What You Need to Know About the Fair Housing Act
As moving season winds down, we would like to take a moment to review one of the most important real estate laws in existence. The Fair Housing Act, landmark legislation that passed 50 years ago, is an essential part of renting and buying real estate in the United States. If you searched for a new home this summer, you likely saw the Equal Housing Opportunity logo on a landlord’s, real estate agent’s, or lender’s paperwork. This federal law, however, is more than just a logo.
Also known as the Civil Rights Act of 1968, the Fair Housing Act was signed into law by President Lyndon B. Johnson just days after the assassination of Martin Luther King Jr. The act itself prohibits housing discrimination based on race, color, religion, national origin, sex, disability, and familiar status. At the time when the act was signed, overt housing discrimination was a massive problem throughout the country. The segregation of whole neighbors and the outright rejection of qualified renters based on race made several parts of the country inaccessible to people of color.
Though the act passed, discrimination in the housing market continues to be an unfortunate reality. According to the National Fair Housing Alliance, over 25,000 housing discrimination complaints were filed in 2017. Over half of the complaints were based on disability, while around 20 percent were based on race. However, these numbers reflect only the reported incidents. The NFHA estimates that over 4 million instances of housing discrimination occur annually.
So, what does housing discrimination look like? Here are a few examples of discrimination people in protected classes have encountered.
- A real estate agent tries to “steer” a buyer away from a certain neighborhood
- A landlord tries to avoid renting to someone by saying the unit has been rented
- A property management company refuses to rent to a family with children
- A landlord evicts a person of color for a reason they wouldn’t evict a white tenant for
- A landlord refuses to make reasonable accommodations for a tenant who is disabled.
If you have been discriminated against, you can take action by filing a complaint with the Department of Housing and Urban Development. You can also file a complaint with local housing resources, which can be found through the NFHA.
Pay Off the Mortgage Before Retirement?
Until recently, financial planners advocated for staving off retirement until individuals were able to pay off their mortgages. However, the tide is turning, and that same conclusion may not be the best choice for all individuals. Most experts will tell you to extinguish the mortgage before you retire, as you will be on a fixed income with reduced cash flow. The logic behind this is that you’ll need to budget harder to ensure you have cash available for essential living expenses. Additionally, you’ll likely need to pay for additional Medicare as you age. Additionally, some people fear losing their homes due to the inability to keep up with mortgage payments. This is the last thing a retired person will want to deal with.
However, times are changing, and many homeowners are carrying mortgage debt well into their 70s and 80s. In the 1980s and 1990s, it was common to pay off a mortgage in full before retirement. However, many people can’t afford to pay off the entire mortgage before they reach retirement age, often pushing retirement off in order to continue making mortgage payments.
This reality has created a trend shift. Fewer than half of all Baby Boomers are mortgage-free in retirement. A recent survey from American Financing found that 44% of 60- to 70-year-old homeowners will retire while still holding a mortgage. Additionally, with rising mortgage rates, future generations of homeowners will be facing the same problem. Increased household debt and the prevalence of low-down payment mortgages will continue to push payments well into retirement.
If you’ve reached retirement age and still have a few years left on your mortgage, you should not rush the repayment process. This could result in a lack of resources down the line, which can be dangerous in retirement. Additionally, many current homeowners have relatively low mortgage rates, meaning monthly payments may not be a huge burden in retirement. Putting money into an illiquid asset later in life may not be very strategic; if your money is tied up in a property, you may experience additional financial burden.
In the end, the decision to pay off your mortgage before retirement is entirely personal. Individuals should consider their retirement packages, savings, and monthly payments before acting.
The Implications of High Mortgage Rates
Mortgage interest rates are rising steadily, and they are only projected to increase for the next four years. Freddie Mac reported that rates have hit their highest levels since 2011, but anything below 6% is still considered to be “good.” However, this is not necessarily a mortgage doomsday. Interpreting the implications of rising mortgage rates can be difficult, but we’re here to help.
While we may no longer have lifetime low home loan interest rates, we still have historically excellent rates. Rates hit 30-year fixed all-time lows in November of 2012, when mortgage rates bottomed out at 3.31%. In 1981, the average rate was almost 17%–an almost unthinkable figure for most current homeowners. However, in the early 1980s, the Federal Reserve was fighting inflation, and these high rates reflect that battle.
When it comes to mortgage rates, it’s all about relativity. If you experience something better, such as record lows, it’s hard to see dramatic increases—even if those increases are still lower than most yearly averages. There’s a difference between, “Your mortgage will cost around $100 more every month” and “We currently have the highest rate in over four years.” If you already have a mortgage, there is no need to panic; simply refine your budget and continue making your payments.
Going forward, it is important for potential homeowners to grow accustomed to higher mortgage rates. There will, of course, be periods of relief, but rates will continue to rise over time. Anticipate pullbacks along the way to jump on short falls, but use this as an opportunity to better budget and curb the cost of your potential home. Use a mortgage calculator to understand exactly how much you can afford to spend on a house, then only look for homes within your budget. Similarly, select the type of mortgage you’d like to have before jumping into a sale. This will allow you to better understand the costs and repayment process.
Over time, current and potential homeowners will adjust their expectations and learn to accept higher rates. In most cases, especially for those still paying off homes from the 1980s, we might even come to understand that it could, in fact, be a lot worse.
What Does the Builder’s Warranty Cover?
Buyers of newly-built homes are often interested in warranties. Known as a “builder’s warranty,” this agreement promises that the builder will repair or replace certain elements of a home if things go awry. Some of these warranties may be backed by the builder directly, while others are purchased by builders from independent companies that may assume responsibility for specific claims. In some cases, a homeowner will purchase coverage from a third-party warranty company as a way to supplement coverage provided by the builder.
Before investing in this type of warranty, it is essential to understand what’s covered and what is not covered. Additionally, you should understand the claims filing process; disputes may arise, and you should prepare to defend yourself if necessary.
In the case of newly constructed homes, most warranties will offer limited coverage on factors like workmanship and materials as they relate to components of the home. This may include windows, sliding doors, roofs, plumbing, electrical, and HVAC systems. A warranty will generally provide coverage for one- to two years, but separate components may have their own timelines. The warranty itself will define how and by whom repairs are made.
So, what’s not included? Warranties will not cover household appliances, and they rarely cover tile and drywall cracks and irrigation systems. Most builder’s warranties exclude expenses that may be incurred as a result of the repair, such as household storage.
However, you should understand that all warranties are different. Before you close on a new home purchase, ask your builder or third-party warranty provider the following questions.
- What does the warranty cover?
- What is not covered by the warranty?
- What is the claim process?
- What is the extent of your liability?
- Where are some of your previous projects so I can speak with owners there?
Additionally, before signing, check with your state’s Attorney General Office or contractor licensing board to ensure your builder is offering all warranties they are required to provide.
How to Deal with Counteroffer Negotiations
An initial offer does not guarantee a sale. In fact, it does not even guarantee a price. A lot can happen between the initial offer and closing day. Enter: The Counteroffer.
Negotiations are one of the more stressful aspects of the homebuying process. The negotiation itself is driven by the counteroffer: the rejection and counter to an offer made by a member of the negotiation. These offers are often handled between real estate agents, but they are incredibly time-sensitive, inducing stress in all parties involved.
So, why were you countered? If the initial offer was below list price, the counteroffer is expected. If there are several offers, the listing agent will present all options to the seller and notify the buyers of any choices. In addition to disputing final price, a seller may counter a proposed closing date. If they need to move out quickly, they may want an earlier time; if they need to take their time with the moving process, they may push later. Price and date are concomitant, and a disagreement on one can mean a failed deal or negotiation.
If your offer is countered by the seller, it is essential to have an experienced real estate agent review the material. This professional will allow you to put yourself in a better position to counter the counter. Carefully review every aspect of the deal and consider every aspect of the sale, including both old and new information. If you offered above the list price, remember that the appraisal may come in low. To that end, consider undertaking an appraisal or inspection before settling on a price and time. If you’ve offered before these processes, prepare yourself for a future counteroffer.
If you are experiencing negotiations, carefully plan and establish your baseline with a real estate agent. Understand the point at which you are able to walk away from a sale, and don’t allow yourself to be lured above your comfortable price point.
What Does it Mean to be “House Poor”?
If you’re a current or aspiring homeowner, you’ve likely heard the phrase: house poor. This situation occurs when a person spends a large proportion of their total income on home ownership, which likely includes mortgage payments, property taxes, maintenance, and utilities. As a result of high home ownership costs, these individuals are short on cash for discretionary items and may experience difficulty meeting other financial obligations, such as vehicle payments and childcare services.
In most cases, being house poor is a result of “buying too much house.” Put simply, the homeowner has overestimated the amount of financial contributions they are able to make toward a home. Purchasing smaller homes or waiting to save money are great ways to prevent this situation, but it is not uncommon for a homeowner to bite off more than they can chew in a mortgage agreement. This may be the result of total cost underestimation, but it may also be the result of a lost job or decreased income.
The best way to prevent becoming house poor is to clearly and strategically budget. Experts say consumers should plan to spend approximately 25% of their income on home expenses. If a homeowner has other expenses and no additional debt, they can potentially spend up to 30%. In all cases, it is important to start a savings account to help save each month to address issues around the home.
Unfortunately, even the best budgeting can’t prevent job loss or emotional trauma. Changes to a household’s spending outlook may create difficulty in making mortgage payments. There are ways to reduce spending, such as canceling vacations or downgrading vehicles. Many individuals choose to pick up a second job to pay additional housing bills, while others choose to simply sell the home and purchase or rent a smaller property.
Though becoming house poor is a scary concept, many American homeowners are experiencing the phenomenon. As a result, it is important to only spend within your financial limits—especially when it comes to large investments, like homes and cars.