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Showing posts from July, 2014

The Reason They're Called Benefits

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The Veterans Administration guarantees home loans for eligible veterans.  It is considered an attractive loan because the veteran can purchase the home with no down payment up to specific loan limits and no mortgage insurance. This makes the monthly payment considerably lower.Let’s assume a buyer wants to purchase a $200,000 home and can get a 4.5% interest mortgage for 30 years. A FHA loan would require a $7,000 down payment plus $3,377.50 in up-front MIP which can be rolled into the mortgage. The monthly mortgage insurance premium would be $221 per month for a total payment of $1,215.94. The VA loan doesn’t require a down payment. There is a 2.15% VA funding fee that can be rolled into the mortgage which would make the principal and interest payment on $204,300 much less at $1,035.16. The revised loan limits for 2014 are published by VA and can change each year especially based on high-cost areas. However, a lender can allow a home purchase in excess of these amounts with a …

Indecision Costs

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More money has been lost to indecision than was ever lost to making the wrong decision.  The economy and the housing market have caused some people to take a “wait and see” position that could cost them in lost opportunities as well as almost certain higher costs in the future.To illustrate what the opportunity cost might be, let’s compare what the value of the down payment two years from now would be if it was invested in a certificate of deposit, the stock market or used to purchase a home today. A 3.5% down payment on a $175,000 home is $6,125.00.  If it was invested in a CD that would earn 2%, a person would have $6,372 in two years.  The earnings would be taxed as ordinary income tax rates.  It wouldn't earn much but it would be safe and secure. The same amount would grow to $7,013 in the stock market if you picked the right stock or fund and it yielded 7%. The earnings would be taxed at the long term capital gains rate.  The return could be greater but so is the risk i…

Every Renter Should Know

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The first home purchase can be the culmination of years of planning and consideration. Buyers typically look for 12 weeks and use a variety of information sources for research before purchasing. However, many renters are not near as thorough in their study.Like any other commitment a person makes, careful consideration and understanding is required. There are things that every renter should know before they rent a home or apartment. A lease is a binding, legal document. Understand the lease before signing and ask questions. Get the complete agreement in writing instead of verbal statements. Tenants have rights too and they vary depending on the state and city. Tenants need renter’s insurance for their personal belongings and liability. The landlord is responsible for a habitable and safe environment and should typically pay for repairs due to normal wear and tear. Do a walk-through of the property before signing a lease. Don’t withhold the rent t…

Fifteen Will Get You Three

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Freddie Mac chief economist, Frank Nothaft, says that affordability, stability and flexibility are the three reasons homebuyers overwhelmingly choose a 30 year term.  However, for those who can afford a higher payment, there are three additional reasons to choose a 15 year term: save interest, build equity and retire the debt sooner.First-time buyers have a higher tendency to use a minimum down payment and are very concerned with affordable payments.  It is understandable that the majority of these buyers select 30 year, fixed-rate mortgages. Consider a $200,000 mortgage at 30 year and 15 year terms with recent mortgage rates at 4.2% and 3.31% respectively. The payment is $433.15 less on the 30 year term but the interest rate being charged is higher.  The total interest paid by the borrower if each of the loans was retired would be almost three times more for the 30 year term. Another interesting thing about the 15 years mortgage is that more of the payment is going to principal t…

Make Good Offers Better

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It’s disappointing, frustrating and sometimes, discouraging when you lose a home you want to buy. One of the hardest lessons for today’s buyers is that writing an offer doesn’t mean that you’ll get the home or even a counter-offer.  The low inventory affecting many of the housing markets requires a different strategy to give you the best chance to get the home you want. Make your best offer initially; you may not get a chance to accept a counter. Submit a written pre-approval letter from the lender. Increase earnest money above what is considered normal. Make a larger down payment. Eliminate unnecessary contingencies. Don’t ask for personal property not included in the listing agreement. Pay your own customary closing costs. Shorten the inspection period. Buy the home “as is” subject to inspections which still allows you to get your earnest money back if the inspections are unacceptable but doesn’t require the seller to make repairs.��…