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How much home can I afford with rising interest rates?

Put your best foot forward when making an offer

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In today’s hot market, there are often stories of bidding wars and multiple offers.

For many, purchasing a home is a significant, exciting expenditure. It’s one of the biggest financial decisions many people make, and it’s one that is worth considering carefully. Often, in a market as competitive and fast-moving as the current one, homebuyers find themselves looking at potential homes and realizing that a highly competitive offer may be necessary. There are often stories of bidding wars and multiple offers being made on available homes in a matter of days. 

While that may not be the case forever, what will remain true is that most homebuyers want to put their best foot forward when making an offer. Most buyers want to find a home they love, that they can bid on competitively, and that they can afford if they end up being the chosen buyer. This begs the question – what type of offer is reasonable to make given your financial circumstances? How much home can you afford? These are important questions to ask.

A closer look at the calculations

Determining how much you can comfortably spend on the mortgage for a new home while still meeting all of your other existing financial obligations is an important calculation to make ahead of time. After all, purchasing a home is a decision that can significantly impact your financial situation, so you want to be sure that you’re fully informed and that you feel confident in the choice you make. 

Often, the rule of thumb where mortgages are concerned is that you can “afford” a mortgage that is around 2 to 2.5 times your income. A mortgage payment is typically made up of four primary components – principal, interest, taxes, and insurance. It is important to consider each of these components when determining the total amount of the mortgage, and what percentage of your annual gross income will go toward that payment. Often called the front-end ratio, or mortgage-to-income ratio, you’ll want to consider that percentage and usually seek to secure a mortgage payment that does not exceed roughly 28 to 30% of your annual gross income. Considering the numbers is only a part of the picture, however.

Looking beyond the numbers

Making this decision is not always strictly a matter of numbers and calculations. It also involves carefully considering your priorities and preferences and truly making a decision that you feel will give you the freedom to live in a home that you love and enjoy, while also continuing to maintain the lifestyle that you love. Determining how much house you can afford will depend on a variety of factors, including:

Your loan amount and the term of years over which your mortgage will last;

Your income;

Your total monthly expenses;

Any taxes you might be required to pay, property or otherwise;

Current mortgage rates and estimated closing costs;

Any homeowners’ association fees;

Any other relevant factors that you determine should be considered in consultation with a trusted agent. 

After considering all of these factors, be certain to keep in mind that it’s also important to be realistic as you make your decision about what you can comfortably afford. Don’t underestimate your monthly expenses. It may not be helpful to tell yourself that you’ll cut back on leisure spending if you don’t think you really will, or to underestimate what you might need in an emergency fund for unexpected events. Doing so can often leave you in a difficult spot where debt can accumulate quickly. If anything, it’s best to overestimate your expenses so that you have some breathing room in your budget. 

We’re here for you

Wherever you are in the real estate process – if you’re searching for the perfect home to buy, considering whether now is the time to sell, or anywhere in between – at GayRealEstate.com, we’re here for you. We are passionate about connecting LGBTQ buyers and sellers across the country with talented, experienced, and LGBTQ-friendly real estate agents who know and love the communities in which they live and are ready to help you calculate just how much home you can afford, and connect you with a top LGBTQ+ mortgage lender for prequalification. Having the right agent can make all the difference to your real estate experience, and we want it to be the very best it can be. If we can help you, visit us at GayRealEstate.com today to get connected and get started. 

Jeff Hammerberg is founding CEO of Hammerberg & Associates, Inc. Reach him at 303-378-5526 or [email protected]

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Real Estate

Finding your footing in fall housing market

Act quickly before winter arrives when selling

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Fall can be a good time to sell, but act fast before winter sets in.

Though it may not feel quite like fall weather quite yet in some parts of the country, as students return to school, we know that it means fall is right around the corner. Without question, fall is usually a wonderful season – it is the perfect time to enjoy beautiful weather, and plenty of festivals and fun. The return to school also means, for many, a return to routine – to getting organized and beginning again to check things off the to-do list after the lazy days of summer are over. 

You may have heard that housing inventory and activity is often lower in the fall than in the popular spring and summer seasons – and this is true. On the other side of the coin, however, fall buyers are often more serious about buying. They may be eager to buy quickly to get children enrolled in school, because of a job relocation, or due to a change in their family situation. Often, fall buyers are eager to find a home they love quickly, and to take action once they find it.

The good news is that if you plan to list your home for sale in the fall, there are a few tips and things you can add to your to-do list that will help you market your home in the best way possible and maximize your chances of a quick and successful sale. These include:

Act quickly: Depending upon the area of the country that you live in, beautiful, crisp, colorful fall weather might quickly give way to less desirable winter weather. It’s often far easier to sell a home in the fall than it is to sell in December, January, or February when bad weather might make traveling difficult, and potential buyers less likely to want to leave their homes. Once you’ve decided you’re ready to sell, it’s best to make every effort to list your home quickly to take advantage of good weather and buyers on the market.

Photograph the property as soon as possible: In many parts of the country, fall is a truly beautiful season of the year. Fall typically also offers plenty of beautiful, natural light. Take advantage of those ideal conditions by taking pictures of your property early. Don’t wait until the leaves begin to fall and the skies turn gray. Get your pictures early and use them to attract potential buyers to the unique beauty, both indoors and out, that can be enjoyed in your home.

Feature some fall curb appeal: You may not have spring flowers in the fall, but there’s abundant natural beauty to enjoy nevertheless. If you have falling leaves, make sure to regularly rake and bag them. Mow the lawn, perhaps add some new mulch, or consider adding some fall flowers. These steps don’t take long or cost much money, but they can go a long way toward catching the eye of potential buyers. 

Leave the lights on: In fall, the sun begins to set early. As a result, it’s important to keep your home as bright and inviting as possible. Clean your windows, open the curtains or blinds, and encourage as much natural light to come in as possible. If you have very dark paint colors, consider having a few rooms repainted to lighter shades. This will maximize light, and make your home appear more open and airy. Finally, if the showing is later in the day, be sure to leave plenty of lights on within the home. This will not only increase your curb appeal as potential buyers approach the home by making it look warm and inviting – it will also help buyers feel more comfortable inside your home as they envision themselves in that space. 

While these tips are intended to be helpful, it’s important to remember that one of the best steps you can take to truly increase your chances of a successful home sale is to hire a real estate agent who knows and loves the community and can help you truly tailor the marketing and pricing of your home to potential buyers in your area. Finding and connecting with an agent that can help you do exactly that is essential. At GayRealEstate.com, we’re here to help. 

At GayRealEstate.com, we aren’t just passionate about real estate. We’re passionate about real estate with a purpose. Our mission is to connect LGBTQ home buyers and sellers all over the country with knowledgeable, talented, and experienced LGBTQ-friendly realtors who know their communities well and are dedicated to helping clients every step of the way. Wherever you are in the real estate process, and whatever your goals, we’re here for you, and we’re ready to help. If you’re ready to get started, connect with us today. 

Jeff Hammerberg is founding CEO of Hammerberg & Associates, Inc. Reach him at 303-378-5526 or [email protected]l.com.

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Real Estate

5 tips for novice house flippers

Hire an architect, budget for overruns, and more

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Do your homework before entering the home flipping market.

If you still use Facebook, you know that there is a group for everything, from different breeds of dogs and cats to silly games that lead to data mining of your information for business or nefarious purposes, to groups that offer advice on certain medical issues, to everything real estate.

One of the Facebook groups in which I participate allows users to share do-it-yourself home improvement tips. It’s a bit like HGTV or the DIY network, with a dose of reality thrown in.

Simple topics might include improving curb appeal, selecting paint colors, installing flooring, replacing an electrical fixture, or changing a toilet. 

Sometimes contractors weigh in on more complicated work and even give an idea of how long a project might take and how much it might cost in a particular area of the country. 

It constantly surprises me how little people know about how their home works. I fault the seller’s market over the past years, where inspections are either short or non-existent, for much of that.

It used to be that an inspector would spend several hours with a buyer, going through the condition and operation of a home’s systems and fixtures, providing a written report, and even including a binder that outlined how to fix simple items or when to conduct general maintenance. 

The advent of the “walk and talk” inspection, conducted prior to making an offer, shortened that process. A buyer would have to take his own notes while the inspector was talking and pointing things out. Often, the buyer would go home with information in cryptic shorthand that made no sense a few weeks down the road.

Some people still fancy themselves as house flippers, intent on making a massive profit by making a few choice renovations and reselling a home. My Facebook group often brings out those who have the desire but lack the skills or funding. 

One person recently posted photographs of a house he was interested in renovating for profit. His first question was whether he could remove all the mold himself or whether he should hire a professional mold remediation company.

I looked at the photos and immediately thought of Tyvec suits, respirators, and those movies where CDC warns of a toxic environment that must be contained and the toxins eradicated — not my idea of a DIY project.

Another unrealistic aspect of this renovation was his cost estimate — $100,000 to cover mold remediation, a new roof, central air conditioning and heating and, of course, new electrical, plumbing, drywall, fixtures, cabinets, and appliances. Even with a price of $175,000 for the house and a potential value of $400,000 after renovations, the professional flippers told him he was living in La-La-Land.

Amateur flippers in the DMV have seen their options dry up in the past five years, as even distressed properties left in disrepair can sell for half a million dollars or more. Even the professionals are knocking on doors, sending postcards in desired neighborhoods, and calling or texting owners and real estate agents, looking for properties to fix and flip.

Still, if you are inclined to try rehabbing, even for your own home, here are my top five things to consider before diving in.

• Get to know what permits you will need and the process and timeline for obtaining them, or else you may face the dreaded orange Stop Work Order slapped on the home’s window.

• Find an architect and/or engineer to help with planning the layout. Remember, not every wall can come down to make an open concept floorplan without shoring it up in another approved manner.

• Learn about “hard money.” Unlike traditional home loans that are based on income, assets, and credit, these high-interest, short-term loans rely on the difference between what you pay for the house (“as is” value) and what the “as renovated” value is estimated to be upon resale.

• Consult with a real estate agent about popular features and finishes to help you sell the house quickly and get the highest price. Purchase those items locally to avoid supply chain delays.

• Budget for unexpected cost overruns of 10-15%. Even with an interest-only loan with no payments due until resale, you will still owe taxes and insurance and make periodic payments for materials and labor. Don’t forget to add commissions and closing fees on the purchase and sale.

Your first project may not result in the profit you anticipated, but it will give you a sense of whether it’s worth trying again or leaving renovations to the professionals.

Valerie M. Blake is a licensed Associate Broker in D.C., Maryland, and Virginia with RLAH Real Estate / @properties. Call or text her at 202-246-8602, email her via DCHomeQuest.com, or follow her on Facebook at TheRealst8ofAffairs

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Real Estate

Mortgage rates continue to drop while rent skyrockets

Start living for yourself and not your landlord

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Remember you can always refinance a high interest rate down the road.

There are several sayings that I keep in my “Realtor tool kit,” aside from those catty, snarky comments, I hold two true and use them on a daily basis: “Date the rate – marry the home” and “You’re paying a 100% interest rate when you rent.”

It’s pretty simple. As we have seen rates fluctuate as much as some of our waistlines — mine included. Let’s look at the housing market in terms that we all know and understand: DATING! 

It’s important to realize that we are NOT marrying the interest rate we purchase our home with, instead we are merely dating — for however long or short it may be. Here in D.C. it’s often short; can I get an amen? But in all seriousness, we see rates come and go up and down. We were spoiled with the unsustainably low rates for the past several years below 4% and now that rates are, frankly, where they should be, we are claiming the victim role. Today is still a great time to buy. The rates we are seeing today are still historically low when you think about it. We are lucky to live in an area such as the D.C. metro where demand is always strong and a change in party means more than a recession in regards to the housing market. Rates have continued to drop in the past few weeks. 

Aside from the current rate that you are paying, it’s important to realize that you are marrying the house and just simply dating the rate. You can refinance your interest rate whenever you want. Trade that baby in for a new model with a lower rate. You are, however, married to the home that you decide to purchase. If you are currently in the market and see a home that you absolutely love — or in my case is like 80% okay because we all know that you are the arm candy here and hold up the relationship — or I mean the house has a dishwasher and central AC, then buy it. You can always refinance later to a lower rate.

Looking at the second saying in my bedazzled sparkling Realtor tool kit we have the saying “You’re paying a 100% interest rate when you rent,” which is for sure factual. You are paying someone else’s mortgage and as such that interest rate is 100%. Don’t get me wrong, when I first moved to D.C. from quaint Bethany Beach, Del., I rented as I was unsure of what neighborhood I wanted to call home. But once I got my bearings I stopped paying 100% interest and helping pad the landlord’s pockets and started living for myself, my future, and married the house. I would encourage everyone that is reading this and who is currently in a rental to speak to a mortgage broker – see what you can afford and if it makes sense for you to buy — I bet it will. In most cases, it is less expensive to buy than it is to rent in cities, including in D.C. Not only is it less expensive, but there are several grant and down payment assistance programs available to district residents to help with making homeownership a reality for you.

Start living for yourself, not your landlord, and always remember to date the rate and marry the home.

Justin Noble is a Realtor with Sotheby’s International Realty licensed in D.C., Maryland, and Delaware for your DMV and Delaware Beach needs. Specializing in first-time homebuyers, development and new construction as well as estate sales, Justin is a well-versed agent, highly regarded, and provides white glove service at every price point. Reach him at 202-503-4243, [email protected] or BurnsandNoble.com.

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