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Georgetown Real Estate Law Blog

What to know about the current housing market

The mortgage on a median-priced home in America is up 13 percent from the first part of 2017. This could make it more challenging for Delaware homebuyers this spring season. When a buyer takes taxes and other costs into account, a total mortgage payment can easily exceed 30 percent of a person's income. Ideally, housing should constitute no more than 30 percent of a person's take-home pay.

A combination of increased interest rates and a lack of inventory have resulted in the higher home prices. The interest rate for a 30-year fixed-rate loan was 4.46 percent as of March 16, the highest since January 2014. It's important to note that home prices haven't appreciated equally throughout the country. In cities such as San Francisco and Seattle, a mortgage now costs $378 and $449 more a month than a year ago.

Residential real estate sales fall as mortgage rates rise

People in Delaware may be closely following trends in the residential real estate market as they look to purchase a home or relocate by selling their home and searching for a new residence. Across the United States, mortgage rates are rising, and it appears that fewer people are selling their homes. In January 2018, pending home sales, a measure of signed contracts, went down 4.7 percent in comparison with the previous month, December 2017.

In fact, the residential real estate numbers that had already been projected for December were revised down following confirmation. The National Association of Realtors, or NAR, tracks trends in the American housing market. While the economy in general is doing well, the NAR said, housing supply on the market is limited and mortgage rates are rising, leading to fewer people deciding to purchase homes at this time. In addition, they said, the effect of these issues is felt most strongly in the lower or entry level of the housing market.

The commitment of buying a home together

Buying a home may be one of the most significant purchases a person makes. For Delaware couples who decide to purchase a home together, it can turn out to be more of a commitment than getting married. Engaged couples who decide that they no longer want to get married can simply end their engagement. However, if they have purchased a home together, the financial entanglements can make getting rid of the home a complicated process and might result in a major financial loss.

The financial costs for improving the condition of a home can be much higher than for counseling for a troubled marriage. If a couple is unhappy with the state of the electrical wiring, plumbing, size or layout of the home, they should expect to pay thousands of dollars. Homes also require maintenance and repair, and homeowners do not have the luxury of ignoring issues with the home, some of which could develop into substantial and expensive problems to solve.

Mortgage rates continue to increase

Delaware homeowners may soon be paying more on long-term mortgage rates. Interest rates are rising because the Federal Reserve is taking action to keep inflation at a reasonable level. It is expected that the Fed will raise rates at its March meeting. The national bank raised rates three times in the previous year. The 30-year rate was 4.22 percent as of Feb. 1, which was the highest since March 2016.

The rate for 15-year fixed-rate loans was 3.68 percent as of Feb. 1, which was the highest since July 2011. These loans tend to be widely used by those who are looking to refinance their current loans. The rate for a five-year adjustable mortgage was also at its highest since April 2011. It is important to note that these rates do not include points that some borrowers may pay ahead of time to get the lowest possible interest rate.

What to do prior to making an offer on a home

While buying a home may be an admirable goal, Delaware residents will need to prepare ahead of time to achieve it. For instance, it may be necessary for individuals to look at their budgets to determine how much home they can afford. They should look to see how much is left over each month after car payments, food and other expenses are taken into account.

Homeowners should spend no more than 33 percent of their monthly income on a mortgage payment. Once a person determines how much house that he or she can afford, it is time to do a credit check. To qualify for most loans, a borrower should have a credit score of 620 or higher. Those who are at or below 620 may benefit from closing old credit accounts or increasing current lines of credit in an effort to increase their scores.

What to know about HECM reverse mortgages

Older Delaware residents may be interested in using a HECM reverse mortgage to purchase a house. The reverse mortgage itself will cover up to 60 percent of the purchase price, and buyers tend to liquidate assets to cover the remaining balance. There is a 2 percent mortgage insurance premium is 2 percent of the property value no matter how much cash a person draws.

Buyers may be able to choose between a fixed or adjustable rate depending on their needs. Generally speaking, an individual may be able to draw more cash if borrowing with an adjustable interest rate as opposed to a fixed one. The loan balance on an adjustable rate HECM reverse mortgage may also be lower a decade after the house is purchased. Of course, this may be because the interest rates are initially lower on a loan with an adjustable rate compared to one with a fixed-rate.

What to know about selling a home during a divorce

Delaware residents may understand that moving can be quite stressful. The stress level may be amplified when the move is related to a divorce. In many cases, selling a home after the end of a marriage is like selling a house for any other reason. It is important that it looks like it has been properly cared for. If it doesn't, it may have a hard time attracting a buyer's interest.

This means that the floors should be finished, the faucet should be repaired and the walls should be given a fresh coat of paint. If there are animals living in the house, they should be removed during showings as they can cause problems as it relates to selling the home. A former couple will have to communicate who will get custody of the pets and when the pets will be moved from the home.

Tips for selling a home during the holidays

The holiday season isn't usually the best time for a home to be on the market because of all the celebrations that take place and the number of people who enter and exit the home. With a few tips and the assistance of a real estate agent and attorney who can help complete the paperwork required for the sale, the process can often operate in a smooth fashion.

Holiday decorations should be kept at a minimum with a few simple decorations to adorn the front door and the walls that will offer ideas to someone interested in buying the home. A home that is for sale needs to be kept as clean as possible, even in the winter months. Leaves should be raked out of the yard, and a rug could be placed at the entry doors for guests to wipe their feet to prevent mud from getting on the floor.

Home buying mistakes

Many individuals and couples living in Delaware are interested in purchasing a new home. It isn't unusual, however, for prospective homebuyers to begin the process only for things to go awry when it comes to securing financing and closing the deal.

Many of the mistakes people make when buying a home are financial. One significant issue is that many people begin shopping for a home before they know how much of the mortgage they could qualify for. Financial experts generally recommend that homebuyers find a reputable lender and get pre-approved for a mortgage before searching for a home in earnest. After all, there are few things worse than falling in love with the home only to find that one simply can't afford it.

Titling a home owned with a partner

Delaware residents who buy a house with a spouse may have legal protections. However, those who buy a home with someone they are not married to may not have many options if something goes wrong. According to a 2013 study from Coldwell Banker, roughly 25 percent of millennial couples owned a home together. Low mortgage rates and tax advantages were among reasons cited for making such a decision.

One issue that those living together will need to resolve is how to handle the cost of owning a home. It is rare that costs can truly be split 50/50, and it may be necessary to determine that repairs or other housework have a monetary value. The couple may also need to decide who holds the title. If only one person holds the title, the other will essentially pay rent even if both call the house their home.