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What You Need to Buy a House in 2020

A Home For Sale

What to Expect for the Housing Market in 2020

You are about to embark on one of the most amazing and rewarding experiences that can ever come from spending money: buying a home. If you are trying to figure out where to start as a first-time homebuyer buying a home in 2020, you should know that the entire process is not quick, but when all is said and done, there are few things more exhilarating than buying a house.

Every year the U.S. housing market is different. While the economy expands and contracts, the housing market reacts, producing buyers and sellers markets. If you’re planning on buying a house in 2020, it’s important to understand what the market is doing now and how it’s expected to perform over the course of the year. Luckily, Redfin chief economist Daryl Fairweather gives us her keen insights into what the housing industry is doing in 2020.

“With every new release of data this year, I’m becoming more and more confident that demand will be strong in 2020—just as strong as, if not stronger than, in 2018 and 2017. The big question for the housing market this year is supply. Will homeowners sit on the sidelines, content with their refinanced loans, or will they want to get in on the action too and move up, move down, or cash out entirely? New construction is beginning to pick up though, so even without new listings of existing homes there will be some relief for homebuyers hoping for more selection. However, due to the high cost of acquiring and developing land in expensive coastal cities, much of that new construction will be built far away from urban centers or in already affordable metros.”

If you’re looking to buy this year, follow these guidelines to help equip you with what you need to buy a house in 2020.

1. Check Your Credit Score

Before applying for a loan and certainly before ever making an offer on a house, you should know your credit score. Why is your credit score important? Well, it’s not only the difference between getting a low-interest rate on a home loan versus a high one, but it will also directly impact how much a bank or lender will loan you. There are several websites you can use to check your credit score, here are a few to consider: TransUnion, Equifax, Experian.

You can check your score as much as once a day without affecting your credit, also known as a soft inquiry. Hard inquiries are when financial institutions check your credit, typically when you’re applying for a loan or credit card. Hard inquiries lower your score a few points, so try to keep hard inquiries to a minimum.

2. Improve Your Credit Score

Maybe you just checked your credit score and realized it’s not as high as you had expected. Don’t worry, there are a few things you can do now that will help raise your credit score so you can capitalize on a great interest rate.

Pay your bills on time

If you tend to be late on a bill here or there, what you might not know is that you’re negatively impacting your credit. Start paying your bills on time, now. Set up automatic payments for your bills or set reminders, just make sure you can meet the due dates for all your bills going forward. Establishing a history of paying your bills on time is paramount in raising your credit score.

Pay down the debt on your credit cards

One of the biggest contributing factors to your credit score is something called credit utilization ratio. This ratio is determined by taking your average expenditures on all your credit cards each month and dividing it by your total credit limit. Lenders want to make sure you’re not close to maxing out your credit cards and prefer to see a credit utilization ratio of 30% or less.

Don’t apply for new lines of credit or close old ones

Opening new lines of credit is not going to help you increase your score and in many ways can do the opposite. Applying for new credit cards produce unneeded hard inquiries into your credit history, which also negatively affects your credit. Closing unused credit cards can also have negative consequences as this also shows that you’re limiting the credit available to you, which increases your credit utilization ratio.

Have a credit report company dispute inaccuracies for you

After you get your credit report, you may notice several inaccuracies that can be dragging your credit score down. The good news is that you can dispute these errors and a professional can easily get them wiped from your credit report so your credit score can bounce back.

3. Know What You Can Afford

The best way to determine for the first time how much house you can afford is to simply use an affordability calculator. Though calculators such as these do not necessarily account for all of your monthly expenditures, they certainly are a great tool for understanding your larger financial situation. As a first-time homebuyer, if you want to get a better estimate you could get pre-qualified where the bank will give you a guess at how much you could borrow.

After you figure out what you can comfortably afford, you can then start online window shopping for houses and begin to narrow down what you want in a house versus what you can afford. Are you looking at specific neighborhoods? How many bedrooms do you want? Do you need a large yard, big deck, swimming pool, man cave, she shed, etc?

Understanding what you can afford in the area you want to buy will help keep you grounded and focused on what you want in a house versus what might be nice to have.

Keys to a New Home

4. Save Up For a Down Payment

Unless you want to pay Private Mortgage Insurance (PMI), you want to save up for a sizable down payment. PMI is an added insurance charged by mortgage lenders to protect themselves in case you default on your loan payments. The biggest problem with PMIs for homeowners is that they usually cost you hundreds of dollars each month. Money that is not going against the principal of your mortgage.

How much should you save for a single-family home? Twenty percent down is typical for most mortgages to avoid paying for PMI. However, there are other types of home loans, such as FHA-backed loan, Conventional & a VA loan if you have served in the military and qualify, that may allow you to put down less than twenty percent while avoiding PMIs altogether.

As an added benefit to having a sizable down payment, you may also receive a lower rate that will save you tens of thousands of dollars in interest over time. So start saving now!

5. Build Up Your Savings

Banks like to see a healthy savings account and other investments or assets (i.e. 401k, CDs, after-tax investments) that you can tap into during hard times. What they want to see is that you are not living paycheck to paycheck. A healthy savings account and other investments are a good idea in general as it will help you establish your future financial independence, but it is also a necessary item on your checklist of what you need to buy a house in 2020.

6. Have a Healthy Debt-to-Income Ratio (DTI)

Another key component banks consider when issuing loans, is your debt-to-income ratio. The debt-to-income ratio is a lender’s way of comparing your monthly housing expenses and other debts with how much you earn.

So what is a healthy debt-to-income ratio when applying for a home loan? The short answer is the lower the better, but definitely, no more than 43% or you may not even qualify for a loan at all. There are two DTIs to consider as well.

The Front-End DTI: This DTI typically includes housing-related expenses such as mortgage payments and insurance. You want to shoot for a front-end DTI of 28%.

The Back-End DTI: This DTI includes all other debts you may have, such as credit cards or car loans. You want a back-end DTI of 36% or less. A simple way to improve this DTI is to pay down your debts to creditors.

How do you calculate your DTI ratio? You can use this equation for both front-end and back-end DTIs:

DTI = total debt / gross income

7. Budget for Extra Costs

There are a lot of little costs that go into buying a house for the first time that are often overlooked by new home buyers all the time. Though there are some things, such as sales tax and home insurance, that can be wrapped into a home loan and monthly mortgage, there are several little things that cannot be included in the home-buying package and need to be paid for out of pocket.

Though these items can range in price depending on the area, size and cost of the house you’re buying here is a list of extra costs you should consider (not all-inclusive):

  • Home Appraisal Fee
  • Home Inspection Fee
  • Geological study
  • Closing costs*
  • Property taxes**
  • Home insurance
  • **Utility hookup/start fees
  • HOA fees
  • Home remodeling/updating
  • Existing propane gas

*Closing costs can sometimes be wrapped into the home loan, depending on the agreement with your lender.

**Property taxes and home insurance can be paid separately or your lender could include it into your monthly mortgage payment.

A Man With a Credit Card

8. Don’t Close Old Credit Card Accounts Or Apply for New Ones

Closing a credit card account will not raise your credit score. In fact, in some cases, it may lower it. Instead, try to pay down the balance as much as you can, while continuing to make your monthly payments on time. If you have an old credit card you never use anymore, just ignore it, or at least don’t close it until after you have purchased your new home.

Opening new credit cards before buying a home is also not a good idea. You don’t want creditors checking your credit or opening new cards under your name, as you may lose some points on your score.

The absolute worst thing you can do is max out one of your credit cards, even if the limit on the card is low. If you do, your score may plummet. Try tackling your credit cards by paying on the ones with the highest interest rate first, then as one gets paid off, focus on the next card until you’re free and clear.

9. Solid Employment History

If you haven’t gotten the picture yet, banks like consistency, including your employment history. Banks like to see a borrower with the same employer for about two years.

What if you have a job with an irregular or inconsistent pay schedule? People with jobs such as contract positions, who are self-employed, or have irregular work schedules can still qualify for a home loan. A mortgage known as a ‘Bank Statement’ mortgage is becoming rapidly popular as more self-employed or what has been referred to as the ‘gig economy’ has taken off.

10. Know the Difference Between a Fixed Rate and an Adjustable Rate Mortgage

The difference between these two types of mortgage rates lies within their names. A fixed-rate loan is exactly that, an interest rate that will never change the moment it’s locked in. You will pay the same amount the very first month you pay your home loan and will continue to pay that same amount over thirty years (or however long the loan term is).

An adjustable-rate mortgage (ARM) is typically a mortgage that starts at a lower rate than fixed interest rates but then is adjusted each year typically resulting in a rate higher than a fixed-rate. A 5-1 ARM is a popular mortgage offered by lenders, which is a hybrid between fixed and adjustable-rate mortgages. Your mortgage would start at a lower fixed-rate for the first five years, then after that time has elapsed, the rate would then be adjusted on an annual basis for the remainder of the loan term.

11. Follow Interest Rates

It is important to know what interest rates are doing. The big question is are they on the rise or are they falling?

When the economy is good the Federal Reserve typically raises the interest rate to slow down economic growth to control inflation and rising costs. When the economy is in the dumps the Fed does the exact opposite. They lower the interest rate to entice more people to make larger purchases that require loans (i.e. land, cars, and houses) to help stimulate the economy.

As new soon-to-be homeowners, it’s a good idea to know how the overall economy is doing, and more importantly, how it’s impacting the rates you’ll soon be applying for. Why are small hikes in interest rates so important to you? To put it into perspective, even a one percent increase in your rate on a home loan is the difference of paying or saving tens of thousands of dollars in interest payments on your home loan over time.

12. Understand How Much Time it Takes to Buy a House

First-time homebuyers don’t often know how long it takes to become a homeowner. The process from start to finish is time-consuming and very relative to individual circumstances and the housing market in your area. However, there are some general universal constants that you can expect, such as a cash offer on a house is usually much quicker than a traditional loan, and if there is a perfect house in a good neighborhood and at a great price, you better expect competition and added time for a seller to review offers.

Depending on the housing market in your area and possibly which season you’re buying in, it can take you a couple of weeks to find a home or more than a year. But after you find your home you can typically expect the entire process from making an offer on a house to walking in its front door, to be as little as a few weeks to a couple of months on average.

13. Find a Knowledgeable Real Estate Agent

There are several ways to find a knowledgeable real estate agent. Many people rely on recommendations from friends and family, while others look to online reviews. While both of these scenarios work well and can land you a great real estate agent, the reason these agents rise above the others as the best of the best or the crème de la crème is because of their intentions.

A good agent isn’t trying to get you into a house as quickly as possible so they can earn a commission. Instead, you want an agent that will act as your guide through the home buying process, while having your best interests in mind. A good agent will be able to tell you straight if they think a house is a good fit for you, or if you should keep looking. They should also be expert negotiators so that you get the best deal possible.

14. Find a Mortgage Lender

There are a few things to keep in mind when researching a good mortgage lender. The first thing that comes to most people’s minds is what mortgage rate can they get. You may have to shop around to find the best rate because lower the rate the more money you save.

Secondly, how does that mortgage rate compared to other lenders? By looking at positive and negative online reviews you can usually establish a theme pretty quickly of the strengths and weaknesses of the lender, and what you can expect for a level of service down the road.

Ask the lender what their average length of time is to close on a house after the offer has been accepted? A good mortgage versus a bad one can be the difference of moving into your new home two to four weeks earlier. You want to find out how streamlined their processes are.

Finally, figure out what type of loan is right for you. Should you go with an FHA loan, which is a government-backed loan, conventional or VA loan. Each situation is different, so it’s best to ask and have a game plan.

15. Get Pre-approved

When being approved by a mortgage lender, you should be aware that there is a small but relevant difference between the typical fast preapproval for a home loan versus an underwritten pre-approval.

The fast pre-approval usually encompasses a credit report and a loan officer review and can be done in less than a couple of hours. This basic pre-approval allows you to quickly know how much you can afford and then make an offer on a house that may have just come on the market.

The underwritten pre-approval usually takes about twenty-four hours and includes a credit report, loan officer review, underwriter review, and a compliance/fraud review. Though this process takes longer, your offer on a house is stronger. Eventually, if you’re planning on buying a house, you will have to go through the underwritten pre-approval process anyway, so it’s better to jump on it from the start.

16. Research Neighborhoods or Areas You Want to Live

There are many variables to think about when researching your future residence. The key to beginning your research is to determine those variables most important to you. Are you looking for a good school district, a large single-family home, a fixer-upper, convenience to commuter options, a specific neighborhood that is extremely friendly and ranks high on Walk Score, or simply homes for sale in Sacramento?

Your real estate agent will most likely tell you to figure out your list of the things you want in a house versus the extra features that you would like to have, but wouldn’t deter you from a house if it wasn’t there.

Your list will help your agent narrow down the number of houses they’ll show you, saving you time by only showing you houses you’d be interested in.

17. Shop For Your Home and Make an Offer

Now that you know where you want to live and you’re pre-approved, the fun begins. You get to look at houses! Once you find the house you know would be a great fit for you and your family, you’ll want to make an offer.

There are numerous variables to consider and hopefully, your knowledgeable real estate agent will help you through this process. Understanding the condition of the US housing market, how houses have been selling in the neighborhoods you’re looking into and at what price (above or below asking), and knowing if there are often other competing offers will help you assess and determine how you’d like to make your offer when the time comes.

Negotiating an offer on a house can be emotionally taxing, so do your research and rely on your agent’s advice so you come to the table prepared.

18. Get a Home Inspection

Congratulations are in order! The sellers have accepted your offer. Now you want to get the home inspected to make sure there are no underlying issues that could cost you money down the road, such as a bad roof or foundation. Usually, a home inspection is a contingency built into the initial offer, and your real estate agent can help you set this up. However, it is recommended to hire an inspector that is certified by a national organization (such as ASHI or Inter-NACHI). Though you can waive this contingency if you’re trying to make your offer more competitive in a hot market. Just be aware that if you do waive a home inspection contingency, you may be taking on considerable risk.

There are several types of home inspections, but in general, a typical home inspection involves a certified inspector that will go in, around, under, and top of your house looking for anything that could be of concern, such as structural or mechanical issues. The inspector would also look for safety issues related to the property. Though they will go into crawl spaces and attics as part of their inspection, they will not open walls. They will inspect the plumbing and electrical systems and should point out any defect in the property that could cost money down the road for the homeowner.

Then they will put their findings into a nice written report for you with pictures, which then basically becomes a miniature instruction manual for your house. No house is perfect, but the report will give you a great snapshot of the property at the time of the inspection. If there are fixes that need to be addressed, this report will certainly let you know.

You should also know that the sellers are not required to make any repairs to the property. However, you can request them through your agent, which will let you know what repairs are reasonable or not.

If you are looking for a reliable home inspector in Fort Worth, TX, you can always count on CKA Home Inspections LLC. We offer a full range of home inspection services. Find out how we can help by calling (817) 437-2397.

19. Have the Home Appraised

Home appraisals are an important part of the process because oftentimes house prices can quickly skyrocket when the housing market is hot, and banks do not like to loan out more money than what a home is worth. A home appraiser will not only tell you what the home is worth for the area and the current housing market, but this appraisal will also directly affect the size of the loan the bank will give you.

If the home appraisal comes back and states that the house is worth $300,000, but you made an offer of $310,000, the bank will most likely only lend you $300k. You will then either be stuck with paying the additional $10k out of pocket, or you may try to renegotiate the price with the sellers to see if they would be willing to come down. Or you may lose the house altogether.

Also, the mortgage lender will usually set up the home appraisal so you can take this time to focus on other homeownership tasks that need to be finished up.

A Man Signing Closing Papers on a Home.

20. Close the Sale and Sign The Papers

Congratulations, you’re a homeowner! Your real estate agent should help you map out the last details, such as when and where you should sign all the papers to take ownership of the house and, of course, the handing over of the keys. Welcome to your new home.

Originally published on Redfin

Learn more about buying a house or home inspection in Fort Worth, TX by calling CKA Home Inspections LLC at (817) 437-2397.

How Do You Get Termites in Your House?

Termites In A Nest.

What is the first sign of termites?

When termites enter home the first sign of a termite infestation is flying termites. These flying termites, also called swarmers or alates, are the males and females that have left a nest in search of a mate to establish a new colony. You may see them swarming at night around light sources, and most drywood species you see swarming. Spotting these flying insects is just one of the signs of termites in homes. Learn more about how to spot termites in the home by checking for the following signs of termites:

  • Seeing blisters in the wood flooring: If you’re noticing what appears to be blisters in wood flooring, this could mean termites are feeding within it or below. Subterranean termite species damage the subfloor in a way that makes wood floors appear water damaged.
  • Seeing hollowed or damaged wood: Damage to wood behind walls is evidence of a termite infestation. You’ll notice long grooves in the wood that weaken the wood. The wood may also appear hollowed or honeycombed.
  • Finding discarded wings or other evidence of swarms: Once termites land, they twist off their wings, because they have found a place to establish a new colony. You may find these wings near windows, doors, and other access points.
  • Finding mud tubes: In areas where the ground meets the house, you may find pencil-sized mud tubes, indicating subterranean termites have begun nesting underground.
  • Noticing droppings: Drywood termites leave droppings that look like sawdust or coffee grounds.

If you suspect you may have termites, or want to find out if a property you are buying may be infested, give CKA Home Inspections LLC a call at (817) 437-2397 for a termite inspection

While some damage caused by termites might look like water damage, when you have actual water damage, you’ll need to hire a restoration service to clean and restore your property.

Where do termites live?

In the U.S. three termite species, subterranean. Formosan subterranean, and drywood, are the primary species that cause damage to homes and property in the area. Both the subterranean and Formosan species build their nests underground access wood through pencil-sized tunnels called mud tubes. These tubes are signs of termites in homes. These species require soil to survive. Drywood termites, on the other hand, can survive anywhere wood is available as a food source. You can find them in the walls, in the wood framing in bathrooms, and even in furniture.  

What do you do if you have termites?

If you’ve noticed signs of termites in homes like mud tubes or hollowed wood, or they’ve been found through a termite inspection, the termites can be removed. The earlier they’ve been discovered, the better, because they’re likely to have caused less damage than a long-term infestation. Usually, once you’ve found termites, you’ll need to get in touch with a pest control service to get rid of them. 

Once your home has been treated for termites, and any repairs have been made, you can prevent their return through various means. By taking precautionary measures like trimming shrubbery away from the house and foundation and limiting mulch around the home, you can help prevent their return. You also want to keep firewood away from the base of the home, and make sure any moisture buildup or airflow problems are taken care of as soon as possible. Even with these preventative measures in place, always stay alert to the signs of termites in homes.

Can you treat for termites yourself?

If you already have an infestation, it’s usually best to enlist the services of pest control to remove the infestation. Preventative measures such as trimming back shrubbery can be taken as well. You may also apply termite control pesticides to infested areas, or around the base of the building as a preventative measure. There are also termite baits available that can be placed in the soil around the home to lure the insects out to kill them.

What kills termites naturally?

There are methods to kill termites naturally without using liquid pesticides or baits. Some natural methods include using nematodes, vinegar, borates or borax powder, orange oil or wet cardboard.

Nematodes are parasitic worms that eat termites.They can bought online or at specialty stores and placed in areas where the termites are or where you believe them to be. You can spray a mixture of half a cup of vinegar mixed with the juice of two lemons where the termites are. This mixture kills the termites on contact. Borax, which you can buy as a laundry detergent, can be sprinkled around the affected area, or mixed with water and sprayed on the area. 

Orange oil, which can be bought at home improvement stores, can be sprayed directly on the termites to dissolve their exoskeletons. Regularly spraying orange oil around the home serves as a deterrent to infestation.

Wet cardboard can be placed near an infestation to draw the termites out. They will begin eating the cardboard. As they feast, you can burn the cardboard to kill them. This process will need to be repeated. 

A Technician Inspects a Termite Infestation.

Termites in house for sale

Signs of termites in homes can be discouraging for homebuyers. If termites are found in a house for sale, it can be a deal breaker. When you see signs of termites in home in Fort Worth, TX, give CKA Home Inspections LLC a call at (817) 437-2397 for a termite inspection.

What’s Involved in an Attic Inspection?

Checking for adequate insulation is a key part of an attic inspection.

Get a Complete Picture with Attic Inspection

As one of the last steps of the home buying process, you’ll need to have a home inspection. This inspection reveals any flaws and defects that will need attention before the closing papers are signed. One area home buyers should consider when getting a home inspection is an attic inspection. An attic inspection will give you a much more complete picture of the home’s condition.

When an attic inspection is performed, the inspector is primarily concerned with these five areas:

  • Insulation
  • Framing
  • Ventilation
  • Presence of pests

Insulation

Because insulation is exposed in the attic, this is the best place to evaluate the insulation. Good insulation is important to your home’s energy efficiency, helping it stay warm in the winter and cool in the summer. Without proper insulation, you can end up losing out on your energy bills. Insulation can reveal other things too, like signs of water damage or pest insulation.

With an attic inspection, you’ll know whether the insulation is adequate or if more needs to be added or if it needs to be replaced.

Framework

The attic is also the best place to get a picture of the condition of your home’s framework overall, and a better idea of the condition your roof is in. With an attic inspection, it’s especially good to find out if supporting trusses or rafters have any damage like stress cracks. It’s in the attic where an inspector can better tell if leaks are present, especially if there is sunlight shining through the roof. Dark or scorched rafters could indicate the home was damaged by a fire at some point. If furnaces are located in the attic the inspect can check for any damage or potential problems.

Ventilation

When a home has adequate ventilation it will remove moisture and heat from the home. Poor ventilation can lead to problems like heat build up in the attic, which can cause the air conditioner to run longer on hot summer days. When there is severe winter weather in the winter with ice and snow, a poor ventilation can cause icicles to form in the attic. Any kind of moisture build up in the attic or elsewhere can pose all sorts of problems from mold and mildew growth to leaks.

If you have a fireplace, make sure the inspector checks the chimney when inside the attic. Though the interior of the chimney can’t be checked in the attic, the chimney can can still show signs of wear and aging, such as cracks in the bricks or crumbling mortar.

Presence of pests

If during an attic inspection the inspector spots droppings or sees signs of nesting, the home has an animal or pest problem. From squirrels to raccoons, possums, mice and rats, animal of all types often get inside through the eaves or loose boards and take up residence in the attic. Any animals nesting in the attic can cause considerable damage. They can gnaw through insulation or chew up wiring, putting the home at risk of fire. Other pests such as termites can wreak havoc to wood. If there are signs of termites in the attic, a termite inspection throughout the house may be in order.

Make sure the attic is accessible for an attic inspection.

Accessibility

Of course, if you want to have an attic inspection, the attic needs to be readily accessible. An attic inspection may be something the buyer will have to negotiate with the seller. It’s advisable to get an attic inspection to catch any problems like those outlined above.

Attic inspections are just one service CKA Home Inspections LLC offers as part of a home inspection in Fort Worth, TX and surrounding cities. We also offer crawl space inspections, as well as termite inspections and pool inspections. We take home inspections seriously and always want to provide our clients with as complete and accurate of a report as possible. An attic inspection can help give you that complete picture.

If you are selling your home and want to make sure buyers get no surprises later on, you may want to consider a pre-listing inspection before you go to market. We can provide an attic inspection with your pre-listing inspection as well.

No matter what kind of inspection you receive from CKA Home Inspections LLC, we will provide you with a detailed, easy to read report, along with photos of trouble spots to help you assess problems and address them accordingly. We make sure to keep you updated and informed throughout the whole process. You can also expect a 24-hour turnaround on the inspection report.

Call Today to Make an Appointment

When you’re home buyer about to close on a home, make sure your home inspection includes an attic inspection for a complete picture of the condition of the home you’re buying. CKA Home Inspections LLC provides a comprehensive range of services including home inspections in Fort Worth, TX. To schedule an appointment with us call (817) 437-2397.