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Mortgage Rates and Purchasing Power

How Mortgage Rates Affect Your Purchasing Ability

Mortgage rates are trending upward, although they are still low by historical standards. Even a rise of a few basis points, however, can affect your ability to buy the house of your dreams. When rates start rising, some people rush to buy a home fearing further increases, while others decide to either stay put or consider purchasing a smaller, more affordable home. Those borrowers who have a harder time qualifying for a mortgage may find themselves unable to secure financing.

Types of Mortgages

Today’s buyers have access to various types of mortgages, and that means more choices in purchasing ability. Besides conventional 30 and 15-year mortgages, where the rate is locked in for the life of the loan, other mortgage options include:
• Adjustable rate mortgages (ARM) – the interest rate changes at a certain period, usually annually, and it can move up or down. Initial rates are generally lower than conventional mortgages. If you’re lucky, subsequent rate changes trend downward. If they head in the other direction, you could end up paying a lot more. However, ARMs usually can’t rise more than a particular percentage at each adjustment.
• Option ARM – while this type of ARM indeed offers more options, there’s a downside. You could end up with negative amortization, or a growing loan balance due to interest rather than paying down the loan.
• Interest-only loans – these loans allow interest-only payments for a specific time period, usually up to seven years. After that, the borrower may either refinance or make a lump sum, “balloon” payment. Borrowers may also start paying off the principal, but the payment amount increases a great deal. Interest-only loans are good choices for those who do not intend to stay in a home for the long-term.
• FHA loans- these government-backed loans are a good choice for first-time home buyers, as down payments are lower than those required by conventional lenders.
• VA loans – honorably discharged veterans are eligible for these mortgages, which do not require a down payment.
• Mortgage buydown – this options allows buyers to lower their interest rates temporarily by paying money upfront for the mortgage. In effect, you are prepaying interest. In a 2 to 1 buydown, for example, the interest rate is 2 percent lower for the first year, 1 percent lower the following year, and then reverts to the normal rate in the third year.
Your lender can crunch the numbers on a type of loan, so you can increase your affordability even if interest rates go up. However, such extra affordability is temporary in many situations, so you need to feel comfortable that you can make higher payments when interest rates rise.

Home Prices

Mortgage rates also affect home prices. When mortgage rates rise significantly, home prices may drop. However, the law of supply and demand always rules, and currently there is still a strong demand for housing and a limited supply. If the housing market slows considerably, it is likely home prices will trend lower.

Contact Us

If you’re looking to buy or sell a home or find a rental property, you need a knowledgeable, experienced realtor. Contact Island Realty Group LLC at 808-689-7407 or IslandRealtyGroup@irghi.com.

 

February 23, 2018

Bidding Wars – How to Beat the Competition

Bidding Wars – How to Beat the Competition

In a hot market or when an especially desirable home is for sale, bidding wars often crop up. It’s not always the buyer with the largest offer who wins. While the seller wants the best price, other factors – such as when you can make the move – may influence the decision. Find out when the seller wants to move and see if your schedule can accommodate that. It gives you the edge over the bidder who needs a place right away, for example, and the seller wants time to find their next abode. The fewer contingencies you have, the better your odds.

Research Comps

No matter how much you want a house, you don’t want to pay more for it than you can afford and what it is worth. Unless you’re paying cash, your lender will put the brakes on giving you more money than the house’s value. Research the comps in the area, so you know the highest reasonable offer a seller might receive.

Make Sure Your Financing and Deposit Are in Order

You must receive preapproval from your lender. When you have that documentation, show it to the seller so they know your financing is in order and the deal won’t fall through due to lending issues. Of course, your lender must agree that the house is worth the asking price.
Put as much of a deposit down as you can. That shows the seller you’re serious. If you are lucky enough to pay cash for a home, do it. A cash offer is generally a trump card.

Escalation Clauses

Include an escalation clause, also known as a sharp bid, with your offer. The clause allows you to automatically up your bid to a certain limit. For example, the clause might read that you are willing to pay $5,000 more than the highest offer a seller receives, up to X amount. If the seller receives a $500,000 offer from a buyer, you’re willing to pay $505,000. However, the clause would limit the total price amount to $515,000, so you’re out of the deal if a buyer is willing to pay more than that.

A Note to the Seller

If you really love the home, send a handwritten note – not an email – to the seller. Tell them in a heartfelt way just why you love the house, without offering any criticism of the property. Do you think the seller has exquisite taste and you wouldn’t change a thing? Does the property have beautiful gardens and you would ensure these plants and flowers receive the best of care? Is it an ideal family home you can visualize your kids enjoying a wonderful childhood within? All these things could sway the seller in your direction. One caveat: Don’t include any photos of yourself and your family in the card or letter. That could inadvertently violate federal fair housing laws.

Contact Us

If you’re looking to buy or sell a home or find a rental property, you need a knowledgeable, experienced realtor. Contact Island Realty Group LLC at 808-689-7407 or IslandRealtyGroup@irghi.com.

 

Owning A Rental Property

What to Know When Owning a Rental Property

Many people dream of living in Hawaii, so a rental property may prove a great investment. However, there’s always the possibility owning a rental property can become a giant headache. Avoid the latter by assessing whether you are cut out to be a landlord and by following property rental best practices.

Rental Property Considerations

When buying a rental property, keep in mind that mortgage insurance doesn’t apply to investment properties. That means you must plan on making at least a 20 percent down payment.
How will you handle repairs? If you’re handy and can do all but the most major repairs yourself, that’s a plus, but many landlords don’t live near their rental properties. You may want to hire a property management firm to take care of necessary repairs and other business. The fee you pay the property management firm does cut into your income – the average fee is 10 percent of the rent – but it’s generally your best solution if you aren’t handy or are primarily an absentee landlord.
If the property is a fixer-upper, you will need either serious handyman skills or deep pockets. If you’re just starting out as a landlord, it’s wise to go with a property requiring only minor repairs and get some experience under your belt. You’ll then have a more realistic idea about taking on a bigger project down the road.

Tenant Screening

Careful tenant screening makes the difference between a successful and disastrous rental experience, so it’s absolutely critical. Perform a thorough background check on every applicant. One plus: In Hawaii, landlords can charge potential tenants a non-refundable application fee, with no limit on the amount.
One way to separate the tenant wheat from the chaff while protecting yourself is requiring tenants to carry rental insurance. Such insurance isn’t expensive, and can possibly keep you out of court if something happens to the tenant’s property. Tenants might assume the landlord’s insurance covers their personal items, but that’s not the case. If there’s an issue and the tenant suffers a loss, they might try to sue you if they don’t have rental insurance. Mandatory rental issues protects both parties, and if a tenant can’t afford another $20 a month for premiums, making rent payments on time may also become a problem.

Do Your Homework

Hawaii must abide by the federal Fair Housing Act, but there are also state laws relating to landlord/tenant issues. Familiarize yourself with these laws before becoming a landlord.
Before buying a property, figure out how much you can expect in annual income, your approximate annual expenses and possible risks. Such risks include vacancies, above-average repair costs, non-payment of rent and legal fees if you must proceed with an eviction.
Speak with an accountant familiar with rental properties and have them go over the numbers with you. It’s money well-spent.

Contact Us

If you’re looking to buy or sell a home or find a rental property, you need a knowledgeable, experienced realtor. Contact Island Realty Group LLC at 808-689-7407 or IslandRealtyGroup@irghi.com.

 

January 12, 2018

Strategies for Younger Buyers

Strategies for Younger Buyers Purchasing a Home

As millennials head into their initial home-buying years, the real estate market is ready for this huge demographic influx. Many young people think they can’t afford to buy a home, but they may not know about the tools available to help make home ownership a reality.

Loan Options and Saving for the Down Payment

Hawaiian real estate is expensive, but the 20 percent down payment found in cheaper areas is not the rule here. Many first-time buyers put down 5 percent, which for an average $600K home means saving at least $30K and financing the remaining $570K. Assiduous budgeting and saving can get you to that $30K figure within a few years, but there is another avenue – which does not involve gifts from relatives. That’s using money from your retirement savings account to help finance a first-home purchase. If you take the money from a 401(k), you will have to pay a 10 percent penalty. Take the money from an Individual Retirement Account (IRA) for that first home purchase, however, and there is no penalty. There is a lifetime limit of $10K, but for a couple who each take that amount from their IRAs, they are 2/3 of the way toward that 30K down payment.

If a millennial is a veteran, he or she may qualify for a VA loan, which may not require any down payment. VA loans also do not require private mortgage insurance.
This is a generation who, due to the Great Recession and unprecedented student debt, tended to live with their parents longer than the Baby Boomers. If living with the parents for a while can help millennials save money for a down payment on their own house, it’s a worthwhile tradeoff.

Millennials may consider a Federal Housing Administration (FHA) loan, which does not require as large a down payment – perhaps as small as 3.5 percent of the dwelling’s price. Since an FHA loan is guaranteed by the government, qualifying is easier than with conventional mortgage loans. FHA loans are available for those with lower credit scores. However, loan amounts are not as large, and you will have to pay a mortgage insurance premium. These premiums can cost substantially more than the private mortgage insurance needed for some standard loans.

The Right Realtor

Working with the right realtor can help millennials make their home ownership dreams come true. A real estate agent who specializes in marketing to millennials is not only technologically savvy – an absolute must for this generation – but can guide clients toward affordable homes, appropriate mortgage choices and assist in answering any questions regarding the home purchase process. Since most millennials are extremely cost-conscious, the right realtor helps save them money in ways large and small. Many millennials simply lack the financial knowledge needed to make homebuying and mortgage decisions, and the right realtor can act as instructor.

Contact Us

If you’re looking to buy or sell a home you need a knowledgeable, experienced realtor. Contact Island Realty Group LLC at 808-689-7407 or IslandRealtyGroup@irghi.com.

 

December 19, 2017

Renting vs. Buying: Pros and Cons

Renting vs. Buying: Pros and Cons of Each

Should you rent a home or are you better off buying? The answer depends on your individual circumstances, preferences and your stage of life. The right answer to the question may prove different when you’re 25 as opposed to a decade later, and your financial status at any given time.

Renting

Pro: In terms of upfront costs, renting is less expensive. While you are responsible for the required security deposit and monthly rental fee, you don’t have to worry about saving up a substantial down payment, as occurs when purchasing property. Pro: If you want flexibility, you can simply move elsewhere at the end of your lease, rather than go through the often time-consuming and stressful process of selling your house.
Pro: Budgeting is simpler, since rent is a fixed amount.
Pro: The landlord takes care of any necessary property repairs, and in most cases, it won’t cost you a dime. There are exceptions, depending on the language of your lease and the nature of the repairs.
Con: The lease spells out restrictions on your use of the rental unit. Failure to abide by them can cost you the tenancy. Those restrictions may include having another person live with you if their name is not on the lease. If you bring a pet into a rental dwelling where animals aren’t allowed, you will probably have to rehome it if your landlord discovers you are breaking the lease.
Con: Rent increases at the end of a lease are often steep.

Buying

Pro: When you rent, that money is gone at the end of every month. When you buy, you build equity in your home with each mortgage payment. At some point, you may have enough equity to borrow against it in the form of a home-equity loan to pay for college, a car or some other pricey necessity. You can also make extra principal payments to own your home outright sooner. When you sell, you do not have to pay taxes on capital gains above a certain amount.
Pro: When you own your home, you aren’t subject to a landlord’s rules on pets, redecorating, remodels or other strictures that are an owner’s prerogative.
Con: You must make repairs yourself or call the appropriate professional when something goes wrong, and it is all on your dime unless there is a warranty on the item in question. Repairs and other house-related expenses can also blow a hole in your budget.
Con: While renters can get away with relatively cheap renter’s insurance to protect their belongings, homeowners must pay for home insurance, property taxes, water and sewer service and possibly flood insurance, depending on the area.

The Wild Card

One wild card in the decision to rent or buy involves the Republican Congress’ tax overhaul. States with high state and local property taxes, as well as high home prices – such as Hawaii – will suffer if property tax and mortgage interest deductions are limited. Buyers will have to factor in extra costs, while landlords will likely pass those additional costs onto renters.

Contact Us

If you’re looking to buy, sell or rent a home, you need a knowledgeable, experienced realtor. Contact Island Realty Group LLC at 808-689-7407 or IslandRealtyGroup@irghi.com.

Buying and Selling During the Holidays

Things to Know Before Buying or Selling a Home During the Holidays

Given their druthers, most people prefer not to buy or sell a home during the holidays. It’s such a busy season in other aspects of life, but there are certain advantages to holidays showings and sales: People in the market to buy or sell at this time of year are motivated. Unlike other parts of the country, foul weather isn’t an issue in Hawaii. In fact, you may find “snowbirds” who want to move to a warm climate as soon as possible, and have the time to look for a new residence over the holidays.

Minimal Decorations

If you’re a seller, keep the holiday decorations to a minimum. Your home should feel welcoming to people of all faith traditions. Many holiday decorations overwhelm or clutter rooms, and that’s not conducive to selling your home.

Less Competition for Buyers

Buyers face less competition for available homes during the holiday season. Holiday buyers are more committed to purchasing a home rather than just browsing through open houses. A plus for buyers may prove a negative for sellers, as they’re more likely to receive lowball offers. The downside for buyers is that, with less inventory available, they may not find a home suiting their needs.

Closing Delays

An offer on a house made in early to mid-December is unlikely to go anywhere until after the start of the new year. Everyone involved in the closing – including lenders, appraisers and home inspectors – is more likely to travel or work fewer hours during this time. Keep that in mind if you want to close on the home by the end of the year for tax purposes. A buyer with children who wants their kids in a new school system after the holiday break should realize the process may take longer than they anticipated. The same holds true for relocation buyers starting a job in the beginning of the year.

House Showing Inconveniences

If you’re extra busy during the holidays, house showing becomes an inconvenience. You want your house to look neat and clean, but that’s often difficult when you have gifts and wrapping paraphernalia scattered around or are involved in serious holiday cooking and baking projects. Add shopping, parties and other holiday happenings, and you may not simply have time to keep your house looking up to par.

Whether buying or listing a house for sale, waiting until January generally makes more sense for both parties. However, if you can deal with the inherent inconveniences of house shopping during the holidays, go ahead and seek your new home or list your current one. It could end up a savvy decision.

Contact Us

If you’re looking to buy or sell a home you need a knowledgeable, experienced realtor. Contact Island Realty Group LLC at 808-689-7407 or IslandRealtyGroup@irghi.com.

November 13, 2017

Think About These Before You Buy!

Top 5 Things Buyers Miss When Looking at a Home Prior to Purchasing

You’ll fallen in love with a house, and an inspector has given it an OK. Does that mean the house has no issues? Since there’s no such thing as a perfect house, even in new construction. There’s always a possibility you missed something that may prove a deal breaker or major disappointment simply because it didn’t cross your mind. Rather than rue your purchase, make sure these conditions aren’t an issue with your intended home.

Check Out the Nightlife

It’s likely you paid visits to the home during the day. Prior to purchase, check out the neighborhood at night. It’s possible you’ll find it’s not as peaceful and quiet as you hoped. Perhaps that bar/restaurant down the block attracts a rowdy crowd, or there are neighbors whose dogs bark incessantly.

Look at Zoning

You’re buying a house in what looks like a nice, residential neighborhood. Don’t assume that the neighborhood’s use can’t change – check out the zoning regulations. Also look at the history of the particular home. If the house doesn’t conform to current zoning, such as setbacks, it’s likely grandfathered in. Those regulations, however, can prevent you from making certain changes, including additions.

Is Everything Legal?

Homeowners don’t always follow the law when making renovations. For example, it’s not unusual for someone to turn the wet bar in their lanai – a legal use – into a “full” kitchen with the addition of a stove. That one appliance makes the setup illegal. If two “kitchens” were a factor in your buying the house, you’re out of luck when the appraiser or inspector discover the illegal use.
If the house sports a new kitchen, bathroom or addition, check with the municipality to ensure everything was done to code. Once you purchase the house, you’re responsible for ensuring the property is up to code. Not only is that potentially very costly, you could end up having to tear down illegal work and start from scratch.

The HOA

If you’re buying a house subject to a homeowner’s association (HOA) rules, you must know exactly what the HOA regulations entail. Decide whether or not you can live with any of the restrictions. For example, you don’t want to move in and find out that Fido is over the weight limit for dogs allowed in the development.

Think About Resale Value

Perhaps you got a great deal on the house because of some element that doesn’t appeal to many buyers, such as location on a busy road. It’s not an issue if you can deal with it and indeed to stay put for decades. However, we never know what the future brings, and you don’t want to commit to a house you will have a hard time selling or may have to take a loss on. With real estate, you always have to think with your head instead of just your heart.

Contact Us

If you’re looking to buy or sell a home you need a knowledgeable, experienced realtor. Contact Island Realty Group LLC at 808-689-7407 or IslandRealtyGroup@irghi.com.

Curb Appeal

Curb Appeal

You only get one chance to make a first impression, and that axiom applies to your house when potential buyers arrive. Curb appeal can mean the difference between love at first sight or the decision to bypass the house altogether. Enhancing curb appeal might mean a much faster sale, and possible multiple bids. Pretend you’re viewing your house for the first time and take a long, objective look at it. What do you see, and what do you want buyers to see?

Fresh and Clean

To appeal to buyers, your home must appear fresh and clean. If the house needs painting, invest the money and have it done. Power washing will rid your driveway and walkways of accumulated grunge. Get rid of any clutter on your porch or in your yard. Wash your windows and make them shine – they are the mirrors to the soul of your home. Repair or replace anything detracting from your house and yard, whether it is sagging gutters, broken fencing or cracked pavement.

Landscaping

In the tropics, landscaping easily becomes overgrown. Prune back excess growth, or remove some of the out-of-control bushes and replace them with flowering annuals. Put in fresh mulch, and add a border to clearly delineate the garden from the lawn.
The lawn should always look green and immaculate, not just trimmed but carefully edged. If your lawn needs work, contact a professional for advice ahead of time so your grass flourishes when the house is on the market.

Up on the Roof

The roof’s condition makes a major statement about the home’s overall shape. Put your roof in order prior to sale by replacing any missing or damaged shingles. Hire a professional to clean the roof so that it looks as well-maintained as the rest of the house.

The Mailbox

A run-of-the-mill mailbox doesn’t reflect well on your house. If you don’t want to install an upscale mailbox, make your current one stand out by planting flowers around it and giving it a coat of paint. Brass or architectural address numbers add a nice touch to your mailbox or house.

Driveway Enhancement

If your driveway is boring, give it a border for a more sophisticated look. In an upscale neighborhood, Belgian block is the top choice, but cement pavers along the edge complement any driveway.

Update Exterior Lights

Many buyers will likely visit your house after work, and the right exterior lighting can help make the sale. If your exterior lights need an update, replace them with fixtures and bulbs that accentuate your house’s best features. You also want to ensure that the entrance way, walkway and driveway are well-lit for safety purposes.

Welcome Home

Good curb appeal means your house welcomes visitors. Give the front door a fresh coat of paint and perhaps some new hardware, add some blooms in pots and put out an attractive new welcome mat. With the right curb appeal, a new owner will call your current house “home” in short order.

Contact Us

Your realtor can help you decide how to increase your home’s curb appeal. If you’re looking to buy or sell a home, contact Island Realty Group LLC at 808-689-7407 or IslandRealtyGroup@irghi.com.

October 13, 2017

The Cost of Living in Hawaii

The Cost of Living in Hawaii

Paradise does not come cheap. If you already live in Hawaii, you know that, but those moving here from the mainland or other parts of the world may experience some sticker shock. Keep in mind that virtually everything other than sunshine and lovely vistas requires shipping over long distances, so that adds to the cost of living in Hawaii. It is the most expensive place to live in the United States, but there are variables. It’s slightly cheaper to live in Honolulu than in New York City. While Hawaii celebrates its connection to the natural world, there’s little of that left in Manhattan outside of Central Park. Hawaii also attracts residents who move from places with even higher costs of living and less resemblance to paradise, such as Tokyo, Singapore and Sydney.

Hawaiian Real Estate

Will Rogers famously advised, “Buy land. They ain’t making any more of the stuff.” Hawaii’s high real estate prices derive from several factors, but there simply isn’t much buildable land available. The lack of supply drives up demand. As of 2017, the average single family home in Hawaii is $730K, and the average price for a condo is $390K. In many parts of the country, $390K will buy a nice single family home. That’s not the case here. Hawaiian rents are comparably high. However, careful environmental regulation means Hawaiians enjoy clean air and water and strict, safe zoning.

The Necessities

Expect to pay about 30 percent more for the necessities of life once you move to Hawaii – again, the most expensive in the U.S. Four rolls of toilet paper will set you back about $6, and filling up your gas tank costs more than anywhere else in the country. Electricity is pricey, and second only to Alaska. The majority of grocery products come from the mainland, which is why you might spend $7.50 for a gallon of milk or $5 for a loaf of bread. On the plus side, the luscious tropical fruits aren’t imported, and much of the coffee available is also grown in the state.

Low Unemployment

There’s an upside to this high prices. Hawaii’s unemployment rate is less than 3 percent, which means there are lots of jobs available. Because of the high cost of living, it’s not unusual for Hawaiians to work part-time in addition to their full-time jobs.

Free Beaches and Parks

Yes, you’ll pay more for restaurant meals and a night at the movies in Hawaii, but there’s also plenty of free entertainment, especially of the outdoor variety. There are lots of things to do without spending much money if you enjoy surfing, swimming, hiking and the other outdoor activities which draw people to the islands. Look at it this way. Hawaii is expensive, but its quality of life is unbeatable. It’s a premium people are willing to pay.

Contact Us
If you’re looking to buy or sell a home, contact Island Realty Group LLC at 808-689-7407 or IslandRealtyGroup@irghi.com.

September 15, 2017

How to Host a Successful Open House

How to Host a Successful Open House

An open house provides great exposure to buyers looking for a home in your neighborhood. Yes, you’ll have your share of curious neighbors or people whose Sunday rituals include visiting open houses, but there’s a good chance your dwelling’s next new owner will discover it in an open house. Your real estate agent handles the open house itself, but you’re still the host, even if behind the scenes or off the premises. You’re the one whose taste and décor is on display, even if you’ve made some changes for open house visitors.

Neat and Clean, But so Much More

Of course, your house must sparkle, but you want to create an entire ambience. Evoke a warm, homey feeling by baking cookies and letting the aroma linger. Place some lovely, fragrant plants strategically around the house. Put away the family photos – potential buyers want to imagine themselves living here, not the current occupants. Stage your home with that idea in mind. Anything controversial, whether it concerns political views or art not everyone appreciates, should go into temporary storage.

Closets and Drawers

Clean your closets and organize your drawers prior to your open house. Buyers will look in there to gauge space, and don’t want to come into contact with junk piled in there to make the rest of the home appear less cluttered. If you have to take half of your clothes and shoes out and put them in storage, that’s better than having them kill a possible sale.

Advertise Online and on Social Media

Gone are the days when potential homebuyers perused the Sunday papers to seek out open houses. Today, you want to showcase your open house via social media – with tons of photos and/or video – as well as appropriate internet listings. Yes, there’s an app for local open houses, so make sure your home is included.

Signs and More Signs

Your real estate agent will place appropriate signs around the neighborhood advertising your open house. Attach balloons to the sign in front of your house to let visitors know they’ve arrived at the right site.

Offer Food

People love free food. You don’t have to go overboard. Those freshly baked cookies along with coffee and tea and perhaps a cheese and veggie platter are sufficient. You want a home that says, “Welcome,” and nothing says welcome like snacks.

Make Yourself Scarce

This is often the toughest aspect of an open house for sellers, but it’s really a good idea. An open house usually doesn’t last more than a couple of hours, so go to the movies, enjoy a late brunch or spend time elsewhere with family and friends. If the owner is home, a potential buyer is reluctant to make any critical comments, and your real estate agent can answer most questions the person has. Fido and Fluffy should also go out for the afternoon, whether it’s a long walk for the former or staying with a friend or at a boarding spot for the latter.
The most successful open house results in an acceptable offer. Even if that doesn’t happen at your initial open house, word-of-mouth from an impressed visitor could send a buyer to your door.

Contact Us

If you’re looking to buy or sell a home, contact Island Realty Group LLC at 808-689-7407 or IslandRealtyGroup@irghi.com.