Karp Residential

Real Estate Q&A

I’m happy to have Brian Jessen, Senior Vice President of Mortgage Lending at Guaranteed Rate, Inc., join me for this Q&A.

Question from Jody S: I heard that the limit for conforming mortgages in the Highland Park area was increased recently.  What does that mean?

Brian’s Answer:  A “conforming loan” is a mortgage with terms and conditions that meet the criteria of Fannie Mae and Freddie Mac (government-sponsored entities that insure mortgages issued by lenders).  These are fixed rate loans that typically have LOWER interest rates than other mortgages.

The Federal Housing Finance Agency (which oversees Fannie and Freddie) recently announced that it will raise loan limits for mortgages backed by Fannie Mae and Freddie Mac, giving some homebuyers greater purchasing power. In other words, you can borrow more at a super competitive rate. Starting in 2021, the maximum conforming loan limit will increase to $548,250 – a 7.4% increase from the 2020 current limit of $510,400.  Mortgage loan limits for multi-unit buildings (2-4 unit properties) are even higher.

Any loan amount above the conforming limit is considered a jumbo mortgage loan, which generally has more stringent requirements and tends to carry higher interest rates.

The exact conforming loan limit varies geographically. It will increase to $548,250 throughout most of the country including Illinois - for more information about your local market, contact Brian:  brian@rate.com. 

Question from Michele R:  Is Highland Park experiencing a seller’s market right now?  What are the implications for buyers or sellers?

Nancy’s answer:  Yes, Highland Park and Highwood are experiencing a seller’s market.  This means that there aren’t enough homes on the market to satisfy the number of buyers.  The number of homes available for sale this past year was down dramatically versus the past several years because many homeowners decided put off plans to sell their homes due to COVID.  Meanwhile, demand is strong because of historically low mortgage interest rates (well below 3% in many cases) and a desire for many young city dwellers to move to the suburbs.  Additionally, Highland Park has been particularly appealing because we just went through several years with flat or declining prices. 

In a seller’s market we see more multiple offer situations, especially on homes that are in move-in condition.  Sellers need to be prepared for this, which includes preparing a strong negotiation strategy, AND a plan for moving out quickly.  For buyers, it means that it may take longer to find what you want, and you may be competing with other buyers.  Buyers should be prepared with a mortgage pre-approval or proof of funds.  You should also be mentally prepared for some disappointments along the way. And, just like the sellers, you need to have a negotiation plan.    

Do you have a real estate or mortgage question you’d like answered?  Email me and we’ll address your question in an upcoming blog post:  nancy@nancykarp.com.

This article originally appeared in Highland Park Neighbors magazine.

The Do's and Don'ts after Applying for a Mortgage

Once you’ve found the right home and applied for a mortgage, there are some key things to keep in mind before you close. You're undoubtedly excited about the opportunity to decorate your new place.  But before you make any large purchases, move your money around, or make any major life changes, do consult your lender – someone who is qualified to tell you how your financial decisions may impact your home loan.

Below is a list of things you shouldn’t do after applying for a mortgage. They’re all important to know – or simply just good reminders – for the process.

1. Don’t Deposit Cash into Your Bank Accounts Before Speaking with Your Bank or Lender. Lenders need to source your money, and cash is not easily traceable. Before you deposit any amount of cash into your accounts, discuss the proper way to document your transactions with your loan officer.
2. Don’t Make Any Large Purchases Like a New Car or Furniture for Your New Home. New debt comes with new monthly obligations. New obligations create new qualifications. People with new debt have higher debt-to-income ratios. Higher ratios make for riskier loans, and then sometimes qualified borrowers no longer qualify.
3. Don’t Co-Sign Other Loans for Anyone. When you co-sign, you’re obligated. With that obligation comes higher ratios as well. Even if you promise you won’t be the one making the payments, your lender will have to count the payments against you.
4. Don’t Change Bank Accounts. Remember, lenders need to source and track your assets. That task is significantly easier when there’s consistency among your accounts. Before you transfer any money, speak with your loan officer.
5. Don’t Apply for New Credit. It doesn’t matter whether it’s a new credit card or a new car. When you have your credit report run by organizations in multiple financial channels (mortgage, credit card, auto, etc.), your FICO® score will be impacted. Lower credit scores can determine your interest rate and maybe even your eligibility for approval.
6. Don’t Close Any Credit Accounts. Many buyers believe having less available credit makes them less risky and more likely to be approved. Wrong. A major component of your score is your length and depth of credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both of those determinants of your score.

Bottom Line

Any blip in income, assets, or credit should be reviewed and executed in a way that ensures your home loan can still be approved. If your job or employment status has changed recently, share that with your lender as well. The best plan is to fully disclose and discuss your intentions with your loan officer before you do anything financial in nature.

Adapted from Keeping Current Matters.

Key Terms to Know When You are Buying a Home

Buying a home can be intimidating if you’re not familiar with the terms used throughout the process. To point you in the right direction, here’s a list of some of the most common language you’ll hear along the way.

Appraisal:  This is a professional analysis used to estimate the value of a home.  Getting an appraisal is a required step in validating a home's worth to you and your lender when you are getting a mortgage.  If you are purchasing with cash, an appraisal is optional.

Closing Costs:  This refers to all of the fees required to complete the real estate transaction and are paid at closing. As a buyer, most of your costs will be related to your mortgage.  But you will also pay your attorney (required in Illinois), title insurance, homeowner's insurance (this is just your first payment - your lender will require that you have continuous homeowner's insurance as part of the terms of your mortgage), local transfer taxes if any (this depends on the municipality), and recording fees (this puts information into the public record that you are the new owner of the property).

Credit Score:  Your credit score is a number ranging from 300 - 850 that's based on an analysis of your credit history.  This helps lenders determine the likelihood that you will repay future debts.

Down Payment:  When buying a house, usually the buyer pays a portion of the purchase price with cash and takes out a mortgage for the rest.  Down payments are typically 3% - 20% of the purchase price.  There are some programs that allow you to purchase with 0% down payment that may be available to you, depending on your situation.  Ask your lender for more information.

Home Inspection:  It is the responsibility of the buyer to hire an independent 3rd party (licensed by the State of Illinois) to perform a detailed inspection of the property.  Some optional services that you can include are radon testing, thermal imaging (to look for heat loss and plumbing leaks, for example), and a video of the sewer line.

Mortgage:  A loan that is specifically for purchasing a home is called a mortgage.  If you are a veteran (having served in the military), or a first-time home buyer, you may be able to get special terms for your mortgage.  Be sure to ask your lender if you qualify for any of these programs.

Mortgage Rate:  The interest rate you pay to borrow money when buying a home is your mortgage rate.  The lower the rate, the better.  Note that interest rates right now are at historically low levels.

Pre-Approval Letter:  Once your lender has checked your credit score and verified other key information, they can provide a pre-approval letter indicating that you qualify for a mortgage of a specific amount.  This is a critical step in today's competitive market.  Many sellers won't consider your offer unless you have a pre-approval letter.  This is much better than a pre-qualification letter, which is just based on what you've told the lender, without any verification.

Real Estate Professional:  Real estate professionals are licensed by the state to buy, sell or rent real estate.  They will help you understand and work through the confusing paperwork, find your dream home, negotiate any of the details that come up, and provide you with information so you know exactly what's going on in the housing market.

Real Estate Agent/Broker/Realtor® - what's the difference?  In Illinois if you have a professional real estate license you are a Real Estate Broker or a Residential Leasing Agent.  Real Estate Brokers help people buy, sell or rent residential real property. They act as an intermediary between sellers and buyers and help draw up the necessary legal paperwork to complete transactions.  A Residential Leasing Agent works with property owners to market and show their residential properties and attract good tenants.  Some people may refer to these professionals as “agents” but in Illinois that term is not a recognized licensed designation.

A REALTOR® is a real estate broker who belongs to their local and state association of realtors in addition to belonging to the National Association of REALTORS® (NAR).  The term REALTOR® is a registered collective membership mark that identifies a real estate professional who is a member of the NAR and subscribes to its strict Code of Ethics.  

To maintain your license in Illinois, you must regularly take and pass rigorous continuing education classes which cover new real estate legislation,  fair housing laws and practices, the NAR code of ethics and much more.

I am a broker and a REALTOR® and my business is based on relationships and trust.  I would love to help you find your dream home.  Please reach out to me with any questions.

Your House May Be High on the Buyer Wish List This Holiday Season

Around this time each year, many homeowners decide to wait until after the holidays to sell their houses. Similarly, others who already have their homes on the market remove their listings until the spring. Let’s unpack the top reasons why selling your house now, or keeping it on the market this season, is the best choice you can make. This year, buyers want to purchase homes for the holidays, and your house might be the perfect match.

Here are seven great reasons not to wait to sell your house this holiday season:

1. Buyers are active now. Mortgage rates are historically low, providing motivation for those who are ready to get more for their money over the life of their home loan.

2. Purchasers who look for homes during the holidays are serious ones, and they’re ready to buy.

3. You can restrict the showings in your house to days and times that are most convenient for you, or even select virtual options. You’ll remain in control, especially in today’s sellers’ market.

4. Homes decorated for the holidays appeal to many buyers.

5. Today, there’s minimal competition for you as a seller. There just aren’t enough houses on the market to satisfy buyer demand, meaning sellers are in the driver’s seat. Over the past year, inventory has declined to record lows, making it the opportune time to sell your house.

6. The desire to own a home doesn’t stop during the holidays. Buyers who have been searching throughout the fall and have been running into more and more bidding wars are still on the lookout. Your home may be the answer.

7. This season is the sweet spot for sellers, and the number of listings will increase after the holidays. In many parts of the country, more new construction will also be available for sale in 2021, which will lessen the demand for your house next year.

Bottom Line 

More than ever, this may be the year it makes the most sense to list your house during the holiday season. Let’s connect today to determine if selling now is your best move.

Winter Will Bring a Flurry of Activity to the Housing Market

In the second half of this year, the housing market surged with activity. Today, real estate experts are looking ahead to the winter season and the forecast is anything but chilly. As Lawrence Yun, Chief Economist for the National Association of Realtors (NAR), notes:

“It will be one of the best winter sales years ever.”

The typical winter slowdown in the housing market is simply not on the radar. Here’s why.

Mortgage Rates Remain Low

While today’s historically low mortgage rates are expected to remain low, they won’t be this low for much longer. This could be the last chance for homebuyers to secure such low rates, and they’re ready to take action. In a recent article, Bankrate explained:

“If you’re looking to buy a home…expect mortgage rates to remain low into 2021. However, the possibility of rates falling to 2.5 percent or lower has faded as the U.S. economy has rebounded.”

As long as we continue to see low interest rates, we’ll see hopeful buyers on the hunt for their dream homes. Yun confirmed:

“The demand for home buying remains super strong…And we’re still likely to end the year with more homes sold overall in 2020 than in 2019…With persistent low mortgage rates and some degree of a continuing jobs recovery, more contract signings are expected in the near future.”

Should Sellers Wait for Spring?

The challenge, however, is the lack of homes available for sale. With that in mind, all eyes are on homeowners to see if they’ll sell this winter or wait until spring. Danielle Hale, Chief Economist for realtor.com, says it’s best for sellers to capitalize on this moment sooner rather than later:

“We currently see buyers sticking around in the housing market much later than we usually do this fall. If that trend continues, we will see more buyers in the market this winter, too. So, this winter is likely to be a good time to sell.”

With buyers ready to stay active this winter, sellers who want to close a deal on the best possible terms shouldn't wait until spring to put their homes on the market.

Bottom Line

Experts agree the winter housing market could potentially be bigger than ever. Whether you’re ready to buy or sell, let’s connect today so you can be in your dream home by the new year.

The #1 Reason Not to Wait to Sell Your Home

Many industries have been devastated by the economic shutdown caused by the COVID-19 virus. Real estate is not one of them.

Mark Fleming, Chief Economist for First American, just reported:

“Since hitting a low point during the initial stages of the pandemic, the only major industry to display immunity to the economic impacts of the coronavirus is the housing market. Housing has experienced a strong V-shaped recovery and is now exceeding pre-pandemic levels.”

Buyer demand is still strong heading into the fall. ShowingTime, which tracks the average number of buyer showings on residential properties, just announced that buyer showings are up 61.9% compared to the same time last year. They went on to say:

“Normally, real estate activity begins to slow down in the late summer, but this year it peaked in July, August and into September.”

There Is One Big Challenge

Purchaser demand is so high, the market is running out of available homes for sale. Just last week, realtor.com reported:

“Since the beginning of the COVID pandemic in March, nearly 400,000 fewer homes have been listed compared to last year, leaving a gaping hole in the U.S. housing inventory.”

The National Association of Realtors (NAR) revealed that, while home sales are skyrocketing, the inventory of existing homes for sale is dropping dramatically. Below is a graph of existing inventory (September numbers are not yet available):

Homebuilders are increasing construction, but they cannot keep up with the high demand. Bill McBride, founder of the Calculated Risk blog, in discussing inventory of newly constructed houses, notes:

“The months of supply decreased to 3.3 months…This is the all-time record low months of supply.”

What does this mean for sellers?

Anyone thinking of putting their home on the market should not wait. A seller will always negotiate the best deal when demand is high and supply is limited. That’s exactly the situation in the real estate market today.

Next year, when the pandemic is hopefully behind us, there will be many more properties coming to the market. Don’t wait for that increase in competition in your neighborhood. Now is the time to sell.

Bottom Line

Let’s connect today to get your house on the market at this optimal time to sell.

Fresh Air and Fall Colors on the North Shore

Check out these picturesque places on the North Shore where you can get some exercise and fresh air and enjoy the beautiful fall colors. 

Openlands Lakeshore Preserve (Highland Park, near Highwood/Lake Forest).   A beautiful place with unique landscapes formed over the centuries by the Great Lakes and glaciers.  Starting Oct. 19^th the beach will be closed for at least three weeks, but two blufftop trails will remain open to pedestrians.  https://www.openlands.org/

Skokie Lagoons (Forest Preserves of Cook County, Glencoe/Winnetka) A prime destination for water exploration, featuring public boat access, canoe and kayak rentals, fishing, biking and hiking trails, and picnic areas. https://fpdcc.com/places/locations/skokie-lagoons/

Chicago Botanic Garden (Glencoe)  One of the world’s great living museums and conservation science centers. Pre-register for timed entry for parking; walk in or bike in for free.   https://www.chicagobotanic.org/ 

North Branch Trail System (Forest Preserves of Cook County.  Foster Ave. in Chicago to Dundee Road in Glencoe.) A premier biking route in the northern suburbs, featuring paved and unpaved trails along approximately 20 miles of the North Branch of the Chicago River.  https://fpdcc.com/places/trails/north-branch-trail-system/

Buffalo Creek (Lake County Forest Preserves, Long Grove)  A quiet place to relax with nature, including 5.5 miles of crushed-gravel trails that are open for hiking, biking, and cross country skiing. https://www.lcfpd.org/buffalo-creek/   

Prairie Wolf Slough (Lake County Forest Preserves, Deerfield)  This preserve features a 20-acre wetland, wet prairie and adjacent oak woodlands, a trail for hiking, biking and cross country skiing and a self-guided nature trail.   https://www.lcfpd.org/prairie-wolf/

Heller Nature Center  (Park District of Highland Park)   While the Heller building is closed, the trails are open for walking and running.  https://www.pdhp.org/heller-nature-center/

Green Bay Trail  (Wilmette to Highland Park)  The 9-mile trail runs parallel to Chicago’s Metra commuter rail line through the North Shore.  https://www.enjoyillinois.com/explore/listing/green-bay-trail

Middlefork Savanna (Lake County Forest Preserves, Lake Forest)  Home to a rare tallgrass savanna; a 25-acre parcel here is considered the highest quality tallgrass savanna of its kind in the nation.  The gravel trail is open for hiking, biking and cross country skiing.  https://www.lcfpd.org/middlefork-savanna/  

The Grove  (Glenview Park District)  The area’s most unique outdoor history and nature museum, where you can walk the winding nature trails.  https://www.glenviewparks.org/thegrove/

Is it Time to Move into a Single Story House?

Once the kids have left the nest, you may be wondering what to do with all of the extra space in your home. Chances are, you don’t need four bedrooms anymore, and it may be a great time to sell your house and downsize, maybe even into a single-story home. You’ve likely gained significant equity if you’ve lived in your home for a while, so making a move while demand for your current house is high could be your best step forward toward the retirement goals you set out to achieve several years ago.

The dilemma, though, is where to go next. A big concern for many homeowners who are ready to sell is finding a home to move into, given today’s lack of houses available for sale. There is, however, some good news: the number of single-family 1-story homes being built today is on the rise, improving your odds of finding the right home for your changing needs. In a recent article, The National Association of Home Builders (NAHB) explains:

“Nationwide, the share of new homes with two or more stories fell from 53% in 2018 to 52% in 2019, while the share of new homes with one story grew from 47% to 48%.”

Here’s a map showing the breakdown of newly constructed homes being built by region, and the percentage of 1-story and 2-story homes in that mix:

 

What are the benefits of buying a 1-story home?

Still not sure about buying a single-story home? An article from Home Talk covers several advantages of switching from two floors to one:

1. Energy Efficient

“It is easier to heat and cool a single-story house [than] it would be to regulate the temperatures of a multi-story house.”

Most single-story homes only need one heating or cooling unit, and they typically stay cooler than a two-story home, both of which can lead to significant savings.

2. Easier to Maintain

“Doing a general cleaning in a single story requires less effort and you will be able to see all areas that need cleaning and the areas are easily accessible.”

Cleaning and maintenance of a single-story home can take less time and effort, and better upkeep helps improve the overall value of the home.

3. Accessible for Everyone

“A single-story house can be accessed by anyone, whether they are young children or the senior citizens.”

If you’re looking for a house that provides a safe and easily accessible environment at any age, a single-story home may be optimal.

4. Good Resell Potential

“When buying a single-story house, you should consider the resale value should you think of reselling it in case of a circumstance that can happen. Look at the growth rate of that area. Due to the high demand of these types of houses it is [easy] to resell them and depending on the growth rate of an area, it increases in value significantly.”

Single-story homes have a lot of benefits and are often in higher demand. This bodes well for future resale opportunities.

Bottom Line

There are many benefits to downsizing into a one-story home. Doing so while demand for your current house is high might make it easier than ever to make a move. Let’s connect if you’re ready to purchase the single-story home you need while homes are so affordable today.

Why Selling This Fall May be Your Best Move

If you’re thinking about moving, selling your house this fall might be the way to go. Here are four highlights in the housing market that may make your decision to sell this fall an easy one.

1.  Buyers Are Actively in the Market

ShowingTime, a leading real estate showing software and market stat service provider, just reported that buyer traffic jumped 60.7% compared to this time last year. That’s a huge increase.

It’s clear that buyers are ready, willing, and able to purchase – and they’re in the market right now. In many regions of the country, multiple buyers are entering bidding wars to compete for the home they want. Take advantage of the buyer activity currently in the market so you can sell your house in the most favorable terms.

2.  There Are Not Enough Homes for Sale

In the latest Existing Home Sales Report, the National Association of Realtors (NAR) announced that there were only 1.49 million units available for sale. That number was down 18.6% from one year ago. This means in the majority of the country, there aren’t enough homes for sale to satisfy the number of buyers.

Due to the health crisis, many homeowners were reluctant to list their homes earlier this year. That will change as the economy continues to recover. The choices buyers have will increase going into the new year. Don’t wait until additional sellers come to market before you decide to make a move.

3.  The Process Is Going Quickly

Today’s ultra-competitive environment has forced buyers to do all they can to stand out from the crowd, including getting pre-approved for their mortgage financing. This makes the entire selling process much faster and simpler, as buyers know exactly what they can afford before shopping for a home. According to the latest Origination Insights Report from Ellie Mae, the time needed to close a loan is just 49 days.

4.  There May Never Be a More Important Time to Move

You’ve likely spent much of the last six months in your current home. Perhaps you now realize how small it is, and you need more space. If you’re working from home, your children are doing virtual school, or you just need more space, your current floor plan may not work for your family’s changing needs.

Homebuilders are beginning to build houses again, so you can choose the exact floor plan to match what your family needs, and you can make sure the outdoor space is what you want too.

Bottom Line

The housing market is prime for sellers right now, so let’s connect to get the process started this fall. If the timing is right for you and your family, the market is calling your name.

The Cost of a Home is Far More Important than the Price

Housing inventory is at an all-time low. There are 39% fewer homes for sale today than at this time last year, and buyer demand continues to set records. Zillow recently reported:

“Newly pending sales are up 25.5% compared to the same week last year, the highest year-over-year increase in the weekly Zillow database.”

Whenever there is a shortage in supply of an item that’s in high demand, the price of that item increases. That’s exactly what’s happening in the real estate market right now. CoreLogic’s latest Home Price Index reports that values have increased by 5.5% over the last year.

This is great news if you’re planning to sell your house; on the other hand, as either a first-time or repeat buyer, this may instead seem like troubling news. However, purchasers should realize that the price of a house is not as important as the cost. Let’s break it down.

There are several factors that influence the cost of a home. The two major ones are the price of the home and the interest rate at which a buyer can borrow the funds necessary to purchase the home.

Last week, Freddie Mac announced that the average interest rate for a 30-year fixed-rate mortgage was 2.87%. At this time last year, the rate was 3.73%. Let’s use an example to see how that difference impacts the true cost of a home.

Assume you purchased a home last year and took out a $250,000 mortgage. As mentioned above, home values have increased by 5.5% over the last year. To buy that same home this year, you would need to take out a mortgage of $263,750.

How will your monthly mortgage payment change based on today’s lower mortgage rate?

This table calculates the difference in your monthly payment:That’s a savings of $61 monthly, which adds up to $732 annually and $21,960 over the life of the loan.

Bottom Line

Even though home values have appreciated, it’s a great time to buy a home because mortgage rates are at historic lows.