Shasta Association of REALTORS® My Market
The real estate market can be fast paced and ever-changing, like attempting to take a still photograph of a speeding target! With that in mind, we offer My Market! The resources herein are designed to provide you with market information, not just figures, necessary for your home buying or selling decisions. Of course, this information cannot take the place of the knowledge and experience of your REALTOR®, rather it supplements those professional skills to sort through and interpret how those market changes impact you as a buyer or seller.
The Granny Flat - a "Win-Win" housing solution right in your backyard?
According to a recent report by the California Association of REALTORS®, (“C.A.R.”), California’s housing crisis is caused by a historic divergence between the demand for homes in California and the supply of available apartments and homes. We are still far from building enough units to satisfy general demand and it may take a long time for the state to build enough housing to reduce rental prices. In the mean-time, there is something that regular homeowners can do to supplement their incomes, increase the value of their homes, provide housing to neighbors, prepare for their own retirements, and partially relieve the housing pressure on their communities: the ADU!
Accessory Dwelling Units – ADUS or granny flats are a relatively affordable type of home to create because they do not require the purchase of land, new infrastructure, or parking; they can either provide income for homeowners or private space for extended friends and family, allowing intergenerational homes, or even helping older owners to age in place. They are well suited for young families, student aging parents, nannies, or even regular renters, and can be a win-win solution for homeowners and renters.
OK you may be asking: if ADUs are so good, why aren’t they more available or abundant? Why aren’t they everywhere?
Well, for many years, a thicket of local agency regulations, approvals and fees created substantial financial and time requirements before homeowners could even start on building a secondary unit. For example, a 2015 Berkley study found that many Bay Area homeowners were interested in building an ADU, most were deterred by regulations that existed to keep them from getting built.
But, the State of California passed legislation in 2016 aimed at reducing many of the worst barriers, fees and red tape that homeowners faced when trying to get approved locally to build their own granny flats. So hopefully, as contractors, builders, and owners learn more about the viability of ADUs in their communities they will start to be built in substantial numbers.
While the demand is certainly there for all types of housing in California, before you invest substantial money converting your garage or making a new ADU, you may want to know who is interested in renting out your new unit. It turns out many people across age groups think that ADUs would make a good affordable home. A 2017 C.A.R. survey of 1700 Californian renters found that 70% of renters in total were either moderately or very interested in ADUs. But older people were especially amenable to downsizing and renting small affordable units in their communities.
While ADUs and granny flats won’t be the only solution to the state’s housing issues, they can certainly be one of the many solutions. (Article courtesy of California Association of REALTORS®, Market Snapshot, September, 2017)
Is a mortgage with no closing costs right for you?
Yahoo Finance reported that a mortgage isn't free -- there are fees associated with getting the loan. Those closing costs usually total thousands of dollars. Besides writing a check to pay those fees at the closing table, there's another way to pay them when you refinance your mortgage: by adding them to the loan amount. The result is called a no-closing-cost refinance. Many lenders offer them. However, you'll probably have to accept a higher interest rate over the life of the loan.
Making sense of the story:
- No-closing-cost mortgages are attractive to borrowers who don't have the cash to pay fees upfront. Waiving the closing costs may be the ticket to getting a mortgage for a new home or a refinance.
- If you don't plan to stay in your home for more than five years, a no-closing-cost mortgage also makes sense. With a traditional mortgage, it could take more than five years to recoup the closing costs.
- The slightly higher mortgage rate associated with a no-closing-cost mortgage is still likely to be less expensive over five years than what you would pay upfront in closing costs.
- Paying a slightly higher interest rate to forgo closing costs may also make sense if you need the cash to do renovations on your home.
- If you plan to stay in your home more than five years, then a no-closing-cost loan likely will end up costing you more than a loan with closing costs. That's true whether you're taking out a mortgage for a new purchase or refinancing an existing loan.
- Typically, you'll break even on your closing costs in a few years. Going with a no-closing-cost loan saddles you with a higher interest rate over the rest of the home loan. That could end up costing you a lot more than the upfront fees if you keep the mortgage for a long time.
What you should know
The more you know about mortgages, the better prepared you’ll be. Here are some mortgage tips for first-time buyers, including:
- Know your credit score. The credit score can be a big key to knowing how much buyers can afford and how much interest they’ll be paying. Home shoppers should be encouraged to check their credit report and FICO score before even starting the homebuying process.
- Estimate how much can be borrowed. Lenders generally don’t like to see a monthly housing payment—one that includes taxes and insurances—that’s more than 28 percent of a pretax income. The percentage threshold often cited for total debt—which includes the mortgage payment—is then no more than 36 percent. Some lenders will offer differing percentages but these are the most commonly used.
- Gather the docs. Buyers will need documents showing their income, employment situation, identity, and more when applying for a mortgage. Encourage them to start collecting their latest tax returns, bank and brokerage statements, pay stubs, W-2s, Social Security card, marriage license (if applicable), and contact numbers for their employer’s HR department.
- Get pre-approved. A preapproval is similar to a full mortgage approval and can be submitted with an offer on a home. It shows the seller the seriousness of the buyer, who has already secured financing to purchase the house.
- Add up closing costs. Closing costs generally range from 2 to 3 percent of a mortgage principal amount. Make sure your buyers factor in closing costs to their overall homebuying budget. (Article courtesy of California Association of REALTORS®, Beyond the Headlines, July, 2017)
Still have questions? Your REALTOR® is a great resource.