Purchasing a Home: How Much Can I Afford?

Before going to look for that perfect home, before writing contracts, before considering all the fun upgrades in the home, one important question needs to be asked, “How much can I afford in a new purchase.” Whether you have a stash of cash in the bank, or a very tight budget, most loan officers are going to need a little information before they can give you a good answer.  Here are a few important items to think over and have in mind when you speak to your favorite loan officer:

  • Down Payment – How much do money do you have saved for a down payment? Of the money you have saved, how much do you want to budget toward a home purchase.  There are FHA loan programs where the down payment is as low as 3.5% of purchase price. While these are great loan programs for making a home purchase, these programs also require mortgage insurance and result in a higher mortgage payment. Other programs that require 20% of purchase price for down payment are available.  These loan programs do not require mortgage insurance. Generally, the higher your down payment, the better the loan program is for the purchaser, because the bank is taking less risk on mortgages with higher down payments.
  • Closing Costs of the Mortgage – Every mortgage has closing costs that range between 2-4% of the mortgage loan amount. That could be $4,000 in closing costs on a $200,000 mortgage. The amount of closing costs varies from lender to lender and different loan programs. Closing costs may also be paid by the seller, allowing a buyer to keep that cash in the bank. If closing costs are paid by the seller, the loan amount tends to be 2-4% higher and the mortgage payment will reflect that higher loan amount.
  • Interest Rates – Currently mortgage rates are under 4.5% on a 30-year fixed mortgage.  While this rate is higher than the lowest interest rates of the past few years, this rate is still a great rate for a mortgage. As the interest rate rises, the amount a homeowner is able to borrow goes down.
  • Property Taxes – Property taxes are generally paid through the mortgage payment and divided into 12 payments. Typically, property taxes are $1,200-$1,800 annually. The result is that property taxes will add $100-$150 to a mortgage payment.
  • Home Owner’s Insurance – Costs of insurance runs around $40-$60 per month. Costs vary depending on the company you choose, the amount of the policy, and any additional coverage you want to add to that policy.
  • Mortgage Payment – With all this information, a great loan officer is going to be able to calculate what you are able to afford for a purchase price on a home. The loan officer is also able to calculate what your monthly mortgage payment will be. If you feel the mortgage payment is too high, then it is possible to reduce the purchase price down to a payment that is more affordable.

So… are you:

  • Tired of just reading and talking about a new home purchase?
  • Itching to get started finding that special home?
  • Ready to find out how to get a great deal?

…then the Thompson Group is ready to help! Reach us at 480-776-5214 or www.ThompsonGroupAZ.com to get going and find your new home.

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Buying a Home: A Great Investment!

Over the last 5 years, many homeowners questioned what kind of investment their home may or may not be. Many actually suggested that “renting” would be better than paying a mortgage. Well, paying a mortgage over renting is still a much better investment provided the monthly mortgage payments are manageable. Here are a few facts for all you potential buyers to think over:

Based on a loan amount of $150,000 at 4.0% for 30 years, bankrate.com tells us the payment is $716.12 per month and will also provide a full amortization schedule.

After one year, the buyer will have earned $2642 of equity by paying down the principal balance. In addition, the buyer will get tax deductions of over $5951 in interest payments.

After 5 years, the buyer will have earned $14,329 of equity in the home and tax deductions of $28,638 from interest payments.

After 10 years, the buyer will have earned $31,183 of equity in the home. The home owner will also have received over $53,139 in tax deductions for the time period.

Now that is not chump change! If you were to rent an apartment for the same period of time, then you get ZERO! Don’t forget that homeowners in the Phoenix area see annual appreciation that average 3-5%. Over the ten-year period, a homeowner could see additional value appreciation over $445,000 by owning a home.

If you are tired of renting and ready to start investing, we certainly would like to help you!  Not only do we want you to have a great investment, but a home you will enjoy for years to come. To get started, contact us at www.ThompsonGroupAZ.com or (480) 776-5214.

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Trusted Counsel — Benefits of Using a Real Estate Agent

Buying a home is not like buying a TV, a couch, or a car. There generally are no returns, no money-back guarantees and no extended warranties. In most situations, you won’t be able to change your mind and sell your new home and break even – even after five years. Instead, the purchase of a home is a rather important long-term decision. Still, some buyers of Phoenix Arizona Homes ask the question:  Do I need a real estate agent to help? Here are a few questions to ask and some advice you should receive from a knowledgeable real estate agent to help you make a great home-buying decision:

  • Planning for the Purchase – How much should I put down? Who can help me with financing? How long is a typical escrow period? Will my close of escrow change if I buy a short sale or if I  build a home? How long is the inspection period? How do I build my negotiating power before I write a contract?
  • Knowledge of the Local Market – Searching the Phoenix MLS for Phoenix Homes for Sale is just part of the process.  Equally important is understanding the Local Market.  What are the local schools like? Are we near a superfund site? What are comparable homes recently sold? Who can help me paint, install carpet or make other repairs?
  • Finding That Special Home – Where can I find that perfect floor plan? Are there homes available that are not in HOAs? We really would like a diving pool, not a play pool, is that possible? Are there homes that allow horse privileges?
  • Troubleshooting Challenges That Arise – What happens when the seller needs a new roof? We love the home and our appraisal came in low—what’s next? The seller is a bank and is not going to fix the holes in the wall, should we cancel?
  • What Are the Best Deals in Town? – Is this home a good deal? What are typical costs for real estate transactions in the Phoenix Real Estate market? A great real estate agent knows what a good real estate transaction is for their market. Knowing the market is a key to knowing what kind of home a buyer may be able to purchase and what fees are typical. A good agent also knows where to find the best properties and floor plans.

Are you ready to get started finding that special home? Our Phoenix AZ Realtors can help you with all these questions and much more! Contact us at www.ThompsonGroupAZ.com or 480-776-5214 today!

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Financial Advice! Why Purchasing a Home Is Better than Renting

In today’s economy, it’s a common strategy to try and keep expenses down, reduce costs, and “just hang on” while things rebound. And, with economic pressures, this strategy may seem attractive; to just rent for a while and “save some extra money.”

In most cases, though, this is really a misconception. Money paid out as rent is simply money spent. It’s like burning money – aside from the roof over your head for another month, the only person that benefits from that money is your landlord.

On the other hand, turning your rent payment into a mortgage payment will allow that roof over your head to turn into an investment and allow your money to work for you! There are plenty of Phoenix homes for sale available in the Phoenix MLS, so now may be the time to make a prudent decision.

For starters, every dollar of interest paid on your mortgage is tax deductible. Typically, in the first five years of your new mortgage, most of your payment is interest, and therefore is tax-deductible. For a mortgage payment of $1000/monthly, a homeowner could see $8,000-$10,000 in tax deductions.

Another BIG break available right now is record low interest rates. Current rates are in the range of 3.5%-4.0% and allow for a mortgage amount well over $200,000, if you want to keep your payment under $1000/month. Situations do vary, but most home buyers are surprised at what the kind of home and purchasing power is available to them. We have great mortgage officers available if you have questions!

Another great reason to purchase is that once you own a home, you will have potential for future appreciation. On average, most Phoenix Arizona homes appreciate 3-5% per year, often doubling (or more) the value of your investment over the term of your mortgage. In 2012, Phoenix real estate saw increases from 20-30% in home values. On a $150,000 home, that is an increase in value of $30,000-$45,000.

Finally, aside from the financial advantages, as a homeowner, you have the powerful “Joy of Ownership.”  You get to enjoy your home and your home is now YOUR castle – not someone else’s property that you’re living in temporarily. As a home owner, you can paint the walls, pick out your favorite carpet, enjoy your gourmet kitchen, splash around in your pool… You get to decide how you live!

Today is a great time to buy a home. Our Phoenix AZ Realtors would love to help. Contact us at www.ThompsonGroupAZ.com or 480-776-5214.

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Arizona Home Buyers: To Do, or NOT To Do?

Many potential buyers of Phoenix Homes for Sale are often unaware that many of their actions in other parts of their lives can have a significant impact on the home buying and financing process. As a prospective buyer looking for a home in the Phoenix Real Estate market, keep in mind these questions:

  • I have a new job offer, should I change jobs? Changing jobs as an upward movement in the same line of work is okay. Changing jobs into a different line of work can be an issue, and changing jobs for less money is a red flag, depending on the circumstances. Regardless of the reason, pay stubs covering the last 30 days will be required for loan approval.
  • We just sold our classic car for a pretty high price. Is it okay to deposit that money? Moving money around is okay as long as you can paper-trail it. If you move it from one account to another it’s pretty easy to show the money coming in and out of the accounts. Making large deposits that can’t be paper-trailed is a bigger issue – for example, selling items from around the house (like a garage sale) and then depositing those funds into the bank. These funds are nearly impossible to prove their source (especially if it’s a large deposit) and, therefore, would not be included in available funds for closing. Literally, the money is excluded from your qualifying assets. Any deposits outside of payroll deposits (usually over a few hundred dollars) need to be sourced from an acceptable source (i.e. – no selling drugs to qualify!).
  • How much money should I save? Generally, savings of 3.5% of the purchase price is enough to qualify for an FHA loan for Phoenix Arizona Homes. New programs now allow for lower down payments than 3.5% and are wonderful programs for first time home buyers. A great loan officer will be able to tell you which programs may be best for you. Saving more money to put down is also a smart idea. A larger down payment will allow for a better financing, and the extra money could help with purchase of new appliances and potential repairs at your new home.
  • Should I make big purchases before closing escrow? No, no, no — not without speaking to your loan officer first. Large purchases made on credit for a new car, appliances, or even furniture for your new home may push your debt level too high and prohibit the financing of your new home.
  • I was planning on taking a trip out of town – is that a good idea? Probably not, if you can avoid it. But if your trip has already been planned for months in advance, our Phoenix AZ Realtors can help work out the logistics. With faxes and email available throughout the world, most escrows can continue while you are away on business – or enjoying fun in the sun.
  • I have a bankruptcy, foreclosure or short sale on my credit, can I still buy? Most times when a borrower had a past issue on their credit, a good loan officer will be able to give good advice about corrective steps to take. Most borrowers’ past mistakes may be repaired through the passage of time and by establishing new credit. Situations vary, so speak to a good loan officer about your situation.

As you prepare to begin the process of buying a home, it will help you greatly to make sure that actions you take aren’t detrimental to your financing and buying process. Give us a call today at 480.776.5214 – we will not only help you search through the prospects in the Phoenix MLS, but we’ll also help you strategize and avoid potential pitfalls to financing.

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Ghoulish Reasons to Buy a House Right Now

Halloween is just upon us – and it’s that time of year that prompts many of us to start thinking about ghouls and goblins, witches and Jack-o-lanterns, and of course – haunted houses.

But, right now is also a GREAT time to think about houses that aren’t haunted – ones that are more hospitable and inhabitable, and ripe for the purchasing. Here are “ghoulish” reasons to consider buying Phoenix Arizona Homes TODAY:

  • Howlingly high home affordability – The measure of affordability is the relationship of household income to mortgage payments. And right now, with current median income levels compared to low, low interest rates and low, low selling prices, the percentage of median income required to pay median mortgage payments is the lowest it’s been in the last twenty years.
  • Moaning mortgage interest rates – Today’s interest rates are very, very low, and are only likely to climb from here.
  • Home prices are starting to rise from the dead – After the declines of the last several years, home prices are starting to trend upward.  So, NOW is time to buy!
  • Spooked sellers – In today’s market, many sellers are not only wanting to sell, they have to sell – and that means that buyers have the advantage. From homeowners with Phoenix homes for sale trying to avoid foreclosure to banks trying to sell off their foreclosed properties, the reasons for sellers to sell are powerful – leaving buyers in a great position.
  • The best Jack-Own-Lantern: owning is cheaper than renting – The average mortgage principal and interest payment has been below the average rental rate since 2009, and in fact, hasn’t been this favorable in over twenty years!
  • The core of the Carmel apple:  home ownership remains the core of the American Dream – Owning a home is still essential to financial stability and growth. Despite recent short-term trends, the long-term trend of Phoenix Real Estate value is still unchanged. Owning a home allows you to take care of your day-to-day shelter and living needs, while at the same time allows you to invest in your own future.

As the time approaches for kids to think about knocking on doors looking for treats, it’s an ideal time for you to consider “knocking on doors” in the Phoenix MLS and looking for deals. This storm of buying conditions may not be spooky, but it certainly is exciting, and our knowledgeable Phoenix AZ Realtors can help you separate the tricks from the treats and make an excellent choice for your future. Give The Thompson Group a call today at (480) 776-5214, and we’ll help!

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Beating the Hot Phoenix Real Estate Market

Are you a little frustrated with trying to beat the bidding wars and not sure which way to turn? Well, I have found the answer for all my buyers out here. Completely energy efficient new builds is  where it is at!

I know of two locations that can offer the buyer 3-5 bedrooms, 2 baths, 2 car garage, and priced between $120K-$150K. Here’s the best part: if you go in represented by a real estate agent you will have an expert at your side.

Last week I took my clients to a new build to purchase a wonderful home. Within a week the price had increased $5K and was now out of my client’s price range. As the representative for my clients I was able to negotiate with the broker at the new build to sell them the home at the previous week’s prices. Do you think they would have done that if my clients showed up without an agent? NO!

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Great Questions for My Loan Officer

Don’t be afraid to ask your lender questions! How long have you been doing home loans? How long have you been working for your company? How many of your loans did not close in the last year?

Be sure to ask your lender to provide you a pre qualification form and not a pre approval. If your lender is saying I will give you a pre approval form, likely your lender did not complete necessary upfront work to purchase a home. And, we all know that not doing your upfront work leads to issues or nightmares later.

The number one thing for a lender to do is over communicate and never keep you guessing about problems that may occur with your home purchase. Remember, costs of inspections will run up to $1000 and you are going to be in the process of packing up to make the move. If your loan officer can not complete the mortgage, then you are out money and do not get to move!

By the way, I work with several great lenders who have closed many transactions. Should you need suggestions, I am here when you are ready.

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East Valley Homes under $150,000

Wow! Homes are selling fast in the East Valley cities of Phoenix, Chandler, Gilbert, Tempe, Mesa and San Tan Valley.  If you are a buyer looking to purchase a home in today’s market with a price range under $150K, you may be finding it very difficult to get a nice home – or a home at all.

I took a pre-qualified buyer out the last week. After scrubbing the area, I located a fantastic deal for her. The home is upgraded and the seller paid all of my buyer’s closing costs. This home was a gated community with beautiful mountain views, pool, soccer, basketball, clubhouse, children’s play area and plenty of area to ride your bike.

While scrubbing the area, I found a number of other very nice homes between $120,000 and $150,000.  The locations vary from 15-40 minute drive to town. These won’t last long, so please call me at 480-776-5214 to get one!

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Attention Military Personnel

  • Were you or your spouse on official extended duty outside the United States for at least 90 days during the period beginning after Dec 31, 2008 and ending before May 1, 2010?
  • Were you a member of the uniformed services or Foreign Service, or an employee of the intelligence community?
  • Did you purchase a home after April 30, 2011 and before July 1, 2011?
  • Did you enter into a binding contract before May 1, 2011 to purchase a home before July 1, 2011?

If you answer yes to the above, contact your accountant to file form 5045, you may qualify for a tax credit.

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