Will 2021 Be the Best Year to Buy a Home?
Few would argue that 2020 has been one of the most unusual years in recent memory. Much of the world shut down as public health agencies attempted to stop the spread of the novel coronavirus. Additionally, many governments provided economic stimulus to their citizens as an incentive to stay home. In addition to direct cash payments, the United States government also provided eviction and foreclosure relief through the end of 2020. This helped to keep the housing market afloat for much of the year. However, 2021 might see a much different housing market. For those who are prepared, the next year might provide a great opportunity to get into a new home.
Low-Interest Rates When COVID-19 started its rampage across the globe, one of the first steps the Federal Reserve took was a​ ​quick interest rate cut​. Two weeks later, an emergency meeting of the Fed led to another cut. Effectively, governmental borrowing rates in the US have been near 0% since March. This means that borrowing money is cheap. While the interest rate set by the Federal Reserve is not the only factor that impacts mortgage rates, there is a strong correlation. As 2020 moved into summer and fall, mortgage rates for 30-year loans dropped to records
below 3%. Those who are in the market for a house should be able to snag these low-interest rates as long as they are in good financial shape.
Upcoming Foreclosures Because the economic stimulus package provided rent and mortgage forbearance and increased unemployment benefits, many who would have lost their homes during previous economic downturns have protection through the end of 2020. Those who are unable to pay their mortgages or rent after December 31 will be subject to eviction or foreclosure after that date. An increase in foreclosures would likely drive prices down in communities that experience economic distress. With foreclosures on the market at a discounted price, those who are ready to buy a home could find many opportunities with extremely low borrowing costs. While no one wants to see economic recessions and the dislocation they cause, those who are prepared to purchase a home could find some good deals in 2021. Such low rates combined with a soft market come around very rarely. Those who buy assets like homes near the bottom of the market can also benefit from future appreciation. This means that 2021 could be a great year to buy a home.
What Buyers Can Negotiate in Their Home Sale
Purchasing a home involves more than simply a mortgage and an offering price. Buyers have the power to negotiate repairs, appliances, and even cold, hard cash as part of the closing offer. Every real estate market has different standards, so buyers need to understand their area’s rules.
Appliances First-time homeowners moving from an apartment may not have their own refrigerator or washing machine. Appliances can easily be included in the negotiations. Buyers benefit by having one less major purchase on their to-do list, and sellers often don’t want to deal with the hassle of moving large appliances out of the home.
Cash at Closing Buying a home requires an up-front investment. Between the down payment, home inspection fees, and purchases of new furniture or home repairs, buyers may find themselves with limited cash at hand. According to Forbes.com, one of the most common areas of negotiation is cash at
closing. Sellers can give several thousand dollars directly to buyers as part of the closing process. Sometimes, cash at closing is provided in exchange for not making certain repairs, with the understanding that the cash will be used for the buyer to hire contractors. For older homes that need lots of love, sellers may prefer to simply give cash to the buyer instead of dealing with a mountain of repairs.
Insurance, Taxes, and Warranties To sweeten a deal, a seller may be willing to pay for the home’s taxes or future insurance premiums. Because the seller can make monthly or quarterly payments, this option may be more attractive than cash at closing. However, this option is rarely available in a seller’s market and may be off-putting to a seller, so buyers should take care before asking for this item.
Expensive or Exotic Items A seller might offer original artwork commissioned for the property or want to include custom lighting or furniture pieces. Buyers may not value these items as highly as sellers, so it may be worth trying to haggle down the price increase. According to Entrepeneur.com, the best way to negotiate on a home purchase is with an experienced agent. With a strong negotiating ability, almost anything can be included as part of buying a home.
Ways to Furnish Your New Home
After purchasing a home, people should take the time to furnish the entire place. While furnishing the new place​, financial planning lessons will come in handy. The main question should be how the furniture bill will be footed. Below are suitable furniture payment options:
Cash Paying for the furniture using savings or taking time to save the money needed to acquire such items. By taking this route, people can avoid debts. While buying furniture using cash, consider purchasing it over a prolonged period. Dedicate a percentage of the monthly paycheck each month to ensure the budget will not bring about financial straining. Always come up with a list of items that are needed, then purchase everything depending on priorities.
Pros ● ●
No debts. No interest or fees.
Cons ● ● ● ●
No reward programs. It’ll take time to save up. The credit score is not impacted. It’s impossible to furnish the entire house at once.
Personal Loan With a personal loan, homeowners get a large sum of money at once. Such an option ensures homeowners can purchase all the furniture they need at a go. They can pay back the personal loan progressively. As a homeowner, come up with a suitable payment plan depending on the amount of money you need. The only issue with a personal loan is the fees and interest, which means people have to part with a larger amount of cash. The credit score also determines the amount of money a person qualifies for with a personal loan. As for personal loans, numerous online lenders are ready to assist as long as their credit scores are good. After applying for the loan, the lenders can transfer the money within a business day.
Pros ● ● ● ●
Online lenders ensure the process is convenient and accessible. Homeowners can furnish the entire house at once. Ability to access high loan amounts. By making timely payments, the credit score improves.
Cons ● ●
A poor credit score will make it hard to get a personal loan. Paying more because of the fee and interest rates.
Conclusion Besides opting for cash or personal loans, there are furniture stores that offer financing options. The only issue is when a person is looking for different furniture pieces, which means they cannot access everything from one store. In such an instance, people can’t take advantage of better deals that might be offered by other stores.
Refinance Options Hit New Low in November 2020
Record-low interest rates have combined with a record-high housing demand to create a seller's market that many have only envisioned. States that have a higher cost of living are seeing higher savings, but homeowners across the nation can benefit from this financial boon.
Record Low Rates Freddie Mac's record low of 2.72 percent for a 30-year fixed mortgage has caused a record volume of high-quality mortgage refinances. Those who took advantage of record-low rates saved an average of more than 300 dollars each month. November's​ ​drop in mortgage rates​ set a record for the 13th time in 2020. Homeowners who hadn't previously taken advantage of the drop in interest rates may be able to save even more on their monthly mortgage since rates are continuing to drop. Almost 5 million borrowers could save more than 400 dollars monthly, and almost 3 million could save more than 500 dollars monthly.
The Trend
Experts are optimistic about the trend continuing for the foreseeable future and recommend that those who have higher-interest mortgages consider their refinance options. Although refinancing requires a considerable amount of paperwork, the rewards of lower interest and paying off the mortgage balance sooner can outweigh the inconvenience of the paperwork that's required for a straight refinance. Those interested in a cash-out refinance can benefit as well due to the record-high demand for housing, which has occurred due to the pandemic. According to Standard & Poor's Case Shiller National Home Price Index, housing prices had grown​ ​7 percent​ according to their annual adjustment in September. Even though homeowners need to retain a minimum of 20 percent equity in their homes, they can still benefit from near record-high equity levels.
Location, Location, Location By state, California has the most homeowners who could benefit from refinancing, followed by Florida, Texas, and New York. By city, homeowners in metropolitan New York City have the highest potential for savings, followed by Los Angeles, Chicago, and Washington, D.C.
Getting Started Those who aren't currently homeowners but would like to take advantage of the record-low rates may be able to do so even if they lack copious amounts of cash. Crowd-funding is a popular method for investing in commercial buildings. Many companies offer investments for potential landlords. REITs, or real estate investment trusts, provide an excellent entry strategy into commercial and residential real estate markets. No matter your choice, this is an ideal time to take advantage of the current low-interest rates for real estate.
A 401(k) May Not Be Enough For Retirement
Retirement planning is a complicated business. Generations ago, many workers entered retirement with a pension paid by their longtime employer. Later,​ ​401(k) accounts​ emerged. These, too, are provided by employers. 401(k)s provide workers with a tax-advantaged way to save for retirement. With a 401(k), people have more control over how much they save and how it's invested. Most people deposit about 10% of their earnings into their 401(k). Often, their employers also provide a company match. Some profit-sharing plans also involve 401(k)s. There are limits to how much a worker can invest during each year. As people get nearer and nearer to retirement age, they're able to invest more in their 401(k). These accounts are a wonderful instrument for saving. They can grow a great deal over time. For people who start a 401(k) upon entering the workforce at 20 or 22, it's possible to build a sizable nest egg. But due to limits on contributions imposed by the IRS and other phenomena like inflation, a single 401(k) account is unlikely to be enough to retire on. Another issue is the costs associated with 401(k)s, including management fees and, eventually, taxes. 401(k)s are tax-deferred. That means workers avoid taxes on the funds they deposit at the time they deposit them. But at withdrawal, 401(k)s are taxed. The tax rate can change over
the years. Depending on who's in power politically, workers may pay more taxes than they would have when depositing into their accounts. Some people work during their retirement in order to make up the shortfall from their 401(k). Others start a Roth IRA in addition to their 401(k). IRA stands for Individual Retirement Account. Deposits into a Roth IRA are taxed at the time they're made. Upon withdrawal, they are tax-free. Roth IRAs also allow people to make withdrawals at any time with no tax penalty. That's not the case for 401(k)s. In some ways, Roth IRAs use the opposite structure of a 401(k). IRAs are available through financial providers like banks and brokerages. Even apps like Acorns offer IRA options for their users.
Important Things To Do Before Moving Into Your New Home
Buying a new home is a significant undertaking and is considered a major life event. While there are many things to be excited about, there are also many things involved in the purchase of a home that can be quite stressful. That is why ​it is essential to have proper planning​ before buying a home and moving to ensure things go smoothly.
Understanding the Home's Mechanical Systems A house has several major mechanical systems. These include the plumbing, electricity, HVAC system, the structure, and the appliances. Each of these has its own benefits, potential problems, and proper ways of operating. Understanding each one, how they work, and their current condition is vital to ensuring their proper care and upkeep.
Getting Utilities Turned On
Before moving into your new home, it is important to know what utilities have to be turned on in the home or may be in need of refilling. People who are buying homes with HVAC systems and water heaters running on oil or propane gas should find out how much fuel they have in their tanks to ensure they have enough to run the things they need. Homebuyers who have natural gas in their new home will need to contact the natural gas company that services the home area to have their gas turned on before moving in. When it comes to electrical utilities, getting the electricity up and running is simple and just requires a phone call to the local electric company for the area to get it turned on.
Proper Packing Is Essential It is essential to make sure all the items being moved are correctly packed. Failure to do this can result in the damage of furnishing and personal belongings. Items that can be of particular concern include breakables, electronics, and furniture. Items that are not properly packed can be readily damaged in a move and be a hazard to movers.
Have the Home Inspected for Pests and Potential Hazards Houses are a big attraction for insects and other invasive creatures. Because they are a warm and safe place away from the elements, they are inclined to be harbingers of insects and small animals if proper protections and safeguards are not in place. While some pests are not harmful, some can cause health risks and damage to the home. That is why having the home inspected before you move is essential to ensure the only inhabitants in your new home is you.