack a credit history with a credit reporting agency. Furthermore, the credit history of many people is not substantial enough to create a credit score.

Required disclosures in residential real estate sales

When people want to sell their homes in Delaware, the law requires that they make certain disclosures to the buyers. Delaware's disclosure law is designed to benefit buyers while also providing protections to sellers. It is important for sellers to understand their responsibilities to disclose and for buyers to understand what disclosures are required.

Sellers might be hesitant to reveal certain material defects in their homes because they fear that it may make it more difficult for them to sell their properties for the prices that they want. If they fail to disclose defects, however, they may expose themselves to costly legal liability in the future.

Sale of property still possible in foreclosure

Delaware homeowners who are struggling to keep up with mortgage payments often have questions about foreclosure. Specifically, many homeowners wonder whether it is possible to sell a home once the process has begun. Typically, the homeowner retains the right to sell the property up until it is sold at auction. In such a situation the owner must be able to cover the outstanding amount owed to the lender, including any penalties and back payments.

The foreclosure process begins with a notice of default. Following the notice of default, the home is in pre-foreclosure. During this time, the homeowner may be able to negotiate a settlement with the lender or arrange to sell the home and pay off the debt. This strategy protects the homeowner's credit from further damage, but requires disposition of the home.

Completing a residential property transaction online

Online banking has made the days of writing dozens of checks each month to cover household expenses a distant memory for many Delaware residents, and they can now use the internet to buy or sell real estate. Several companies already allow consumers to submit mortgage loan applications online, and websites like Zillow and Trulia let prospective home buyers view available properties on the internet and even take virtual tours. However, there are drawbacks as well as benefits when conducting residential property transactions completely online.

While consumers have been able to complete and submit mortgage applications on the internet for some time, it has been difficult until recently for online applicants to provide loan officers and mortgage brokers with the documents that underwriters need. This can now be done by providing lenders electronic access to pay stubs, tax returns and bank statements. However, applying for a loan online may not be practical for those seeking a jumbo mortgage or individuals with unconventional financial situations or income that could be difficult to verify.

What to do when rent is not paid

If a tenant in a Delaware residential property fails to pay rent, a landlord may have many options to either demand that it be paid or terminate the rental agreement. At any time after rent is due, a landlord may issue a written demand for payment. If the past due amount is not paid within five days, a landlord may terminate the agreement. It may also be possible to provide more than five days to pay the past due amount if desired.

In the event that the tenant still has not paid the rent, it may be possible to ask for summary possession or to take other appropriate actions to remedy the issue. After a tenant has been notified in writing demanding payment of past due rent, a landlord may impose additional charges. These charges are considered to be additional rent that has accrued.

Millennials are struggling to afford down payments

Experts are reporting that the majority of millennials in Delaware and across the country don't have enough money to afford a new home down payment. The millennial generation, which remains one of the hardest hit by the financial recession, continues to struggle with employment, income and savings. Despite these drawbacks, the generation seems to remain optimistic about home ownership, with 80 percent of millennials reporting a desire to eventually own a home.

The data about millennials and home ownership comes from a survey done by Apartment List. According to that survey, about 70 percent of millennials have saved only $1,000 or less toward a house down payment. Even those in the older segment of the generation, ages 25-34, probably wouldn't be able to afford a down payment of as little as 10 percent within three years. As few as 15 percent would be able to save that much within a year.

Investing in commercial properties

Delaware residents who are thinking of investing in real estate may wonder about the choice between residential and commercial types. While buying residential properties has some benefits, it may be more beneficial to purchase commercial properties for several reasons.

Commercial properties usually have better tenants. Landlords of residential properties are obliged to handle all the home's problems, which can occur anytime during the day or night. However, commercial property owners can expect calls during the day when the business is open, and their relationship with their tenants will likely be more business-like and professional.