Lenders regularly publish mortgage rates but they may not be available for all buyers.
Imagine that the mortgage payment based on an advertised rate influenced a buyer to make an offer on a home. After negotiating a binding contract, this buyer makes a loan application and finds out that for any number of possible reasons, that rate isn’t available.
Even if the person does financially qualify for... [Read more]
Yogi Berra said he’d give his right arm to be ambidextrous. While most first-time home buyers are not going to that extreme, it is interesting to see what sacrifices are being made according to the National Association of REALTORS® 2016 Profile of Home Buyers and Sellers.
• 43% – cut spending on luxury or non-essential items
• 34% – cut spending on entertainment
• 27% – cut... [Read more]
Occasionally, when dealing with close relatives who might also become heirs, signing a note and handling the paperwork properly may seem like a needless effort but it could mean the difference in being able to take a legitimate interest deduction.
Home mortgage interest is deductible only if the loan is a secured debt which involves the buyer signing an instrument like a mortgage or deed of trust that... [Read more]
There seems to have been an accepted progression for homeowners going from starter home, to gradually moving into one’s dream home, then, downsizing after becoming an empty nester and finally, into a retirement home. However, Marianne Cusato’s 2016 Aging-in-Place Report indicates that many older Americans don’t plan on following that pattern.
61% of homeowners above the age of 55 intend on staying... [Read more]
There is a common body of knowledge among real estate professionals that indicates that the longer a home is on the market, the lower the price will be. Many sellers discount this belief in the beginning because they feel confident their home will sell quickly.
Lowering the price is the most obvious thing that can be done to encourage buyers but it might be good to look at what builders do. Builders... [Read more]
The ironic thing about people who think they can’t afford to buy a home for themselves, end up buying the home for their landlord. There are several facts that support this notion.
Mortgages, whether held by an owner-occupant or an investor, are usually amortized so that each payment reduces the principal amount owed so that the loan will be repaid totally over the term. A tenant is inadvertently... [Read more]
• “It’s impossible to get low down payment loans.” – FACT! FHA down payments are 3.5% and VA is 0%. In some areas, there may be some 0% down payment USDA loans available. FNMA and Freddie Mac have 3% down payment programs.
• “It takes perfect credit to get a loan.” – FACT! There is a relationship of better rates to better credit but many issues on a credit report can be explained... [Read more]
Every year, it seems like the same things are on the list but this could be the year you really do invest in a rental home.
Rents are climbing, values are solid and mortgage rates are still low for non-owner occupied properties. A $150,000 home with 20% down payments can easily have a $300 to $500 monthly cash flow after paying all of the expenses.
There are lots of strategies that can be successful... [Read more]
In 1966, a gallon of gas was $0.32 and today, it is $2.49. A dozen eggs were $0.60 but they’ve only doubled to $1.33. A gallon of milk was $0.99 and today, it costs $3.98. You could send a letter for five cents and now, it costs forty-seven cents.
The average cost of a new car in 1966 was $3,500 and today, it will cost $33,560. New cars have more features than the earlier models but they’re still... [Read more]
Since the election, rates have started going up and it will have a direct effect on the cost of housing. There is a rule of thumb that a ½% change in interest is approximately equal to 5% change in price.
As the interest rates go up, it will cost you more to live in the very same home or to keep the payment the same, you’ll have to buy a lower priced home.
Before rates rise too much may be the best... [Read more]
During the Great Recession, some homeowners elected to rent their home rather than sell it for less than it was worth.
IRS tax code allows for a temporary rental of a principal residence without losing the exclusion of capital gain based on some specific time limits. During the five year period ending on the date of the sale, the taxpayer must have:
• Owned the home for at least two years
• Lived... [Read more]
Mortgage approval isn’t final until it’s funded. Things can change prior to the loan being closed that can affect a pre-approval such as changes in the borrowers’ financial situation or possibly, factors beyond their control like interest rate changes.
Good advice to buyers is to do nothing that can affect your credit report until the loan closes. Opening new credit cards, taking on new debt... [Read more]
A person called into a radio talk program with a situation that was troubling to the caller and disturbing based on the potential tax liability that may have been avoided.
The caller’s elderly father had deeded his home to his daughter a few years earlier because in his mind, his daughter was going to get the home eventually and this would be one less thing to be taken care of after his death. The... [Read more]
Most people think they’ll have a house payment and a car payment for the rest of their lives but it doesn’t have to be with a plan and a little discipline. The plan is to make additional principal contributions to a fixed rate mortgage to shorten the term and save tens of thousands in interest.
If a person were to make an additional $100 payment each month applied to principal on a $175,000 mortgage,... [Read more]
Homeownership, part of the American Dream: a home of your own where you can feel safe, raise your family, share with your friends and enjoy life. The benefits are easily recognizable but maintenance is just a real and should be considered.
Property taxes and insurance are two of the largest expenses homeowners have aside from their mortgage interest. But, as any homeowner knows, there will be occasional... [Read more]
Saving the down payment may be unnecessarily keeping would-be buyers from getting into a home. They may be unaware that the funds might be available.
The NAR Profile of Home Buyers and Sellers reports that 81% of first-time buyers got all or part of their down payment from savings. Less than 4% said that all or part of the down payment came from a withdrawal in their IRA and 8% from their 401(k) or... [Read more]
“It’s not far, if you know the way.” What this expression implies is that you could have a long way to go if you don’t know where you’re going or how to get there. Just like reading a map, there are some definite steps that will improve your success in buying a home in today’s market.
• Know your credit score – the best mortgage rates are available to borrowers with the highest scores.... [Read more]
Special consideration is made by IRS for the sale of a jointly-owned principal residence after the death of a spouse. Surviving spouse may qualify to exclude up to $500,000 of gain instead of the $250,000 exclusion for single people if certain requirements are met.
• The sale needs to take place no more than two years after the date of death of the spouse.
• Surviving spouse must not have remarried... [Read more]
Real estate is the overwhelming preferred choice by Americans as identified in a recent survey. With the Dow Jones industrial average reaching record highs, it might be expected that the stock market would be the favored choice but that wasn’t the outcome.
Analysis of the report suggests that the popularity for houses could be that they are tangible assets that you can see where your money is actually... [Read more]
It’s not “if” the rate goes up but “when” the rate goes up; it could make a big difference for some buyers. Freddie Mac predicts that mortgage rates will be at 4.5% a year from now.
If buyers can afford a home with higher interest rates, it means higher payments. Higher payments might mean they won’t have the money to spend on other things like furniture or improvements to the home or an... [Read more]
Some people wait to buy a home until they have 20% down payment to avoid paying the mortgage insurance which is required by lenders when the loan-to-value ratio is greater than 80%, with the exception of VA loans.
To illustrate a typical situation, let’s assume that buyers have $10,000 for a down payment on a $200,000 home. They could purchase it today with a 95% loan or save another $30,000 in... [Read more]
Having a dust-free home isn’t difficult, but it takes a serious commitment and a housekeeping strategy that addresses the dust and its causes. Whether your motive is cleanliness or to eliminate the cause of some allergies and asthma symptoms, it will be worth it.
• Try to dust your home at least twice a week. Dust the tallest items and work your way down. Dust picture frames, blinds, baseboards... [Read more]
Fair market value is the price that real estate would sell for on the open market without any unusual forces being involved. The definition is relatively simple but there certainly different methods of determining what it is.
A homeowner could order an appraisal before they put their home on the market but would incur the expense of an appraisal and more likely than not, it won’t or can’t be used... [Read more]
There are two negotiation periods in some home sales. The primary negotiation takes place when the contract is agreed upon that includes the price, closing and possession. Buyers and sellers alike feel relieved once this first round has resulted in an agreement but there may be more negotiations to come if there are contingencies for financing, inspections or other things.
The purpose of an inspection... [Read more]
It’s surprising to realize that most people spend more time planning their next vacation or cell phone purchase than they do on their own retirement. Let’s look at a hypothetical situation where you have $35,000 to invest for your retirement in 15 years. Have you compared where you might have the best opportunity?
The safest place to put it might be a certificate of deposit because it’s insured... [Read more]
“If you waste my time, don’t expect me to hang out with you very long.” This could have been said by a buyer or seller or a real estate agent. Time is valuable and no one wants to waste their time.
Most people can’t put their lives on-hold while they’re trying to buy or sell a home. Whether they have a family, a couple or single, life continues and the time constraints of moving can become... [Read more]
Listing photos may be one of the most important marketing efforts that lead to a potential buyer.
Nearly, all buyers use the Internet during the home search process. They usually start looking at homes online before they contact an agent. It’s far more efficient to screen properties by looking at the pictures that have been posted than to make appointments with each homeowner, drive all over town... [Read more]
It has been said that change is the only constant. Most of the financial experts have been expecting interest rates to increase along with home prices. While homes, in most markets, have definitely seen increases over the past five years, the mortgage rates today are actually lower than they were a year ago.
If the interest rates were to increase by 1% over the next year while homes appreciated at... [Read more]
While all contracts must have certain required elements, mutual assent, consideration, capacity and legality, there are some things that increase its chance of being accepted.
The seller generally wants the highest possible price with the fewest inconveniences in the shortest period of time. In the same way, the buyer generally wants the lowest possible price with the fewest inconveniences in the shortest... [Read more]
Asking the right questions will lead to the answers that help you determine which agent to use for one of the largest investments that most people make…the purchase or sale of their home.
Rudyard Kipling wrote the verse “I keep six serving men, they taught me all I knew; their names were what and why and when and how and where and who.” Prefacing your questions with one of these words can help... [Read more]
In the last few years, some people who were unable to sell their homes, rented them instead. The market has improved in most places and the home may easily sell now and possibly, for a higher price.
Even though the opportunity to sell in the near future might not change, there could be another opportunity that could quickly disappear for some homeowners.
Most homeowners are aware that there is a capital... [Read more]
Retirement Funds for Home Purchase
For the person who has good credit and income but not enough money for the down payment on a home, their qualified retirement program could offer them some help. The rules are different depending on whether it is a 401(k), a Roth IRA or a traditional IRA.
Up to half of the balance of a 401(k) or $50,000, whichever is less, can be borrowed by the owner at any age for... [Read more]
The seller has three tools available to affect the marketability of their home: price, condition and terms. Price is the easiest to adjust for the competing properties, amount of inventory or market conditions. However, lowering the price is not necessarily the best decision when trying to maximize the proceeds of sale.
If a home is in poor or outdated condition, updating can be done to make it show... [Read more]
If competition is a buyer’s biggest concern, for goodness’ sake, get in the game. In a new survey of close to a thousand home buyers conducted by Redfin, affordability is still the number one concern but due to low inventories, competition from other buyers is moving its way up the poll.
26% identified affordability while 19% mentioned competition and 15% mentioned low inventory as their respective... [Read more]
Rental homes can be a natural alternative investment choice for homeowners because they are already familiar with houses. Maintenance on a rental is not that much different than on your personal home. The same plumbers, painters and other workmen can be used to make repairs.
Single family homes offer an investor high loan-to-value mortgages at fixed interest rates for long terms on appreciating assets... [Read more]
Parents, with children getting closer and closer to entering college, may also be feeling stress because they haven’t saved enough for tuition and other expenses. It’s estimated that the average cost for the 2015-16 school year is $32,405 for private colleges, $9,410 for state residents of public colleges and $23,893 for out-of-state residents.
If you started saving the year your child was born,... [Read more]
It is estimated that seven million out of 50 million homeowners could save money by refinancing their existing mortgages. Obviously, if the replacement mortgage has a lower rate than your existing one, you will save money.
If you bought a home before 2011 and are paying mortgage insurance, you should investigate refinancing to eliminate that requirement. Even if you don’t get a lower interest rate,... [Read more]
Huge opportunity!! If you are contemplating purchasing a home, now may be one of the best times. The Neighborhood lift program is kicking off on June 10/11 2016 It will be held downtown Minneapolis at the convention center and you need to make a reservation to meet with a loan officer to review the program and get qualified. Contact me and I’ll tell you about this amazing program sponsored by... [Read more]
Are you underwater on a loan and want to look at the possibilities of a refinance? Check out this link I found on the new HARP guidelines- HARP Loan Program : Eligibility & Guidelines for 2016
http://themortgagereports.com/259/harp-making-home-affordable-guidelines . Maybe refinancing is an option. Are you considering selling and would like to know the currently value of your home, let me know... [Read more]
You’ve saved the money and are ready to pay cash to build a new pool for your home. However, that’s just the beginning of your soon to be increased expenses which will include maintenance, higher utilities and higher taxes.
Homeowners obviously benefit by a larger equity when their home increases in value due to appreciation. A not-so-obvious effect that will also more than likely take... [Read more]
Real estate lost a lot of value during the recession but most areas have rebounded considerably. In some cases, the homes are worth more than they were before the housing bubble burst.
The dynamics are classic for this type of market: inventories are low, mortgage rates are low and demand is high. All price ranges are on the rise with some at an even higher rate because the short supply is causing... [Read more]
There is an infrequently-used mortgage program available that could be the solution to a buyer’s or seller’s problem.
A temporary buydown is fixed rate mortgage that the seller has prepaid interest at closing to lower the payments for a number of years. The borrower must qualify at the note rate but gets the benefit of lower payments for the early years.
A 2/1 is a common buydown that... [Read more]
Buying rental property can be an excellent decision and the better informed you are, the more likely you’ll have favorable results. The following suggestions can help you with your decisions.
Real estate is a long term investment affected by supply, demand and the economy. It isn’t an investment that is easily converted to cash. The costs to acquire and dispose of real estate are sizable... [Read more]
“If I tell you it’s going to rain, you can put the buckets on the porch.” If you grew up in the south, you made have heard this expression when a person is testifying to the veracity of his word. If you know a person and/or their reputation, you know whether you can trust their word or not.
However, with a stranger such as a buyer, the seller doesn’t know whether they’ll... [Read more]
Credit scores are used by lenders to measure the credit worthiness of borrowers. While there are several different companies that offer scores, the FICO, Fair Isaacson Corporation, is the model that is used most often.
There are five key components that determine the overall score or rating. The most emphasis, 35% of the overall score, is placed on payment history which reflects whether the borrower... [Read more]
A homeowner’s tax savings benefit is generally realized when they file their federal income tax return after the money has been spent for the interest and property taxes. Some people look forward to the refund as a means of forced savings but some people need to realize the savings during the year.
It is possible to adjust the deductions being withheld from the homeowner’s salary so they realize... [Read more]
You might be surprised how many people contact real estate offices because they want to buy a home but they don’t have the down payment or the credit to qualify. Occasionally, an agent will be working with someone who does have the down payment and credit but for whatever reason, decides to postpone the decision to purchase now for some point in the future.
It’s not uncommon that once they’re... [Read more]
“Anyone may arrange his affairs so that his taxes shall be as low as possible…” While Judge Learned Hand was talking about federal income taxes, it can be applied to property taxes as well.
States have a process of assessing the value of a property based on a number of things that can include size, amenities, location and what the owner paid for the property. Most states make adjustments... [Read more]
Leverage gives the user a maximum advantage whether it is physically lifting a large object or rapidly building equity in a home. In the case of the home, the high loan-to-value mortgage allows the profits made to be greater than simply the cash invested.
A $250,000 home can be purchased on a FHA loan with a 3.5% down payment of $8,750. If the home appreciates at 2% a year, in seven years the equity... [Read more]
Ask any real estate professional if they have sold a house without the buyer having physically seen it and they’ll most likely tell you they have. While it may have been an unconventional sale, it is more prevalent today than it was twenty or even ten years ago.
The digital world of the Internet has changed the process of buying a home. It is evolving as people have become more comfortable with... [Read more]
The principle to pay yourself first has been referred to as the Golden Rule of Personal Finance.
The concept is that one of the first checks you write each month is for your own savings. The rationale is that if there is no money left after a person pays their bills, there is nothing to contribute to savings or investments that month.
By establishing a priority to save, a person realizes that the... [Read more]
Similar to an annual wellness physical, homeowners should consider an annual review of the financial elements of their home. It’s particularly valuable based on the fact that their home and its equity is generally, one of their largest assets.
• List of similar properties recently sold and currently available
• Information on challenging property tax assessment
• Refinance Analysis to: ?... [Read more]
Let’s say that you just won $8,750 on a lottery scratch-off ticket. You’ve decided to be frugal and invest the money and have decided on three alternatives: buying a certificate of deposit, a mutual fund or use the money as a down payment for a $250,000 home.
To compare the three alternatives, let’s look at the equity in each one three years from now.
The certificate of deposit can be invested... [Read more]
People tend to fear what they don’t understand. Homeowners understand fixed rate mortgages and remember the horror stories of people who lost their homes because they could no longer afford them when their adjustable rate mortgages went up.
Interest rates on fixed-rate mortgages have be so low for enough years, that borrowers haven’t even given much consideration to an adjustable rate mortgage.... [Read more]
You are probably aware that Federal law entitles you to a free copy of your credit report annually by each of the three credit bureaus: TransUnion, Experian, and Equifax. By regularly looking at each of these reports, you can determine if there are any errors on them and be aware of your credit worthiness.
Instead of ordering all three at the same time, experts recommend that you stagger them throughout... [Read more]
Technology has certainly streamlined the home buying process and introduced things that help purchasers make better decisions. Buyers have enthusiastically embraced video tours, digital signatures and the enormous amount of information available about a home, neighborhood, schools and neighbors.
The ironic thing is that buyers are ignoring the one single thing that can help them secure the “right”... [Read more]
Most of us understand the expression “burning the candle at both ends” to mean working so hard that you burn yourself out. Normally, that wouldn’t be a good idea unless it is intentional.
If the candle is your mortgage and the strategy is to get it paid off early, being “burned out” would be a good thing. One end of the candle would be your regular mortgage payments and the other... [Read more]
One of the big banks has a voluntary program available that transfers $100 each month from your checking account to your savings account. In five years, the account owner would have over $5,000 because of a type of forced savings.
Similarly, when a person buys a home with a standard amortizing loan, each month, a part of the payment is used to reduce the principal loan amount. Amazingly, over $4,000... [Read more]
The more equity in your home, the more options you have. Since equity is determined by the difference between value and what is owed on a property, when homes lost value during the Great Recession, homeowners’ equity decreased.
Negative equity occurs when the value is less than the mortgage owed. According to CoreLogic, 91% of all mortgaged properties have equity and only 4.4 million properties... [Read more]
The first thing every homeowner needs to know about plumbing is how to turn the water off in case of an emergency. It’s like having a fire extinguisher; you hope you never need it but you want it just in case you do.
Generally, the cutoff is in the front of the home. There may be a separate cutoff box on the owner’s side of the meter. If not, the owner needs to be able to open the water meter and... [Read more]
Appreciation, tax advantages, cash flow, leverage and equity build up each contribute to the rate of return on rental real estate. If that sounds confusing and it’s keeping you from investing in rentals, try looking at it a different way.
Consider this, look at only cash flow and equity build-up to determine whether to buy the property. They are easy to calculate and their outcomes are both reliable... [Read more]
An Automated Valuation Model, AVM, is a computer approach that looks at public records to make a determination based on square footage, comparable sales and other elements. It is as easy as putting your address in a blank but unfortunately, AVM results may only be accurate about 20% of the time.
A popular AVM, Zestimate®, states “It is considered a starting point at determining a home’s value.”... [Read more]
Homeowners should recognize that the same trusted professional who helped them buy or sell their home can be a valuable resource while they own their home too.
Think of your REALTOR® as an indispensable homeowner’s resource who can make recommendations about a variety of services that homeowners will use throughout the tenure in their home. This experience far exceeds personal experience because... [Read more]
Affordability and stability are reasons homebuyers choose a 30-year fixed rate mortgage. It makes the payment lower than a 15-year mortgage and the principal and interest portion of the payment will be constant for 30 years.
A common belief among homeowners for decades was that they would always have mortgage payment. The Great Recession has caused many individuals to rethink that concept and make... [Read more]
Insurance and homeowners go together like peanut butter and jelly. Lenders require fire insurance at a minimum for homes with a mortgage but many owners opt for a more comprehensive coverage with a homeowner’s policy.
However, comprehensive doesn’t mean that everything is covered. Filing a claim is not the time to learn that you don’t have the right coverage. Discuss the following issues with... [Read more]
A variety of factors have led to a shortage of rental units, especially single family homes, and as a result, rents have been steadily increasing nationwide. In most markets, it is considerably less to own than to rent.
In some cases, the total house payment is less than the rent for a similar size and condition home which supports a purchase. However, when you factor in some of the financial benefits... [Read more]
Rental homes have several distinct advantages compared to alternative investments. These advantages coupled with the opportunity for a higher yield make it a clear choice for some investors.
1. Most investments must be paid for in cash. Stocks can be purchased with 50% cash but if the value goes down, more cash has to be used to keep the margin at 50%. Rentals can readily be financed with only 20-25%... [Read more]
According to a Federal Reserve report on Consumer Finances, homeowners’ net worth is 36 times greater than that of renters. Building on that study, the National Association of REALTORS® believes that by the end of 2015, the factor will grow to 41 times greater.
There can be several factors that contribute to this disparity but an important one is the forced savings that is achieved due to an... [Read more]
It seems fairly innocuous; a friend or family member wants you to co-sign on a loan because they don’t qualify. They assure that they’ll make the payments; they’re quite convincing and very appreciative. You don’t want to disappoint them and after all, it’s not like it’s going to cost you anything…is it?
Think of it this way. They couldn’t get a loan unless you co-sign for them. If... [Read more]
As rates are inching up but still very affordable, buyers should remember that there is an alternative to a fixed rate mortgage that can provide the lowest cost of housing for the homeowners who understand the parameters.
A $300,000 fixed-rate mortgage at 4% has a principal and interest payment of $1,432.25 per month for the entire 30 year term. A 5/1 adjustable mortgage at 3% has a $167.43 lower... [Read more]
The City of Woodbuyr continues to offer $25,000 in deferred financing to income-qualified first-time homebuyers.
Please visit www.woodburyloans.com to see the program guidelines and learn more information.
As a reminder, five main advantages of our program that may save you hundreds of dollars per month include:
1. The principal of the Woodbury loan is deferred for 30 years.
2. Woodbury’s... [Read more]
Making additional payments toward the principal of your mortgage will do three things for the homeowner: save interest, build equity and shorten the term on fixed rate mortgages.
These things should be beneficial enough to justify the extra payments but another huge advantage is available to those who have private mortgage insurance on their loan. Mortgage insurance rates vary but can range from seventy-five... [Read more]
A home can easily be a person’s largest personal asset and it can be a powerful tool to increase financial stability also.
Since most mortgages are amortizing, the loan becomes a forced savings account that reduces the unpaid balance with each payment. The equity could be used to improve a homeowner’s financial position involving other loans.
While every homeowner recognizes that they can... [Read more]
Some people take their credit for granted and don’t start paying attention to it until they need it. The problem with this is that it could delay if not altogether cause the loan to be denied.
The most common issue is not correcting items on your credit report. A large majority of credit reports have errors but not all of them are critical. Since it takes time to remove them, it is a good practice... [Read more]
An unexpected, larger-than-normal water bill could lead a person to think that they might have a leak. Before incurring the cost of a plumber, it is fairly easy to run your own test.
Locate your water meter. They’re usually in the front of the house, near the street. In some cases, you might need a meter key to open it; they can be purchased at Lowe’s, Home Depot or other hardware stores.
Step... [Read more]