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Showing posts from 2018

Your Real Estate Resource

Being a better homeowner is a full-time job.It's not just about making better decisions when you buy and sell; it's making better decisions throughout the time you own the home.It takes good information to make good decisions.Think of times when you need advice on financing, taxes, insurance, maintenance, finding reasonable and reliable contractors and lots of other things.Imagine how nice it would be to have a real estate information line you could call whenever you have a question.During the purchase or sale, the obvious place to get real estate answers is your agent but where do you go the rest of the time? Since homeowners are now staying in their homes for ten to twelve years or more, they need a reliable resource for good information and advice.Our objective is to move from a single purchase or sale to customers for life; a select group of our friends and past customers who consider us their lifelong real estate professional.We believe that if we help you and your friend…

More Comfortable, Convenient and Secure

Smart home technology promises to make your home more comfortable, convenient and secure.  It may not be the home from the Jetson's but artificial intelligence is the hope to make it the home of the future which is available now and controlled from anywhere you have an Internet connection.When Alexa appeared at Christmas-time two years ago, most people thought it was a novelty to ask what the weather will be or to play a song.  Few people understood the vision of Amazon would be verbally purchasing everything imaginable and that your calendar, contacts, lights, and appliances would all be connected.There are plenty of players in the market including Amazon Alexa, Google Assistant, Samsung Smart Things, Apple and others.  It starts with a hub that acts like a brain for your system to connect the different home automation devices.  You'll establish an online account with the hub manufacturer so that you can adjust settings and controls.You could start simple with switch and plug…

Another Type of Financing Concession

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Price, condition and terms are factors that any owner must consider when marketing their home.Price is usually the easiest to adjust to compensate for shortcomings in location or condition of the home.Improving the condition of the property is more time consuming but updates to kitchens, baths and other things can appeal to a buyer.One of the most overlooked marketing factors are terms which are also referred to as financing concessions.Paying part or all a buyer's closing costs is the most common financing concession.By doing so, the buyer doesn't need as much cash to get into the home which can be attractive to more buyers. There is another financing concession that is not used very often in today's market but it is still allowed and can increase the marketability of a home. A temporary buy-down of the interest rate makes a lower payment for an initial period.It is still a fixed-rate mortgage that the buyer must qualify for at the note rate and there is no negative amort…

44 Times More Than a Renter

The Federal Reserve Board's Triennial Survey of Consumer Finances recently revealed the net worth of a homeowner was $231,400 compared to $5,200 for a renter.The net worth of homeowners increased 15% from 2013 to 2016 while renters' decreased by 5%.Appreciation and principal reduction are the two dynamics that affect a homeowner's equity.Each payment is applied to the interest for the previous month and the principal reduction to retire the mortgage.A $300,000 home purchased with a $294,566 FHA mortgage at 5% for 30 years has an average monthly principal reduction $362 in the first year. Two percent appreciation would benefit the buyer by $500 a month.In this example, the equity grows by $860 a month for the homeowner.A tenant would have to invest $660 a month over and above the rent they're paying.Based on the assumptions listed above, the $10,500 down payment would become approximately $85,000 of equity in seven years. Leverage and forced savings contribute to the di…

Gift of Equity

There is a little-known mortgage program that could provide the vehicle for the right person to get into a home.If a person sells their home to another for less than the fair market value, the difference in the appraised value and the sales price is considered a gift of equity for the buyer.FHA requires that borrowers receive gifts of equity only from family members transferring title to the borrower.An appraisal is required to determine the value of the home.The sales price is subtracted from the appraised value to determine the equity to be gifted.If a home appraises for $300,000 when the owner will sell it for $250,000, the gift is $50,000.The gift is applied to the down payment.In this example, the borrower would have to qualify for a $250,000 mortgage which would require private mortgage insurance because a 20% down payment on a $300,000 home would be $60,000.If the buyer had an additional $10,000 in cash to put down, the PMI would not be required, and the monthly payments would …

Do You Know the Way?

It may be natural for first-time buyers to be unsure of the process of buying a home because they haven't been through it before but even repeat buyers need to know changes that have taken place since the financial housing crisis.The steps in the home buying process are predictable and generally follow the same pattern.It certainly makes the move stay on schedule when you know all the different things that must be done to get to the closing.In the initial interview with your real estate professional, you share the things you want and need in a home, discuss available financing and learn how your agent can represent you in the transaction.The pre-approval step is essential for anyone using a mortgage to purchase a home to assure that they're looking at the right price of homes and so they'll know what they can qualify for and what the interest will be.Even with lower than normal inventory, it is difficult to stay up-to-date with the homes currently for sale and the new one …

Roll the Repairs into the Mortgage

It's been said that if you can find a home that has most of what you want, you should go ahead and purchase it.Many first-time buyers are using everything they have for a down payment and closing costs and would have to "live" with the less than perfect home until they can save the money to make the changes.The FHA 203(k) mortgage allows a borrower to purchase a home and provides additional funds for improvements to be made.These types of renovations can include kitchen and bathroom remodels, flooring, plumbing, heating and air conditioning systems, additions and other things.The benefit to the buyer is that they have the opportunity to consider a home that needs repairs and might have been unacceptable without a program like this.Being a FHA loan, a minimal down payment is required, fair interest rates and generous qualifying requirements.The 203(k) Streamline can be used for cosmetic improvements, appliances and minor remodeling up to $35,000 in cost.As you can imagine…

Getting the "Right" Home

Finding the right home is still the biggest challenge buyers are faced with in today's market as is shown in the latest Confidence Index Survey.Assuming the buyers find the "right" home with determination, perseverance and the help of a real estate professional, 88% of all transactions last year required financing to get the buyer's address on the home.93% of first-time buyers needed financing.Pre-approval is an essential step that needs to be handled before buyers begin searching for a home.The benefits to the buyer fall into the category of confidence.PRE-APPROVAL GIVES YOU CONFIDENCEKnowing the amount you can borrow
the mortgage amount decreases as interest rates riseLooking at the right priced homes
price, size, amenities, locationComparing and identifying the best loan
rate, term, typeUncover issues early that could affect the most favorable loan terms
time to cure possible problemsBargaining power to negotiate with the seller and possibly, competing buyers
price, te…

Start Early and Live Happily Ever-after

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As storybooks go, the character is introduced, they meet their love interest, a villain thwarts their intentions, true love overcomes, they marry and live happily ever-after.It's a very familiar formula.Similarly, there is a formula that couples follow in real life.They go to college, get a good job, rent a home, fall in love, get married and buy a starter home.They start a family, move into a larger home, save for their children's education, start planning for their retirement and if they live within their means, they invest their surplus funds.An alternative to this might be to start investing in rental homes early in their adult life before their standard of living becomes so expensive that they don't feel like they have the money to purchase rentals.There are infinite possibilities but let's say a single person, after getting a good job, buys a small three or four-bedroom home with an owner-occupied, minimum down payment.They move into the home and possibly, rent o…

It's Not Just the Tax Benefits

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When the standard deduction for married couples filing jointly was increased from $12,700 to $24,000 for 2018, there was some speculation that the bloom was off the rose of homeownership.The thought was that if the tax benefits from being able to deduct the property taxes and interest was less than the standard deduction, that maybe, the buyer would be better off continuing to rent.With mortgage rates as low as they have been for the past eight years, payments have been lower and so has the amount of interest that was paid.This and the fact that sales and local taxes, which include property taxes, are limited to $10,000 a year on the Itemized Deduction form have made it harder to reach the increased standard deduction.The reality of the situation is tax benefits are only one of the components that make a home an excellent investment and it probably contributes the least of the top three benefits.Principal reduction and appreciation build an owner's equity in an automatic way that …

HELOCs Becoming More Expensive

In September, the Federal Reserve raised interest rates for the third time in 2018 and they're expected to go up one more time this year and three times next year.If you have a Home Equity Line of Credit, HELOC, you're paying more to use that money and it is going to become more expensive.It may make sense to refinance your home and consolidate the balance of your HELOC to lock in a lower mortgage rate.Most lenders require that the combination of these loans should not exceed 80% of the home's fair market value and that you have good credit and adequate income to support the payment.A HELOC is a first or second mortgage that allows the borrower to withdraw money as needed, up to the line of credit provided by the lender.A draw period is established where the borrower is only required to pay interest.Since all HELOC loans are variable rate mortgages, during periods of rising rates, the cost of the funds increase.However, unlike adjustable rate mortgages that have specified …

Fast Track Rental Property

FHA allows owner-occupants to purchase up to a four-unit property with a minimum 3.5% down payment.The rent collected on three units could be used to make the payment and the owners' pro-rata share would be less than ¼ of the payment itself.The owner-occupied unit would be considered their principal residence.The other three units are treated as rental property and eligible for cost recovery, a non-cash deduction plus all the normal business expenses.The rental income of the three remaining units is calculated as income and assists the buyer in qualifying.A homeowner could buy a four-unit, live in one for two years, buy another four-unit with a minimum down payment, move into one unit, rent the other three as well as the previous unit in the first property.Then, after another two years, repeat the same process over again.The fifth year, the homeowner/investor would have a total of 11 rental units plus the one that they are occupying.An acquisition strategy like this might be diffi…

Mortgage Free

It may be an all too common belief that a person will have a house payment and a car payment for the rest of their lives.However, with a plan and some determination, you can be mortgage free.Planning for retirement is obviously important and many times, an activity plagued by procrastination.Some homeowners' goal is to have their home paid for by retirement, so they won't have payments.It makes sense to eliminate a sizable recurring expense before they quit working.By making regular principal contributions in addition to the payments, the debt can be eliminated by the target retirement date.Assume a homeowner refinanced their $300,000 mortgage at 4% last year for 30 years with the first payment due on May 1, 2017.With normal amortization, the home will be paid for at the end of the term.Additional principal contributions with each payment will save interest, build equity and of course, accelerate the payoff on the home.An extra $250.00 a month would pay off the mortgage 7.5 ye…

How to Clean Gutters

The gutters and downspouts on your home are intended to channel rainwater away from your home and its foundation.When they're blocked and not functioning properly they can lead to the gutters coming loose, wood rot and mildew, staining of painted surfaces, and even worse, foundation issues or water penetration into the interior of the home.Most experts recommend cleaning the gutters at least once a year.More often might be necessary depending on the proximity of leaves and other debris that could collect.If this is a task that you feel comfortable about tackling yourself, there are few things to consider.If the debris is dry, it will be easier to clean the gutters.Safety is important, and precautions should be taken such as using a sturdy ladder and possibly, having someone hold it while you're on the ladder. Other useful tools will be a five-gallon plastic bucket to hook on the ladder to hold the debris; work gloves to protect your hands from sharp edges of the gutters; a tro…

Consumer Protection from Irresponsible Mortgage Practices

Congress enacted the Dodd-Frank Act in 2010 in response to the mortgage crisis that led to America's Great Recession.The two parts that apply closely to homebuyers are the Ability-to-Repay (ATR) and Qualified Mortgages (QM).A Qualified Mortgage is a category of loans that have certain, more stable features that help make it more likely that borrowers will be able to afford their loan.These loans do not allow certain risky features like an interest-only period when no money is applied to reduce the principal; negative amortization that would allow the mortgage balance to increase; and, "balloon payments" at the end of the loan that are larger than the normal periodic payments.A debt-to-income ratio of less than or equal to 43% has been established to provide a limit on how much of a borrower's income can go toward total debt including the mortgage and all other monthly debt payments.However, the Consumer Finance Protection Bureau believes these loans should be evaluat…

Quick Plumbing Inspection

No one wants to waste water or money.For that reason, take a few minutes every other month to do the following inspections:Check to see if cutoff valves on sinks and toilets are working properly.

Many times, builders will put individual cutoffs on supply lines to sinks and toilets.It is reasonable to expect them to work but after some time, they can corrode which prevents opening and closing.It is a good idea to test them occasionally before you need them in an emergency.

Fill each sink with a few inches of water to see if they drain in what you feel is a normal time.

A slow-draining sink can be an indication of a clog that builds up around the insides of the pipe.Common causes are food, grease, hair and soap scum.Plunging can take care of some slow-running sinks.After partially filling the sink with water, seal the plunger over the drain and pump it up and down a few times.

Inspect each toilet to see if they are leaking water from the tank into the bowl.

Toilets that continue to run after…

Act Decisively

Whether it is hesitation or procrastination due to uncertainty, it can cost buyers by having to pay more for both the house and the financing.This is one of those markets where most of the experts expect interest rates and prices will continue to rise through 2019.The National Association of REALTORS® reports there is currently a 4.2-month supply of homes for sale which is close to the same as last year's inventory.Normal inventory is considered to be a 6-month supply.If during the period you're waiting to buy, the price of the home goes up by 5% and the mortgage rate increases by 1%, the payment on a $275,000 home with a 95% mortgage could be $233.80 more each and every month.Over a seven-year period, the delay to purchase would total close to $20,000.To act decisively, you need good information; a confused mind will not generally make a decision.In today's market, you need to know exactly what price home you can qualify for and you need to know what kind of home you can …

Reduce Refinancing Costs

There is much more than a lower rate and payment to determine whether to refinance a mortgage.Lenders try to make refinancing as attractive as possible by rolling the closing costs into the new mortgage so there isn't any out of pocket cash required.The closing costs associated with a new loan could add several thousand dollars to your mortgage balance.The following suggestions may help you to reduce the expense to refinance.·Tell the lender up-front that you want to have the loan quoted with minimal closing costs.·Check with your existing lender to see if the rate and closing costs might be cheaper.·Shop around with other lenders and compare rate and closing costs.·If you're refinancing an FHA or VA loan, consider the streamline refinance.·Credit unions may have lower closing costs because they are generally loaning deposits and their cost of funds is less.·Reducing the loan-to-value so mortgage insurance is not required will reduce expenses and lower the payment.·Ask if the …

Moisture & Mold

Moisture is mold's best friend and it thrives between 40 and 100 degrees Fahrenheit which is why it is commonly found in homes.Mold spores float in the air and can grow on virtually any substance with moisture including tile, wood, drywall, paper, carpet, and food.Moisture control and eliminating water problems are key to preventing mold. Common sources of moisture can be roof leaks, indoor plumbing leaks, outdoor drainage problems, damp basements or crawl spaces, steam from bathrooms or kitchen, condensation on cool surfaces, humidifiers, wet clothes drying inside, or improper ventilation of heating and cooking appliances. Control the moisture problemScrub mold off hard surfaces using soap and water or other cleanser; dry completelyDo not paint or caulk moldy surfacesDiscard porous materials with extensive mold growthAvoid exposing yourself or others to moldPeriodically, inspect the area for signs of moisture and new mold growthThe EPA suggests that if the moldy area is less than…

What to Avoid Before Closing Your New Home

It's understandable; you’re excited; you've found the right home, negotiated a contract, made a loan application and inspections.Closing is not that far away, and you are making plans to move and put personal touches on your new home.Even if you have an initial approval on your mortgage, little things can derail the process which isn't over until the papers are signed at settlement and funds distributed to the seller.The verifications are usually done again just prior to the closing to determine if there have been any material changes to the borrower's credit or income that might disqualify them.Most lending and real estate professionals recommend NOT to:Make any new major purchases that could affect your debt-to-income ratioBuy things for your new home until after you closeApply, co-sign or add any new creditClose or consolidate credit card accounts without advice from your lenderQuit your job or change jobsChange banksTalk to the seller without your agentThe lender a…

Rising Rates Affect the Cost Too

Mortgage rates have risen 0.5% in 2018 on 30-year and 15-year fixed rate mortgages and experts expect them to continue to increase. Buyers paying attention to the market understand the relationship that inventory has on pricing; when the supply is low, the price usually goes up. Rising interest rates can affect the cost of homes also. When interest rates go up, fewer people can afford homes. Lower numbers of buyers can affect the demand, which could cause prices of homes to come down. The question is how much do the interest rates have to go up to affect demand? As the rates gradually go up, the affect may not be noticeable at all except for the fact that the payments for the buyer have increased. A ½% change in interest is approximately equal to a 5% change in price. A $300,000 mortgage at 4.5% for a 30-year term will have a $1,520.06 principal and interest payment. If the mortgage rate goes up 0.5%, it would affect the payment the same as if the price had gone up 5%. The d…

Replace It Anyway

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If it's not broken, why would a homeowner consider replacing something as expensive as a toilet when there may be other things in the home to replace that provide more aesthetic appeal. Don't be too quick to ignore the functionality and the reliability of this basic convenience.The first rationalization might take place at the economic level. A water-saving model could easily pay for itself in a few years and then, there is the good feeling of participating in the conservation of our natural resources.Having to plunge a toilet more than once a week could motivate a homeowner to spend money on a replacement especially, if having made repairs to the flapper and fill valve didn't solve the issue.Maybe your existing toilet has ugly scratches that make it difficult to clean. Maybe there are cracks in the tank or bowl that you're concerned will develop into a leak at the worst possible time.The average cost to replace a toilet is around $400 with models ranging more and l…

Before You Leave Town...

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Along with all the planning of what you're going to do and where you're going to stay, consider this checklist to make you feel more comfortable while you're away from home. Ask a trusted friend to pick up your mail, newspaper and keep yard picked up to avoid an appearance of not being at home.Stop your mail (USPS Hold Mail Service) and your newspaper.Don't post about your trip on Facebook and other social media until you return; some burglars look for this type of announcement to schedule their activities.Do notify police or neighborhood watch - especially if you're going to be gone for more than just a few days. Let your monitoring service know when you'll be gone and if someone will be checking on your home for you.Light timers make it look like someone is home. Set multiple timers for various times to better simulate someone at home. There are plug-in modules for lights and appliances that would allow you to control them from your phone while your out of…

Owning Makes More Sense

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When comparing the cost of owning a home to renting, there is more than the difference in house payment against the rent currently being paid. It very well could be lower than the rent but when you consider the other benefits, owning could be much lower than renting.Each mortgage payment has an amount that is used to pay down the principal which is building equity for the owner. Similarly, the home appreciates over time which also benefits the owner by increasing their equity.There are additional expenses for owning a home that renters don't have like repairs and possibly, a homeowner's association. To get a clear picture, look at the following example of a $300,000 home with a 3.5% down payment on a 4.5%, 30-year mortgage.The total payment is $2,264 including principal, interest, property taxes, property and mortgage insurance. However, when you consider the monthly principal reduction, appreciation, maintenance and HOA, the net cost of housing is $1,218. It costs $1,282…

A Word Homeowners Need to Understand

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Acquisition Debt is the amount of money borrowed used to buy, build or improve a principal residence or second home. Under the new tax law, mortgages taken after 12/14/17 are limited to a combination of $750,000 on the first and second homes. The mortgage interest on this debt is tax deductible when itemizing deductions.It is a dynamic number that is reduced with each payment as the unpaid balance goes down. The only way to increase acquisition debt is to borrow money to make capital improvements.Prior to the new law, homeowners could additionally borrow up to $100,000 of home equity debt for any purpose and deduct the interest when itemizing deductions. Mortgage interest on home equity debt is no longer deductible unless it is for capital improvements.Acquisition debt cannot be increased by refinancing. Some confusion occurs because mortgage lenders are concerned in making home loans that will be repaid according to the terms of the note and using the home as collateral. That d…

Unexpected Expenses

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It's common for Sellers to consider offering a home warranty or protection plan to make their home more marketable. A growing number of homeowners are now purchasing this type of protection for themselves to limit the unexpected expenses of repairs and replacements.A home protection plan is a renewable service contract that covers the repair or replacement of many of the components in a home. Some homeowners especially like the convenience that it organizes a qualified service provider as well as the cost of the repairs or replacements.There are a variety of companies that offer home warranties and the coverage may differ but the majority of things will include heating, air conditioning, most built-in and some free-standing appliances, as well as other specific items. Additional specific coverage may be available for other items like pool and spa equipment.Some investors are even placing this coverage on their rental properties to limit the amount of repairs during the year. I…

Don't Let a Killer In

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Carbon monoxide is a silent killer you don't want in your home but because it is colorless and odorless; you may not even be aware the deadly condition exists. The Center for Disease Control says more than 400 people in the U.S. die annually from carbon monoxide poisoning and over 10,000 require medical treatment each year.Unmaintained furnaces, water heaters and appliances can produce the deadly gas. In addition, other sources could be leaking chimneys, unvented kerosene or gas space heaters or exhaust from cars or trucks operating in an attached garage.The Environmental Protection Agency suggests the following to reduce exposure in the home:Keep gas appliances properly adjustedInstall and use an exhaust fan vented to the outdoors over gas stovesOpen flues when fireplaces are in useDo not idle car inside garageHave a trained professional inspect, clean and tune-up central heating systems annuallyHeadaches, nausea, vomiting, dizziness and feelings of weakness or fatigue are a f…

Waiting Will Cost More

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An economist responded when asked how interest rates would change: “They may fall some and then, rise and after that, they’ll fluctuate.”Just because interest rates have been low for ten years doesn’t mean they are supposed to be low. The Federal Reserve has raised interest rates twice this year and are expected to go up twice more plus three times next year.  Mortgage rates have risen from 3.95% to 4.62% since the first of January. Increased rates directly affect the payments on homes but so does the price. With inventory levels remaining low, the prices will continue to go up. When interest rates and prices rise at the same time, it costs buyers a lot more.If the mortgage rates go up by one percent and prices increase by five percent in the next year, the payment on a $250,000 home could go up by $200 a month. In a seven-year period, the buyer would pay $18,000 more for the home.People planning to buy a home, need to investigate the possibilities of accelerating their timetable…

The Tax Difference in Second Homes

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A principal residence and a second home have some similar benefits, but they have some key tax differences. A principal residence is the primary home where you live and a second home is used mainly for personal enjoyment while limiting possible rental activity to a maximum of 14 days per year.Under the 2017 Tax Cuts and Jobs Act, the Mortgage Interest Deduction allows a taxpayer to deduct the qualified interest on a principal residence and a second home. The interest is reduced from a maximum of $1,000,000 combined acquisition debt to a maximum of $750,000 combined acquisition debt for both the first and second homes.Property taxes on first and second homes are deductible but limited to a combined maximum of $10,000 together with other state and local taxes paid.The gain on a principal residence retained the exclusion of $250,000/$500,000 for single/married taxpayers meeting the requirements. Unchanged by the new tax law, the gains on second homes must be recognized when sold or di…

When Neighbors Don't Seem to Care

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A home that isn't being maintained like others in the neighborhood can negatively affect your visual sense of appeal and in some extreme cases, even affect property values. It might be an overgrown yard, a fence in need of repair, excessive noise, unruly pets, paint peeling on the home or even a car or boat parked in front of the home that hasn't moved in weeks.Most people want to be good neighbors and may be willing to correct an issue once it is brought to their attention. A practical, but possibly confrontational, solution is to contact the responsible person and describe your perception of the issue. However, they may not always agree with the same urgency and it might be necessary to seek other remedies.An owner-occupant may be more sympathetic to the neighbors and willing to correct the issue. If you think the home might be a rental property, check with the county tax records to identify the owner. They may be unaware of the situation and welcome the notification to…

Flag Protocol

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The American flag is obviously a symbol of our country but it has come to remind us of every man and woman who has fought for the freedom that we enjoy. The emotions that are stirred by images of our flag can run from happiness to sadness to trust and everything in between.Most of us learned American flag etiquette or the Flag Code when we were young but occasionally, it is a good idea to review the guidelines so that the flag is treated with the respect it deserves.The U.S. flag should not be flown at night unless a light is shown on it.The U.S. flag should not be flown upside down except as a distress signal.The flag should never touch the ground.A U.S. flag should be displayed at the peak of the staff unless the flag is at half-staff in mourning.When displaying multiple flags of a state, community or society on the same flagpole, the U.S. flag must always be on top.When flown with flags of states, communities, or societies on separate flag poles which are of the same height and in…

Second Guessing Price

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Imagine a homeowner consulting with their agent about the price to place on their home. The agent suggests that the market data indicates that $200,000 to 210,000 would produce a quick sale by pricing it properly. The owner puts a $210,000 price on the home.The first person who looks at the home offers $205,000. When the seller receives the offer, he comments that he thinks he priced the home too low and counters for  full price. The counter-offer is rejected, the home stays on the market and at the end of the first month when based on market conditions, the home should be sold, no other offers have been made.It may be human nature that when an offer is received so quickly, the first thought to come to mind is that it was priced too low. A more appropriate thought might be that it was priced correctly. In some cases, when a home comes on the market, there is increased competition (real or perceived) among the buyers waiting for the "right" home to come on the market. …

A Home for Tomorrow

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As people near or enter retirement, one of the decisions that typically comes up is whether to sell their "big" home and buy a smaller one. If you know anyone who has been faced with that situation, selling one home and buying a smaller one may not save enough money to make it worthwhile.There are sales expenses on the property being sold and acquisition costs on the replacement home. Generally speaking, homeowners may not mind a home with less square footage, but they usually don't want to give up amenities or locations that they've become accustomed.After a little number crunching, the move may not make enough difference in savings and they end up staying in their current home even if it doesn't fit their needs anymore.What if while this couple were still in their peak earning years, they acquired a home in an area where they would consider retiring and rent it during the interim. They could put it on a 15-year mortgage and possibly, even accelerate the prin…

Assumptions May be an Alternative

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For the last 25 years, most buyers have gotten a new mortgage or paid cash when purchasing a home. For a practical reason, owner-occupant buyers have another alternative: assuming a lower interest rate existing FHA or VA mortgage.In the late 80’s, both FHA and VA began requiring buyers to qualify to assume their mortgages. Prior to that, good credit or even a job wasn’t required. The real reason there haven’t been significant numbers of assumptions in the past 25 years is that interest rates have been steadily going down. If a person had to qualify, they might as well do it on a new loan and get a lower interest rate.Even though mortgage money is currently attractive and available, it is at a four-year high. When interest rates on new mortgages are higher than the rates of assumable FHA and VA mortgages originated in the recent past, it may be more advantageous to assume the existing mortgages.  Conventional loans have due on sale clauses that prevent them from being assumed at t…

Overlooked Recordkeeping

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Homeowners are familiar that they can deduct the interest and property taxes from their income tax returns. They also understand that there is a substantial capital gains exclusion for qualified sales of up to $250,000 if single and $500,000 for married filing jointly. However, ongoing recordkeeping tends to be overlooked. New homeowners should get in the habit of keeping all receipts and paperwork for any improvements or repairs to the home. Existing homeowners need to be reminded as well, in case they have become lax in doing so.These expenditures won't necessarily benefit in the annual tax filing but may become valuable when it is time to sell the home because it raises the basis or cost of the home.For instance, let's say a single person buys a $350,000 home that appreciates at 6% a year. Twelve years from now, the home will be worth $700,000. $250,000 of the gain will be exempt with no taxes due but the other $100,000 will be taxed at long-term capital gains rate. A…

Costs More - Takes Longer

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The one experience that homeowners can agree upon after completing a remodeling project is that it costs more and takes longer than expected. It doesn't really matter that you researched, planned, and received multiple bids, it will, invariably, cost more and take longer than you originally anticipated.Replacing floorcovering or painting is a project that a homeowner can easily get bids and contract with the workmen directly. A new level of complexity occurs when the project involves more specialized contractors, like plumbers, electricians, carpenters, counters, and others.Now, a homeowner is faced with dealing with one general contractor who will run roughshod over the sub-contractors or make the decision to do it themselves. Typically, you'll pay more for a general contractor, but the trade-off is that they have the contacts and experience to make things go smoothly.Subs are notorious for wanting to finish their "part" of the project and move onto to the next j…

Case Study - Housing Decision During Retirement

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A couple is planning to tour the United States in a travel trailer during their first few years of retirement. They are going to sell their current home now and purchase another home when they finish their travels. An interesting exercise is to determine the optimum time of selling the home: now or when they're ready to buy their replacement home.If they intend on traveling for more than three years, then, it may be a good decision to sell prior to the sojourn to avoid paying taxes on the gain in their home. IRS allows for a temporary rental of a principal residence while still keeping the $250,000/$500,000 capital gains exclusion intact. A homeowner must own and use a home for two out of the previous five years which means that it could be rented for up to three years, but it would need to be sold and closed before that three-year window expires.If the travel will be less than three years, there is an option of selling now or later. Using the example below, the homeowner sol…

Waiting Period After Distressed Sale

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"How long do we have to wait to qualify for another mortgage" is the question concerning people who've had a foreclosure, short sale or bankruptcy. The loan types for the new loan will differ in amounts of time to heal credit scores based on the event.The following chart is meant to be a general guide for how long a person might have to wait. During this waiting period, it's important that the person be current on all payments and maintains a history of good credit.A recommended lender can give you specific information regarding your individual situation and can make suggestions that will improve your ability to qualify for a mortgage. This process should be started before looking at homes because of the time constraints listed here can vary based on current requirements and possible extenuating circumstances of your case.
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Waiting Will Cost More

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With the first quarter of 2018 in the books, the 30-year fixed rate mortgage is nearing what Freddie Mac predicted it would be in the second quarter. If this pace continues, rates will exceed the five percent mark expected by the end of the year.The Fed has had its first of an expected three raises for this year and two more are expected in 2019. While these rates are not directly related to mortgages, they certainly have an effect.Delaying the decision to purchase or refinance could be an expensive missed opportunity. A $270,000 mortgage at 4.44% has a principal and interest payment of $1,358.44 per month. If the rate were to rise one-percent in the next twelve months, the payment would be $1,522.88.The $164.44 increase would cost a homeowner an additional $13,812.97 in seven years and close to $60,000 over the full term of the loan.The question facing people is "what would you spend $164.44 each month if you had acted sooner to get the lower rate?"If you're curious…

FHA Advantages

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The Federal Housing Administration, operating under HUD, offers affordable mortgages for tens of thousands of buyers who may not qualify for other types of programs. They are popular with both first-time and repeat buyers.The 3.5% down payment is an attractive feature but there are other advantages:More tolerant for credit challenges than conventional mortgages.Lower down payments than most conventional loans.Broader qualifying ratios - total house payment with MIP can be up to 31% of borrower's monthly gross income and total house payment with all recurring debt can be up to 43%. There is a stretch provision taking it to 33/45 for qualifying energy efficient homes.Seller can contribute up to 6% of purchase price; this money must be specified in the contract and can be used to pay all or part of the buyer's closing costs, pre-paid items and/or buy down of the interest rate.Self-employed may qualify with adequate documentation - two year's tax returns and a current profit…

Standard or Itemized

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Taxpayers can decide each year whether to take the standard deduction or their itemized deductions when filing their personal income tax returns. Roughly, 75% of households with more than $75,000 income and most homeowners itemize their deductions.Beginning in 2018, the standard deduction, available to all taxpayers, regardless of whether they own a home, is $24,000 for married filing jointly and $12,000 for single taxpayers.Let's look at an example of a couple purchasing a $300,000 home with 3.5% down at 5% interest. The first year's interest would be $14,630 and property taxes are estimated at 1.5% of sales price would be $4,500.The interest and property taxes would provide a combined total of $19,130 which is less than the $24,000 standard deduction. Unless this hypothetical couple has other itemized deductions like charitable contributions that would make the total exceed $24,000, they would benefit more from taking the standard deduction.If the mortgage rate were at 8%,…

Inventory Continues to be a Challenge

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In any given market, inventories fluctuate based on supply and demand considering area and price range. The National Association of REALTORS considers a balanced market to be a six-month supply of homes.If it takes longer than six months to sell, it is thought to be a buyer's market and less than six months, a seller's market. Most buyers and sellers probably feel a balanced inventory is more like three months' supply of homes. The inventory of existing homes has been reduced to approximately 1.5 million houses which is 10.3% lower than a year ago. According to the Federal Reserve Bank of St. Louis there are 5.7 months' supply of new homes currently on the market in the U.S.Inventory has a direct impact on price. When demand is constant, but inventory is reduced, price tends to increase because the same number of people are trying to buy a smaller than normal number of homes.As easy as it is to recognize the signs of spring, one should be able to spot the direction…

Your Refund Could be the Difference

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One of the silver linings to filing your income tax return is finding out that you are going to receive a refund. If you happen to be one of these fortunate taxpayers, your next decision is what to do with it. With the average tax refund around $3,000, it could be the difference that makes a home a reality sooner rather than later.Many would-be buyers think it takes 10% or more down payment to purchase a home, but actually, it can be much less. There are VA and USDA mortgages that have no down payment for qualified buyers. FHA has a 3.5% down payment program and FNMA has 3% down payment mortgages for qualified creditors.Closing costs for originating new mortgages can easily range from two to three percent of the purchase price but most lenders will allow the seller to pay part or all of them based on the agreement in the sales contract.While the average tax refund might not cover the down payment on the median price home, it certainly helps. Your refund could make it as simple as…