Home Equity Can Be a Game Changer When You Sell

Are you on the fence about selling your house? While affordability is improving this year, it’s still tight. And that may be on your mind. But understanding your home equity could be the key to making your decision easier. An article from Bankrate explains:“Home equity is the difference between your home's value and the amount you still owe on your mortgage. It represents the paid-off portion of your home.You'll start off with a certain level of equity when you make your down payment to buy the home, then continue to build equity as you pay down your mortgage. You'll also build equity over time as your home's value increases.”Think of equity as a simple math equation. It's the value of your home now minus what you owe on your mortgage. And guess what? Recently, your equity has probably grown more than you think.In the past few years, home prices skyrocketed, which means your home's value – and your equity – likely shot up, too. So, you may have more equity than you realize.How To Make the Most of Your Home Equity Right NowIf you're thinking about moving, the equity you have in your home could be a big help. According to CoreLogic:“. . . the average U.S. homeowner with a mortgage still has more than $300,000 in equity . . .”Clearly, homeowners have a lot of equity right now. And the latest data from the Census and ATTOM shows over two-thirds of homeowners have either completely paid off their mortgages (shown in green in the chart below) or have at least 50% equity (shown in blue in the chart below): That means roughly 70% have a tremendous amount of equity right now.After you sell your house, you can use your equity to help you buy your next home. Here’s how:Be an all-cash buyer: If you’ve been living in your current home for a long time, you might have enough equity to buy your next home without having to take out a loan. If that’s the case, you won’t need to borrow any money or worry about mortgage rates. Investopedia states:“You may want to pay cash for your home if you're shopping in a competitive housing market, or if you'd like to save money on mortgage interest. It could help you close a deal and beat out other buyers.” Make a larger down payment: Your equity could also be used toward your next down payment. It might even be enough to let you put a larger amount down, so you won’t have to borrow as much money. The Mortgage Reports explains:“Borrowers who put down more money typically receive better interest rates from lenders. This is due to the fact that a larger down payment lowers the lender’s risk because the borrower has more equity in the home from the beginning.”The Easy Way To Find Out How Much Equity You HaveTo find out how much equity you have in your home, ask a real estate agent you trust for a Professional Equity Assessment Report (PEAR). Bottom LinePlanning a move? Your home equity can really help you out. Connect with a local real estate agent to see how much equity you have and how it can help with your next home.

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Why Pre-Approval Is Even More Important This Year

On the road to becoming a homeowner? If so, you may have heard the term pre-approval get tossed around. Let’s break down what it is and why it’s important if you’re looking to buy a home in 2024.What Pre-Approval IsAs part of the homebuying process, your lender will look at your finances to figure out what they’re willing to loan you. According to Investopedia, this includes things like your W-2, tax returns, credit score, bank statements, and more.From there, they’ll give you a pre-approval letter to help you understand how much money you can borrow. Freddie Mac explains it like this:“A pre-approval is an indication from your lender that they are willing to lend you a certain amount of money to buy your future home. . . . Keep in mind that the loan amount in the pre-approval letter is the lender’s maximum offer. Ultimately, you should only borrow an amount you are comfortable repaying.”Now, that last piece is especially important. While home affordability is getting better, it’s still tight. So, getting a good idea of what you can borrow can help you really wrap your head around the financial side of things. It doesn’t mean you should borrow the full amount. It just tells you what you can borrow from that lender.This sets you up to make an informed decision about your numbers. That way you’re able to tailor your home search to what you’re actually comfortable with budget-wise and can act fast when you find a home you love.Why Pre-Approval Is So Important in 2024If you want to buy a home this year, there’s another reason you’re going to want to be sure you’re working with a trusted lender to make this a priority.While more homes are being listed for sale, the overall number of available homes is still below the norm. At the same time, the recent downward trend in mortgage rates compared to last year is bringing more buyers back into the market. That imbalance of more demand than supply creates a bit of a tug-of-war for you.It means you’ll likely find you have more competition from other buyers as more and more people who were sitting on the sidelines when mortgage rates were higher decide to jump back in. But pre-approval can help with that too.Pre-approval shows sellers you mean business because you’ve already undergone a credit and financial check. As Greg McBride, Chief Financial Analyst at Bankrate, says:“Preapproval carries more weight because it means lenders have actually done more than a cursory review of your credit and your finances, but have instead reviewed your pay stubs, tax returns and bank statements. A preapproval means you’ve cleared the hurdles necessary to be approved for a mortgage up to a certain dollar amount.”Sellers love that because that makes it more likely the sale will move forward without unexpected delays or issues. And if you may be competing with another buyer to land your dream home, why wouldn’t you do this to help stack the deck in your favor?Bottom LineIf you’re looking to buy a home in 2024, know that getting pre-approved is going to be a key piece of the puzzle. With lower mortgage rates bringing more buyers back into the market, this can help you make a strong offer that stands out from the crowd.

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Houses Are Still Selling Fast

Have you been thinking about selling your house? If so, here’s some good news. While the housing market isn't as frenzied as it was during the ‘unicorn’ years when houses were selling quicker than ever, they’re still selling faster than normal.The graph below uses data from Realtor.com to tell the story of median days on the market for every January from 2017 all the way through the latest numbers available. For Realtor.com, days on the market means from the time a house is listed for sale until its closing date or the date it’s taken off the market. This metric can help give you an idea of just how quickly homes are selling compared to more normal years: When you look at the most recent data (shown in green), it's clear homes are selling faster than they usually would (shown in blue). In fact, the only years when houses sold even faster than they are right now were the abnormal ‘unicorn’ years (shown in pink). According to Realtor.com:“Homes spent 69 days on the market, which is three days shorter than last year and more than two weeks shorter than before the COVID-19 pandemic.”What Does This Mean for You?Homes are selling faster than the norm for this time of year – and your house may sell quickly too. That’s because more people are looking to buy now that mortgage rates have come down, but there still aren’t enough homes to go around. Mike Simonsen, Founder of Altos Research, says:“. . . 2024 is starting stronger than last year. And demand is increasing each week.”Bottom LineIf you’re wondering if it’s a good time to sell your home, the most recent data suggests it is. The housing market appears to be stronger than it usually is at this time of year. To get the latest updates on what’s happening in your local market, connect with a real estate agent.

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