April 24th, 2014
This week, we’ll look at 4 Must-Do’s before buying a home, answer the question if staging really raises a home price, cities where real estate investments are booming, and why renting out your home may help you buy that next house.
As we’ve mentioned in prior posts, 2014 saw the start of requiring more documentation to obtain a home loan in part to the Frank-Dodd act. Getting a home loan with tighter credit restrictions in today’s home loan market can be more difficult, but it’s a lot easier if you’re prepared financially.
In a nutshell, yes, but it’s not as big of a factor as one may think. It’s important to do your research and understand what staging may mean for the price of the house.
A study surveyed 820 homebuyers, walking them through a series of six virtual tours of a single home. Each tour focused on either wall color or furnishings, which are two of the most popular staging elements, according to study co-author Michael Seiler, professor of real estate and finance at the College of William and Mary.
As it turned out, neither wall color nor furnishings made much of an impact on the potential sale price. According to the study, buyers were willing to pay the same price, about $204,000, regardless of how the property was staged.
However, the study found that staging does give buyers a more favorable impression of the home’s livability, something Michael Seiler believes may help the property sell faster. He says the study might not be applicable to all price points and locations.
Investors are draining out of formerly foreclosure-torn cities like Phoenix and Las Vegas, but that doesn’t mean they’re abandoning real estate altogether. Instead they’re relocating to areas with a median home price of $195,000 or less, says RealtyTrac’s Daren Blomquist. But once the buying starts to pick up, don’t expect prices to stay that low.
Real estate investors tend to avoid new homes because they’re looking for wiggle-room in the price, and builders often won’t negotiate. So if you’re looking for a home in the same price range, you may want to look into new homes so you’re not competing with the investors.
One of the biggest obstacles home buyers will face is being able to show enough income to offset their debts. There is a little-known lending guideline that allows you to show more income. You can turn your current home into a rental property and document regular income with the rent. This increases your income and allows you to be eligible for additional loans.
You will need to show that you have at least 30% equity in your current home before you can turn it into a rental property.
Talk with a reputable mortgage professional to understand how your income, equity, and debt work together and what kind of mortgage on another house you could be eligible for.