From Dennis and Jane Guertin | Guertin Family Realty | (952) 442-1300 |
Recent economic news has been good and the housing market is going strong. Here's an update with interest rate predictions for 2015, along with some tips on how to keep surprises from derailing a home sale transaction.
By the way, if you or anyone you know has a real estate need, please contact us today. We'll always provide first-class service!
Dennis and Jane Guertin
(952) 442-1300 Direct

Interest Rate Update and Home Sale Surprises

2015 Interest Rate Update

A strong May 2015 jobs report fueled predictions that
the Federal Reserve may raise interest rates in September or October, according to Washington MarketWatch. While unemployment ticked up slightly from 5.4 to 5.5 percent, this was attributed to more job-seekers entering the labor force in response to favorable hiring conditions.

Interest rates are now in the very low 4 percent range, up from the high 3 percent range very recently. The Mortgage Bankers Association predicted in May that we would see rates closer to 4.5 percent by the end of this year, and in the 5 percent range by the third quarter of 2016.

How does a half-point interest rate hike affect home buyers?

Here's an example using a zero down payment, meaning the loan amount equals the purchase price.

1. A home buyer with $1,500 a month to spend, expecting to purchase a home with taxes and insurance of $2,500 and $700 a year, respectively.

2. A home buyer with $4,000 a month to spend, expecting to purchase a home with taxes and insurance of $6,000 and $1,500 a year, respectively.

In this scenario, when interest rates rise from 4.0 to 4.5 percent, the loan amount each buyer qualifies for drops by around 5.8 percent.

Surprises that Cause Home Sales to Fail

- The buyer applies for new credit after being pre-approved for a home loan.

This might seem like an obvious thing to not do, but it still happens! Whether you're the seller or just friends with either party, it may be a good idea to find out if someone has made sure the buyer knows this is a bad idea.

- The appraiser can't count an unpermitted addition.

Depending on lender guidelines, home sellers might get an unpleasant surprise when the appraiser comes back with a low valuation because several hundred square feet of an unpermitted addition can't be counted as finished floor space.

Tip: If the addition's square footage does not show up on the tax records, this is a sign it may not have been permitted.

- The buyer works with a "credit cleaner" after loan pre-approval.

Credit cleaning services can help repair your credit, but sometimes during this process things get a little worse before they get better. Well-intentioned buyers who work with a credit cleaner and then decide to change lenders during the closing process may find out they no longer qualify because their credit score has dropped.

Common Home Buyer Loan Mistakes

- Waiting to save extra cash while interest rates rise significantly.

In the 4 to 5 percent interest rate range, each additional $10,000 of down payment reduces the monthly principal and interest payment by around $50. It's worth considering whether an increase in interest rates during the time it will take to save the $10,000 is likely to cancel out the savings resulting from the larger down payment.

- Depleting cash reserves by paying off too much debt.

Wait... paying off debt is always good from a lender's standpoint, right? It's understandable to think so, but lenders also need to know that buyers have cash reserves on hand. Paying off a $3,000 credit card may leave some buyers with reserves that are too low for them to qualify for a loan, while in the end the cash outlay reduced their monthly debt burden by just $40 a month. It's always wise to check with a good mortgage professional before making any big decisions in this area.

The bottom line: It's not all bad! :) Most loans close successfully, and even when interest rates go up to 5 percent (which is not likely to happen very soon) they will still be extremely low by historical standards. As always, having good information and knowing about potential pitfalls are the best ways to ensure a successful home sale or purchase.

Handy Home Gadget: The Citronella "Bark Collar" for Dogs

Summer is a season for enjoying open windows and relaxation outside, but this can become impossible when a neighbor's dog is a chronic barker. Unfortunately, many dog owners realize they have a problem but just don't know how to resolve it.

Enter the Citronella Bark Collar, a noise-activated bark-deterrent that sprays a jet of liquid citronella past the dog's nose every time it barks. The combination of the strong smell and the sound of the spray is startling enough to prevent most dogs from barking consistently.

While it may not work on the most hard-core cases, or on dogs that are in fast motion at the time they are sprayed (in that situation it may take the form of a refreshing mist), for the majority of dogs this is an excellent and painless solution. And, for around $50 on, it is probably less expensive than psychotherapy or legal fees.

(What the lawyers make us say: The information in this newsletter is deemed reliable but not guaranteed. Please always consult a qualified expert before making decisions based on this content. Nothing in this article is meant to be taken as expert legal or financial advice.)

Recent Market Highlights

- U.S. home prices rose 4.1 percent year-to-year in March, according to a recent S&P/Case-Shiller report . They rose 6.8 percent year-to-year in April, according to CoreLogic, a data and analytics company.

- The national average 30-year fixed mortgage rate is in the 4 to 4.25 percent range.

The April Pending Home Sales Index rose 14.0 percent year-to-year, according to the National Association of Realtors ®.

Contact Us for Market Information
Are you curious about your home's current market value, or do you have a question about home buying? Just reply to this email, or call us at 952-442-1300.
View Our Featured Home Listings
Links that Make Life Easier

Sometimes real estate-related, sometimes not... these are assorted links that come in handy:

No Phone Trees
Speak to a real person instead of a voice menu when you call customer service.

SmartyPig Savings Tool
SmartyPig makes it easy to save up for specific goals. Users have the option to share goals on social networks for added incentive and help from others.

Summer Dessert Recipes
Desserts from the AllRecipes website that look as though they would be good in any season.

2015 Tile Trends
Current trend picks from Arizona Tile. You can see that patterns are in this year, however a fabric or textured look might have more long-term staying power.

Keep Me Out
This online tool helps you stay away from time-wasting websites.

The Lighter Side

In this hilarious voice-over by comedian Chris Cohen, a Bengal cat gives an unsuspecting Weimaraner a secretive hypnotherapy session. (This needs to be watched with the sound on.)

Click here or on the image to watch the video.

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Please give us a call today at (952) 442-1300 if we can be of assistance!
Have a great day,

Dennis and Jane Guertin
Broker/Owner, REALTOR®, CRS, SFR, CBR, e-PRO, GRI
Guertin Family Realty

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