SHOULD I BUY NOW OR WAIT?
Are you considering investing in real estate but unsure about the right time to make a move? The decision of whether to buy now or wait can be a challenging one, as it involves various factors that impact the housing market. In this blog post, we will explore the current state of the market, discuss the importance of considering the neighborhood, and provide a price comparison for a single-family home with 3 bedrooms and 2 bathrooms.Let's start by examining the market update. Currently, the real estate market is experiencing a period of high demand and low inventory. This means that there are more buyers looking for homes than there are available properties. As a result, home prices have been steadily increasing over the past year. If you decide to buy now, you may face higher prices due to the competitive nature of the market.On the other hand, waiting for a year may give you some advantages. It is difficult to predict the exact trajectory of the housing market, but some experts believe that there might be a slight cooling off period in the near future. This could potentially lead to a decrease in home prices or an increase in inventory, providing buyers with more options and potentially more negotiating power.When contemplating whether to buy now or wait, it's crucial to consider the neighborhood where you plan to purchase a home. Neighborhoods can have a significant impact on property values and overall quality of life. Research the area thoroughly, considering factors such as school districts, amenities, crime rates, and future development plans. If you find a neighborhood that meets your criteria and fits your lifestyle, it might be worth buying now rather than risking losing out on a property in that location.As for the price comparison of a single-family home with 3 bedrooms and 2 bathrooms, let's analyze the current market situation. Suppose the average price for such a home now is $300,000. If the market experiences a slight decline, the home's value might drop to $280,000 in a year. However, if the market continues to soar, the price could increase to $320,000 or more within the same timeframe. Therefore, waiting may save you some money, but there is also a risk of paying more in the future.In conclusion, deciding whether to buy now or wait depends on various factors such as the current market conditions, the neighborhood you desire, and your long-term goals. While waiting might provide some advantages, such as potential price decreases, it also carries the risk of rising prices. Take the time to research and consult with real estate professionals to make an informed decision that aligns with your preferences and financial capabilities. Happy house hunting!
HOME INSPECTION DEBACLES
Closing on a new home can be very exciting, but sometimes you encounter inspection debacles that can break the deal. As a seller, inspection surprises can catch you off-guard forcing you to spend thousands before you can close. As a buyer, these surprises may prevent you from signing off on the home of your dreams. So, as you can imagine, the home inspection is one of the bigger points of contention in a real estate deal. With so much up for negotiation, the home inspection raises many questions. For example, what are mandatory repairs? And, who must pay for these repairs? WHAT ARE MANDATORY REPAIRS? Legally, there is no such thing as a “mandatory” repair after a home inspection. Some states have an “as-is” contract that releases the seller from any responsibility to make repairs. The buyer accepts the property in its current condition, but has the right to walk away from the deal if too many issues turn up. However, requirements that do need to be met by home sellers are largely dependent on three factors: The Purchase Agreement: Standard purchase agreements generally contain a home inspection contingency that allows the homebuyer to back out of the deal should the inspection turn up any major issues. Lender Requirements: Some lenders, particularly those that offer government loans, only approve mortgages on homes that meet their standards for safety, livability, and mandate that certain issues be addressed before closing. These lenders will have an appraiser inspect the property and appraise the value of the home before a deal can be made. Local Regulations: Some areas of the country have particular items that the seller of a home is responsible for before a sale can take place. For example, if a home inspector finds home improvements the seller made not to code or without securing a permit, the local building official will hold the seller liable. They will require the seller to bring the improvements up to code and pay increased permitting fees. Inspections can turn up an array of concerns, from very minor cosmetic issues to more severe issues that prevent the home from being inhabitable. With that said, home inspectors will qualify anything structurally or mechanically deficient, unsafe, not functioning properly, or not in accordance with a state’s standards. These need to be made top priority, and may include: Structural: Major structural hazards or against building code violations. Foundation: Damp or wet crawlspaces, windows and doors that show uneven gaps, sloping floors, and cracked concrete are indications that a home’s foundation is in need of repair. Pests: When looking through the home for any pests (bugs, small rodents, etc.), the biggest issue to keep an eye out for is termite damage. Water: Standing water in the basement, water stains on the ceiling, poor water pressure or leaks, and drainage issues could indicate bigger problems. Faulty Electrical: House fires are often caused by faulty electrical wiring. Mold: Mold usually indicates larger problems and need to be addressed quickly. Mold can also be a major health hazard, especially black mold, and may lead to asthma or other serious health issues. Rot: Rotting in framing or around wood decks, windows, or doors is also usually indicative of larger problems. Roofing: Roofing problems aren’t always cause for alarm, but when a home inspector sees structural damage, mold, or flashing damage, the roof is generally in serious need of repair. Toxic or Chemical Hazards: These may include a positive asbestos or radon test, a sure sign that your home has a significant indoor air pollution problem, or carbon monoxide leaks from appliances, such as water heaters or furnaces. WHO PAYS FOR REPAIRS? If any of these issues arise, they need to be addressed immediately, but who bears the responsibility to pay for them? Technically, all repairs are negotiable. As the seller, you are not obligated to pay for anything, but you should disclose all known issues in good faith and work with the buyer. If you don’t, you will be at risk of losing the sale. Some options might be: Make the Repairs: If the repair requests are reasonable and you can afford to complete them, this is usually the best course of action. If the deal falls apart, you’ll be required to disclose the findings of the report when you re-list your home, and you could risk scaring off a future buyer. Give a Credit: The sellers can negotiate to lower the purchase price to account for the cost of repairs or a cash allowance. That way, the homeowner doesn’t have to manage the repairs, but still absorbs some of the cost. Some buyers also like this option, as it allows them the freedom to pick their own contractors and make sure the work is done correctly. Offer a Home Warranty: Purchasing a one-year home warranty for the buyer can be a nice option too. It will only cost you a few hundred dollars, and it gives the buyer peace of mind in case any issues come up in the first year after closing. This is especially appealing for inspection findings that aren’t necessarily failing items, but aging systems that will need to be replaced within the next few years. Barter: You can always offer to barter with other items, like furniture that wasn’t originally included but the buyer might want, or appliances you weren’t planning on leaving behind.
CLOSING COSTS
As a homebuyer, it’s easy to get caught up in the excitement of making plans for your new home. You have accounted for the mortgage payments, thought about décor and color schemes, and planned where every piece of furniture will go. But, there are still some very important transaction details you may have overlooked, such as the countless transaction fees charged to buyers, known as Closing Costs. These costs can add up quickly and catch you by surprise. Therefore, it is imperative to understand what each fee covers, how you can reduce or eliminate these fees, and how much you may need to pay. Closing costs are unavoidable when buying (or refinancing) a home. However, understanding what these costs cover, ensuring you’re getting the best rates, and budgeting for them will make for a smoother closing process. WHAT ARE CLOSING COSTS? Closing costs are standard fees collected to pay the various parties involved in processing your loan and transferring ownership of the house to you. Once you submit your loan application, your lender is required to provide you with a Loan Estimate. This estimate is legally binding and will outline all fees, the interest rate, and any other costs to close your loan. Review it carefully and if you have questions, be sure to ask your lender, the title company, or your real estate agent to clarify. Three business days prior to closing, your lender will provide a Closing Disclosure for final review. This will show the original estimated closing costs and final closing costs, as well as indicating the difference if costs were adjusted. If you see new fees that were not included in the original loan estimate, or notice that your closing costs are significantly higher, immediately seek clarification with your lender and/or real estate agent. While these figures might fluctuate by closing day, there shouldn’t be any big surprises. HOW MUCH ARE CLOSING COSTS? In general, the total closing costs range between 2% to 5% of the home’s purchase price, and will vary depending on state, loan type, and mortgage lender. Several factors influence your closing costs, and as a result, will vary from one home purchase to the next. It is best to estimate your closing costs at the high end of the range, and hopefully you will be left with extra money. There are many fees that make up the final closing costs when buying a home, most of which do fall on the buyer. PROPERTY-RELATED FEES Appraisal Fee: It’s important for a lender to know if the property is worth as much as you intend to borrow. The average cost of an appraisal by a certified professional appraiser ranges from $300-$400. Home Inspection: Most lenders require a home inspection, especially if you’re getting a government-backed mortgage, such as an FHA loan. Home inspection fees range from $300-$500. LOAN-RELATED FEES Application Fee: This is cost of processing a request for a new loan, and includes fees for credit checks and administrative expenses. The application fee varies depending on the lender and the amount of work it takes to process your loan application. Assumption Fee: If the seller has an assumable mortgage and you take over the remaining balance of the loan, you may be charged a variable fee based on the balance. Attorney Fees: Some states require an attorney to be present at the closing of a real estate purchase. The fee will vary depending on the number of hours the attorney works for you. Prepaid Interest: Most lenders require buyers to pay the interest that accrues on the mortgage between the date of settlement and the first monthly payment, and will depend on your loan size. Loan Origination Fee: Also known as an underwriting fee, administrative fee or processing fee, the loan origination fee is a charge by the lender for evaluating and preparing your mortgage loan. This can cover document preparation, notary fees, and the lender’s attorney fees. Expect to pay about 0.5% of the amount you’re borrowing. Discount Points: By paying discount points, you reduce the interest rate you pay over the life of your loan, which results in more competitive mortgage rates. However, paying points is worthwhile only if you plan to stay in the home for a long time. Otherwise, the upfront cost isn’t worth it. Mortgage Broker Fee: If you work with a mortgage broker to find a loan, the broker will usually charge a commission as a percentage of the loan amount. The commission averages from 0.5% to 2.75% of the home’s purchase price. MORTGAGE INSURANCE FEES Mortgage Insurance Application Fee: If you make a down payment of less than 20%, you may have to get private mortgage insurance (PMI). PMI protects the lender in case you default, and the application fee varies by lender. Upfront Mortgage Insurance: Some lenders require borrowers to pay the first year’s mortgage insurance premium upfront, while others ask for a lump-sum payment that covers the life of the loan. Expect to pay from 0.55% to 2.25% of the purchase price for mortgage insurance. FHA, VA, and USDA Fees: If your loan is insured by the Federal Housing Administration, you’ll have to pay FHA mortgage insurance premiums; if it’s guaranteed by the Department of Veterans Affairs or the U.S. Department of Agriculture, you’ll pay guarantee fees. PROPERTY TAXES, ANNUAL FEES, AND INSURANCE Property Taxes: Buyers typically pay two months’ worth of city and county property taxes at closing. Annual Assessments: If your condo or homeowners’ association requires an annual fee, you might have to pay it upfront in one lump sum. Homeowners Insurance Premium: Usually, your lender requires that you purchase homeowner’s insurance before settlement, which covers the property in case of vandalism, damage, etc. The amount varies depending on where you live and your home’s value. TITLE FEES Title Search Fee: A title search is conducted to ensure that the person selling the house actually owns it, and that there are no outstanding claims or liens against the property. Title search fees are about $200, but can vary among title companies by region. The search fee may be included in the cost of title insurance. Lender’s Title Insurance: Most lenders require a loan policy. This protects them in case there’s an error in the title search and someone makes a claim of ownership on the property after it’s sold. Coverage lasts until the loan is paid off. Owner’s Title Insurance: You should also consider purchasing title insurance to protect yourself in case title problems or claims are made on your home after closing. The owner's coverage lasts as long as you or your heirs own the property. CAN I REDUCE CLOSING COSTS? You might be overwhelmed and feel like you can’t afford all of these fees in addition to the down payment, moving expenses, etc. If you want to reduce your closing costs, it may take some leg work but it’s possible, especially in a competitive housing market. As a buyer, you can negotiate prices and fees with any party involved in the purchase process to reduce closing fees. In some cases, the seller may be willing to cover some or all of the closing costs to finalize the purchase. You may find you are better off in the long run by investing time before closing to negotiate lowering your costs wherever you can. In addition, consider the following options: Research First-time Homebuyer Programs: These programs specifically serve first-time homebuyers, especially buyers with moderate and lower incomes. A first-time homebuyer is anyone who has not owned a home in the last three years. So, even if you’ve owned a home previously, you might still qualify for one of these programs as long as you have not owned a home recently. Use Monetary Gifts: Homebuyers can also use monetary gifts from friends and family to pay for closing costs. Ask your lender about any gift letter requirements and limits on amounts. Shop Around: There are significant savings when you compare fees from lender to lender, and find the most competitive rates. This also applies to third-party services, such as homeowners’ insurance and title companies. Schedule End-of-Month Closing: A closing date near or at the end of the month helps cut down on prepaid daily interest charges. Appeal to the Seller for Help: You might be able to get a seller to either lower the purchase price or cover a portion of your closing costs. This is more likely if the seller is motivated, or the home has been on the market for a long time with few offers. Negotiate Loan-Specific Fees: If you notice duplication or suspect a lender has added unnecessary fees, known as “junk fees,” to your loan, be sure to ask the lender to remove or reduce these fees. Roll Closing Costs into Your Mortgage: The most cost-effective way to cover your closing costs is to pay them out-of-pocket as a one-time expense. However, if that’s not an option, you may be able to finance them by folding them into the loan, but you’ll pay interest on those costs through the life of the mortgage. Therefore, do this only as a last resort.
THE APPRAISAL PROCESS
Whether you’re buying a new house, selling a house or refinancing an existing mortgage, a home appraisal is a key component of each transaction. Understanding the appraisal process and how it impacts your home’s value is extremely important. The more you understand, the smoother the transaction will be. WHAT IS A HOME APPRAISAL AND WHY IS IT IMPORTANT? A home appraisal is an independent and impartial analysis of a home and its value, and are often a key contingency in contracts. Therefore, regardless of your role, appraisals are an important piece for all parties involved in the transaction: the lender, homebuyer, seller, and homeowner. For the Lender: Appraisals are in place to protect the lender's interests, assuring them that they won’t lend a borrower more than a property is worth. For the Homebuyer: An appraisal is important to the buyer because it provides proof that the property has been fairly priced, and will hopefully appraise for at least the offer price they submitted to the seller. If the appraisal comes in at or above the contract price, the transaction proceeds as planned. If the appraisal comes in lower than their offer, it can delay or derail the transaction. The buyer will have to renegotiate the price with the seller, as the lender won't lend a buyer more than the home is worth. For the Seller: And likewise, the appraisal is important to the seller because it tells them how much their home is worth (the fair market value of their property) and if they priced their home correctly. A low appraisal, if accurate, will likely mean the seller has to renegotiate with the buyer to either drop their price to the appraised value or see if the buyer is willing to pay the difference out-of-pocket. If priced too low, the seller may not recover all the equity they have acquired while owning the property, essentially leaving money on the table. For the Refinancing Homeowner: If a homeowner is refinancing a conventional mortgage, a low appraisal can prevent them from doing so. The home must appraise at or above the amount needed to refinance for the loan to be approved. PREPARING FOR A SUCCESSFUL HOME APPRAISAL As the seller, it is imperative that you prepare for a successful appraisal. To make a good first impression, you must show the appraiser that you have a well-maintained home. If an appraiser sees a house that looks junky or unkempt, they’ll have reason to believe that the house itself hasn’t had proper maintenance, which would lower the value of the property. Although appraisers are required to follow strict regulations, much of their job is subjective. There are a few things you can do to help increase your home appraisal value: Curb Appeal: Be sure the front of the house is neat and tidy. Pull weeds, mow the lawn, trim the hedges, edge the grass, plant some flowers, brush away cobwebs, and clear away leaves and debris. While you can’t necessarily put a price on curb appeal through quantitative appraisal methods, appraisers do take it into account qualitatively when reconciling the final value. Don’t water the lawn or run the sprinklers right before the appraisal, as appraisers will need to measure around the outside of your house. Touch Up Exterior Paint: Be sure the paint looks nice and clean. Appraisers will factor peeling paint into their evaluation, especially if they are doing an FHA mortgage appraisal. Declutter/Deep Clean/Stage: Declutter, deep clean, and stage each room to highlight the unique features that may elevate its value, such as a striking fireplace, crown molding or imported tiles. Repairs: Even minor repairs can make a huge difference, as an appraiser may devalue your home if it appears the home hasn’t received adequate maintenance. Go through each room and fix items, such as drippy faucets, broken windows, faulty locks or squeaky doors. Privacy During Appraisal: The appraiser will need space to take measurements and photos without any disruptions or distractions. Therefore, it’s best to take young children and pets out during the appraisal process. Your agent may be present if the appraiser has any questions about your home. Renovations: Compile a list of upgrades you have made to the home, both aesthetic and functional, along with the invoices and warranties. This will help the appraiser see the extra value you have added to the home, and just may help them justify their final appraised value of the property. HOW PROPERTY VALUES ARE DETERMINED During the home appraisal process, a qualified appraiser will conduct a thorough inspection of the property, inside and out, to assess how the property compares to similar properties in the area. They will document your home’s age, construction quality, the integrity of your property’s roof and foundation, and even the health of your gutters and siding. They will study the floorplan, number of rooms, assess if there is an attic, basement or crawlspace, and even the size of your driveway. The appraiser will measure and photograph each room, and the lot the property sits on. External factors like your home’s proximity to good schools, community centers, and other conveniences are considered as well. Housing trends, neighborhood demographics, and how the home fits into the neighborhood also help to determine the property’s appraisal value. The appraisal can take from 30 minutes to three hours. Once the appraiser has all the information they need, they will write up their findings in the Uniform Residential Appraisal Report form and will then send the completed report to the buyer’s lender. WHEN A HOME FAILS TO APPRAISE Typically, homes will appraise at or above the contract value 80%-90% of the time, depending on the market. But if the appraisal comes back lower than expected, there are a few reasons it could have failed to appraise: Contract Price is Over Market Value: In rising real estate markets, it’s common for buyers to compete for a house and drive up the price above market value. At that point, the biggest mistake sellers make is assuming that the buyer will bring extra cash to the table as needed. This is why pricing your house correctly from the start is key. Appraiser Finds Issues Impacting Value: In some cases, an appraiser will identify an issue with the property that must be factored into the appraisal. For example, a room addition without a permit or repairs that are required to be corrected before a house can appraise. An Inexperienced Appraiser: There are a lot of factors that go into appraising a property accurately. "Geographic competency" or an appraiser's knowledge of the local area can make a big difference in whether an appraisal reaches true market value of a home. CAN YOU CHALLENGE A LOW APPRAISAL? If the appraisal does come back lower than you anticipate, you may have a few options: Negotiate: Between a down payment and closing costs, the buyer may not be able to afford the difference between what their lender will cover in a mortgage and their offer price. In this case, the seller may have to reduce the asking price to match the appraisal or meet somewhere in the middle, where ideally, both parties find a happy compromise to save the sale. Submit a Reconsideration of Value: The challenge to the appraised value has to originate from the lender, and better yet if you can bring evidence to the table, then you can submit what’s called a reconsideration of value to the appraiser. For example, there are two identical homes in the same location but the appraiser pulled the lower value of the two to appraise your home. Turns out one of them was a divorce sale and that’s the only reason it sold for less. Then, you might have a case that would prompt an ethical appraiser to own up to the mistake and modify their report. Order a Second Appraisal: A second opinion could lead to a valuation that’s closer to the buyer’s offer price, but it might require the buyer to secure a different lender. If the seller is pushing for a second opinion, the seller would have to pay for it. When everything goes smoothly, the home appraisal is just another box to check on the closing checklist. Regardless of which situation you encounter in your home buying, selling, or refinancing experience, a basic understanding of how the appraisal process functions can only work in your favor, especially if you're buying a home for the first time.
TOP MORTGAGE MYTHS
Purchasing a home is one of the largest and most expensive investments you will ever make, and can be an overwhelming experience if you aren’t familiar with the process. Because buying a home and getting a mortgage go hand-in-hand, it’s important to educate yourself to avoid feeling intimidated. Home loans aren’t always easy to understand, and there are a number of commonly-believed mortgage myths that can make the process even more daunting. It is vital to ask your mortgage loan officer about anything you don’t understand, but being aware of the biggest misconceptions about home mortgages will help to relieve some of the stress. MYTH: IT'S LESS EXPENSIVE TO RENT A HOME VS. OWNING A HOME Although it may seem less expensive to rent in the beginning, it can actually be much costlier in the long run. The monthly rent payment may be less than a monthly mortgage payment, but it's important to remember that you are building equity in your home when paying a mortgage; it is an investment in your future. Rent also has the potential to rise each year, whereas with a fixed-rate mortgage, your monthly principal and interest payments will stay the same for the life of the loan. In addition, owning a home can include many tax benefits. MYTH: INCOME, CREDIT, DEBT, AND BANKRUPTCY CAN BE DEAL BREAKERS Income - While the income a potential borrower makes is important, other factors such as credit, debt, and financial history can impact how much a homebuyer is eligible to borrow. Simply earning a decent living is not enough to be approved for a loan. On the flip side, you can earn a modest income and still be approved, based on the outlying factors. Credit - Credit history is a determining factor in your ability to be approved for a home loan, and additionally will impact the interest rate you are offered. However, you don't need perfect or even excellent credit to buy a home. There are many programs available to borrowers with lower credit scores. Debt - Most people have some kind of debt, from student loans and auto loans to credit card debt. One of the first things that lenders look at when they determine whether you can afford to buy a home is your debt-to-income (DTI) ratio. Your DTI ratio is a percentage calculation that represents the percent of your monthly income that goes toward debt and recurring expenses. The higher your DTI ratio, the riskier you are as a mortgage candidate. However, if you have a DTI ratio of less than 50%, you'll usually be able to get a mortgage loan, even if you have debt. Bankruptcy - Depending on whether a bankruptcy is a Chapter 7 or 11, there are a minimum number of years that must pass before you'll be able to secure mortgage financing. If you do have a bankruptcy or judgments, be sure to discuss the necessary steps to be able to secure financing in the future with an experienced mortgage consultant. MYTH: APPLYING FOR A MORTGAGE WILL HURT YOUR CREDIT It is true that whenever you apply for a new loan or line of credit, your credit score will take a small hit. However, this temporary decrease will only last a short time. About 10% of your FICO® credit score comes from your recent credit inquiries. Therefore, when you apply for a mortgage loan, your score will temporarily drop, but you will likely not see this effect until after you receive your mortgage pre-approval. You can maximize your chances of getting mortgage approval by avoiding applying for new credit cards or loans in the months leading up to your mortgage application. MYTH: PRE-QUALIFICATION AND PRE-APPROVAL ARE THE SAME While they may sound similar, they are not the same. The main difference between a pre-qualification and pre-approval is the level of verification your lender requires before they provide you an estimate of how much you can afford to take out on a loan. With a pre-qualification, your lender only collects basic self-reported financial information, and no financial proof of income and debt is required. With a pre-approval, you have supplied financial information to include credit, employment, and income, and the lender has verified this information. The officer then packages the loan and submits the file to an underwriter for review. A lender will then provide you with a letter stating you've been pre-approved for a certain amount. With that letter, you'll be in prime position to make an offer when you find your dream home. However, the loan will go through formal underwriting when you go to purchase a property to ensure there are no changes to your financial situation. Changing jobs or adding additional debt are just a couple of reasons why a mortgage can be denied, even after being pre-approved. MYTH: FHA LOANS ARE ONLY FOR FIRST-TIME HOMEBUYERS Federal Housing Administration (FHA) loans are government-backed and allow lenders to issue loans with lesser credit and income requirements, compared to conventional loans. While they are a great option for first-time homebuyers, they are also available to homebuyers with lower credit scores, offering lesser interest rates and small down payment options. MYTH: THE LOWEST INTEREST RATE IS ALWAYS BEST When shopping for a home loan, there are many factors to consider. The interest rate, the cost you pay to borrow money, is important because it will affect the size of your monthly payments. It doesn’t, however, include any other fees you might be required to pay the lender for the loan, such as origination fees, closing fees, documentation fees, and other finance charges. The lowest interest rate will not always be in your best interest. Be sure to read the fine print and examine all fees. These costs vary from one mortgage lender to another, so it’s important to talk to at least three lenders to ensure you’re getting the best deal. MYTH: YOU MUST PAY 20 PERCENT DOWN Many homebuyers are led to believe they must have 20 percent of the home's purchase price saved for a down payment. While such a down payment can help lower your monthly payment, it's not a requirement. The more money you put down, the less you'll owe and the less strain you'll feel to cover your monthly mortgage payments. If you can’t afford 20 percent, there are many loan programs that do accept less. However, be prepared to pay Private Mortgage Insurance (PMI), which is added to your monthly payment to cover the extra risk the lender is taking. Other types of loans (such as VA and USDA loans) don't require PMI, but may require you to pay another type of insurance or funding fee. MYTH: YOU CAN NEVER PAY YOUR MORTGAGE OFF EARLY Some lenders may include clauses called "prepayment penalties" inside the terms of your loan. A prepayment penalty is an agreement that penalizes you if you pay off your mortgage too early. Lenders earn money on loans when you pay interest on the principal you borrow. The longer you make payments on your loan, the more money your lender gets in interest. If you pay off your loan too soon, the lender earns less money than they expected. If your loan has a prepayment penalty, it might stipulate that you cannot pay off your loan within 5 years of the date you close. If you do pay your loan off before the date stipulated in the loan terms, your lender might require you to pay any interest they would have earned upfront. This ensures that the lender earns back the money they expected when they issued your loan. Prepayment penalties are much less common than they once were. Many lenders offer loans with no prepayment penalties at all, but be sure to read the fine print or ask if you plan to pay off your mortgage early. MYTH: IF YOU ARE DENIED A MORTGAGE ONCE, YOU WILL NEVER BE APPROVED If you are turned down for a mortgage, don't panic. Paying off debts, paying bills on time, and improving credit scores can help you move from "no" to "yes" the next time you apply. If at first you don't succeed, don’t give up… work hard and try, try again!
BUY OR RENT?
It has been said that being a homeowner is the key to happiness and a big part of the American dream. In addition to being a fulfilling milestone that offers a sense of pride and accomplishment, there are several benefits to buying a home. However, choosing whether to buy or rent a home is a major decision that affects not only your lifestyle, but your financial health as well. Choosing the option that is best for you isn't just about money, it is also about comfort and your vision for your life. Following are some of the major reasons why buying a home may be a better choice than renting. A SENSE OF STABILITY & SECURITY For many, buying a home has a great deal of worth because it gives a sense of stability that renting just doesn’t provide. Buying a home provides your family a place to call their own, and the opportunity to settle in and finally put down roots in a community. Not only do homeowners gain a sense of stability when they settle into a home, but they also contribute to neighborhood stability. Homeowners are more invested in their properties, and thus, their neighborhood, which makes for a more stable and close-knit community. In addition, being a homeowner means that you'll never have to move due to factors outside of your control, such as eviction, so there is much more security. Unless the bank forecloses on your house, your home is yours until you decide to sell it. As someone who rents a home, it is possible for a landlord to evict a tenant, even if the tenant didn't do anything wrong. They own the property and may choose to sell it at any time. A SENSE OF PEACE & PRIVACY Many homeowners will also agree that there is a sense of peace and privacy that comes from owning a home. Aside from the possibility of sharing walls and having noisy neighbors, renters also have to deal with meddling landlords who have access to their private space at virtually any time. The peace and privacy that homeownership can offer is priceless. A LONG-TERM INVESTMENT Homeownership is a profitable long-term investment and a method of forced savings. When you buy a home with a 30-year mortgage and make monthly payments, a portion of that payment pays your loan down, giving you more equity in the home. Real estate appreciates over time and no other asset can build your wealth more consistently. On the flipside, as a tenant paying rent each month, you are essentially financing your landlord’s asset and building his/her wealth. So while a home is a major purchase and can be more expensive upfront, if you consider the fees that come with renting, buying and owning a home will ultimately be more inexpensive. A home is a valuable asset, and worth far more than simply just having a place to live. TAX DEDUCTIONS Owning a home is not only a long-term investment, but you can also benefit from short-term savings with annual, tax write-offs and mortgage interest payment deductions. Every penny of interest you pay on your mortgage each year is 100% tax-deductible, making it one of the best real estate tax deductions available. These deductions can often amount to significant savings, and are of course not available to renters. ESTABLISHED MONTHLY PAYMENTS When you own a home and have a fixed-rate mortgage, you’ll always pay the same amount each month, each year. However, that is not the case when you rent. The cost of rent has increased at a very fast rate throughout the country, and the trend is only expected to continue. The high cost of rent means that paying a monthly mortgage is often comparable to or even cheaper than renting a home. LOW INTEREST RATES AND DOWN PAYMENTS The debate for buying in lieu of renting only gets stronger with the low-interest rates that are currently available. Interest rates are competitively low, so now is a great time to purchase a home. What may seem like a slight difference in your mortgage rate can make a huge difference in your monthly payment. Locking into a low 30-year mortgage rate today could save you hundreds of dollars each month for decades to come. When comparing the benefits of owning vs. renting, you will find that many of the current rental rates are higher than a mortgage payment. In addition, there are loan programs and government assistance programs that can get qualified home buyers into a home with a zero dollar down payment, keeping in mind that does not necessarily include closing costs. Programs vary by lender and borrowers must meet certain requirements. Yet, if you're looking to buy a home with no down payment, look at a VA loan (for veterans, active duty military, military spouses) or a USDA loan. MAKE IT YOUR OWN As a renter, you're living in someone else's home and are therefore subject to their rules. Generally speaking, renters are usually not allowed to paint or make even more extensive changes. Some landlords may approve really nice upgrades, such as installing hardwood floors but more than likely, you will pay for the costs of the upgrade and won’t ever see that money back. If you purchase your own home, you have the freedom and full control to do what you wish without having to worry about extra fees, lease contracts, terms, and other costs associated with renting. You can do anything you want to a property that you own as long as there are no restrictive covenants in the deed prohibiting the changes or any Home Owner Association (HOA) restrictions. You can add on rooms, change the flooring, paint, redecorate, remodel the kitchen, or anything else you so desire. Make sure you receive the proper building and inspection permits for any remodeling that might require them. The flexibility that purchasing your own home provides is a seriously appealing aspect to many and a great reason to buy. EXTRA INCOME OPPORTUNITY Unlike renters, homeowners also have the opportunity to earn extra income by renting out their home, or even just a portion of it. Perhaps you decide to bring in a long-term tenant to rent out your basement, or you look at short-term tenants via renting a room on Airbnb. Everything is completely up to you…how much you charge, how often you have someone renting from you, etc. Again, where owning a home is a long-term commitment, it can prove to be an extremely valuable asset for your future. With all of the benefits of owning a home, you owe it to yourself to find out whether owning vs. renting is best for you. See why it may be the best financial decision you can make, and learn some key tips on how you can get there affordably. Taking the simple step of speaking to a qualified mortgage lender may be the smartest financial situation you make, as it can allow your family to make monthly home payments toward your own asset, instead of increasing your landlord’s wealth.
IS YOUR HOME READY TO SELL?
Choosing to sell your home is one of those crucial decisions that will have a lasting impact on your journey to financial independence. Whether you’ve sold many homes or are considering selling your first, there are many factors you need to know before putting your house on the market. Your time is valuable and your goal is to get your house sold for the highest price in the least amount of time. Selling a home can be inconvenient for your family, create stress and anxiety, and lead to thoughts of uncertainty. These feelings can be minimized if well-thought-out decisions are made, and proper preparation is taken along the way. Whether you are relocating for work, moving to a more desirable neighborhood, making room for a growing family or downsizing, you need to take the proper steps to ensure that your home is ready to sell. EXPERIENCE MATTERS: HIRE SKILLED PROFESSIONALS Often times the most overlooked step when selling a home is the importance of hiring experienced real estate professionals. By partnering with a skilled agent, sellers have the advantage of working with a professional who has expertise in promoting homes, getting your home sold for the most money in the shortest amount of time, and with the least possible inconvenience to you. Homeowners should interview a minimum of 2-3 prospective realtors, as well as other potential team members (i.e., home inspector, handyman/painter, landscaper, interior home stager, photographer, and a closing attorney) to ensure you are choosing the best team of professionals possible. Understandably, giving away a portion of your profits after a home sale can seem frustrating, but consider how much more it can cost you by not allowing these specialists to help you sell your home. TIMING MATTERS: WHEN TO LIST YOUR HOME Deciding when to sell your home is the next most important step. Although experts may say the peak season for selling a home in most housing markets across the country is typically during the spring, you must be sure that you choose a time that is most convenient for your individual situation. There are some strategies that you can put into action to help sell your home regardless of the season or current economic conditions that are out of your control. If you are more flexible in your timing, research your local housing market. Find out how many houses are currently on the market in your area and the average number of days they have been listed. It’s also helpful to look at comparable homes in your neighborhood to get a general idea of what the competition looks like. In addition, it’s important to evaluate the pros and cons of each selling time frame, and to remember that every real estate market is different. APPEARANCE MATTERS: PREPARING YOUR HOME Selling a home is not a simple process, and often a huge undertaking. However, it’s crucial that you make a good first impression for potential buyers. If you don’t make the effort to create an appealing home, it can lead to a poor first impression and can cost you thousands of dollars in the long run. Take the extra time and energy to prepare your home, you’ll be glad you did. Most buyers today will pay a premium for "turn-key" homes. They are not, for the most part, paying the big money for "fix-uppers". Pre-Listing Inspection: Before listing your home, it is a good idea to have a professional home inspector perform a pre-listing inspection. A buyer will likely make their offer contingent on an acceptable home inspection. By completing a pre-listing inspection, you can address reported issues prior to putting your home on the market. Be sure to obtain a detailed report, as well as pictures relating to anything they note in their findings. In addition, consider inspections for radon, pests, chimney, septic, and well water. Curb Appeal: Homebuyers often make snap judgments based simply on a home’s exterior, so curb appeal is very important. Start by cutting the grass, trimming the hedges, and clearing away any clutter. Consider replacing house numbers, painting the front door, planting some flowers or installing a new porch light. While significant landscaping updates don’t play a major role in a buyer’s decision- making process, it does help to avoid anything that could detract from a positive first impression. Repairs and Renovations: Take care of all those pesky repairs you’ve been procrastinating. Cracked window sills and unsightly holes in the wall can be a deal-breaker. And, while kitchens and bathrooms can increase the value of a home, you won’t get a large return-on-investment if you do a major renovation just before selling. Minor renovations, however, may help you sell your home for a higher price. New countertops or appliances may be just the kind of incentive you need to attract a buyer. In addition, one of the easiest and most cost-effective updates you can make to your home is to apply a fresh coat of neutral paint. Neutral colors also help a property stand out in online photographs, which is where most potential buyers will get their first impression of your property. Clean and Decluttered: Tidying up is a good first step, but consider hiring a regular housekeeper while your home is on the market. Tossing dirty laundry in the closet and vacuuming the floors is just not enough anymore. This gives you more time to focus on your family and life, but still ensures your home is ready to show. In addition, declutter by removing personalized photos, memorabilia, and other knickknacks. Buyers want to envision how various spaces could be used in different ways to meet their lifestyle needs and desires. Staged: Staging your home will highlight your home’s best features and compensate for its shortcomings. An un-staged home will pale in comparison to others on the market. There are many DIY simple staging tips that you can try, or again, consider hiring a professional who has the eye and training to stage your home successfully. PRICE MATTERS: SET A REASONABLE LISTING PRICE Pricing your home correctly from the start is extremely important. Avoid making emotional decisions, as the first few weeks of your listing are critical to achieving your goals, and buyers will swarm to a well-priced listing. Your house is competing against similar listings to find one of those buyers. If you live in a “hot” market, there are more buyers than sellers and prices are likely being driven up by that demand. You can often price your house more aggressively as long as you stick within reasonable price limits. In a "cold" market, buyers tend to be more selective and pricing usually needs to be at or slightly below market value to attract an offer. Don’t Pad the Bill: Once you and your agent have priced your home, resist the temptation to add the costs of sale (commission, transfer taxes, closing costs, etc.) and a "negotiating premium" to the asking price. By adding these line items to your asking price, you may just price yourself right out of the market. You will do far better generating multiple offers by not adding these items, than you will for an offer that you must "negotiate". Estimate the Potential Profit (or Loss): Once you have decided on a listing price, be sure to evaluate potential gains or losses within your acceptable price range. The selling price may be reduced by the following: real estate commissions, closing costs, title charges, government recording and transfer fees, additional settlement charges, debt obligations for existing mortgage, and home repairs (completed prior to and in order to list your home). WHAT ELSE MATTERS? Adequate Social Media Exposure: There is also a great deal of success in getting the word out about your desire to sell via social media sites (Facebook, Instagram, Twitter, etc.). Many agents also use YouTube videos, Pinterest groups, and blogs to obtain potential buyer lists and market their services. Accept All Showing Requests: Set your expectations upfront... selling a home is inconvenient. You must get your home ready, keep your home ready, and be out of your home at any given moment. Your family's routine will be interrupted by constant showing requests, day and night. Never turn down a showing request, as you won't ever know which buyer will be the buyer. Gather Important Documents: Collect important information on the major mechanics of the home, as well as any repairs and renovations that have been completed. This may include paperwork and warranty information on your roof, HVAC system, hot water heater, appliances, kitchen or bathroom remodels, window or flooring installation, and any permits pulled to conduct the work. Selling a home is likely to bring added stress, anxiety, and unwanted uncertainty. These feelings, however, will be drastically decreased if you set your expectations and the proper preparation is taken. Understanding the importance of these steps and how to make suitable decisions can make the difference between success and disaster in your home-selling experience.
HAVE YOU SCHEDULED YOUR ANNUAL MORTGAGE CHECKUP YET?
It’s a new year and a time of significant change in our world, but what about in your life? In the past year, you may have experienced shifts in employment, had a baby, been married, been divorced or reached retirement age. These are events that can completely alter the course of your life, and yet…your mortgage may have remained the same. This time of year, many of us are thinking about routine annual maintenance: annual physical exams, annual performance reviews, annual auto tune-ups, and even annual spring clean-outs. But, have you scheduled an annual mortgage checkup? Think about all of the life change you have encountered since taking out that mortgage five, 10 or 20 years ago. With that being said, a mortgage doesn't get better with time, but rather, is likely to grow stale and outdated when left unattended. It does not reflect the latest market interest rates, match your current financial needs or take into account your future plans. Therefore, it is important to evaluate your mortgage loan annually to ensure you've got the absolute best loan for your family's finances and long-term goals. A mortgage checkup is painless, and like your annual physical, is well-advised. WHAT IS A MORTGAGE CHECKUP? A mortgage checkup is an in-depth look at your current mortgage and financial situation to ensure that the existing structure maximizes your tax benefits, provides optimal cash-flow, and best suits your financial future. Market conditions fluctuate, your income and finances shift, and your household goals evolve. Given all these changes, your mortgage may need alteration as well. An experienced loan advisor will help you decide what action, if any, is best for you based on your unique situation, whether you're preparing for a significant life change, you want to improve your savings or find out if you can buy a new home. PREPARING FOR YOUR CHECKUP Simply getting a mortgage checkup doesn't require a credit inquiry or mortgage application unless the conversation leads you to a prequalification, so no need to worry about the impact to your credit report. However, to accurately assess your mortgage needs, it is imperative that you have the following information to discuss with your loan advisor as you talk over your mortgage options. Existing Mortgage Information: Be sure to have up-to-date mortgage information, such as: current home value, monthly payment, interest rate, loan term, balance, and mortgage origination year. Current Financial State: Regardless of the length of time in your existing loan, your financial state has likely changed overtime. Perhaps you have new income or employment, have taken on new long-term debts or paid off existing debts. Maybe your credit score has improved, qualifying you for a better rate. You may be able to afford a higher payment (to pay off your loan sooner) or perhaps you need to decrease your monthly obligation. Also, having a copy of your current credit report and credit score will be helpful to your advisor. Future Plans and Financial Goals: Any known significant changes could also mean additional expenses, and these factors could impact your mortgage decisions. For example, how long do you plan on living in your home? Are you getting married, having a baby, sending a child to college or planning to start a business. To more accurately assess your situation, be sure to disclose these relevant details to your advisor. THE BENEFITS OF REFINANCING If it hasn't been long since you purchased your home, or even refinanced, you may currently be in the most practical position, but only by performing a mortgage checkup will you know for sure. When reviewing your mortgage with your loan advisor, it will give you an opportunity to crunch the numbers, look at different scenarios, and decide on the best route. One of the most common and viable options your advisor may recommend is to refinance your current mortgage, which could offer many benefits. Lower Interest Rate: Refinancing your loan may help you lower your interest rate and save hundreds on your monthly payment. Throughout the pandemic, mortgage refinancing made headlines as interest rates plummeted, staying below 3 percent. As expected, rates have now begun to move upward, though they still remain in historically low territory. Refinancing at today's rate, compared to 10 years ago, could save you thousands over the life of your loan. New Loan Type: Perhaps you don't need to lower your interest rate, but you could refinance to change an adjustable-rate loan to one with a fixed rate. Shorter Loan Term: Refinancing to reduce the length of your mortgage, from a 30- to a 15-year loan, could help you pay it off sooner. Debt Consolidation: If you're dealing with a number of debts with high or growing interest rates, refinancing could also consolidate multiple loans into one home loan, with a potentially lower rate, and ultimately have the opportunity to save you money in the long run. Home Equity: Cash out some of your home's equity for major expenses like college, medical bills, or home upgrades and renovations. Eliminate PMI: If you are locked into Private Mortgage Insurance (PMI), find out if you can request early cancellation and potentially save hundreds a month on this added cost. Savings. Security. Peace of mind. That's what you can expect when you reach out to your loan advisor and schedule your annual mortgage checkup. With all the change going on in our world, chances are the loan that was working for you a year ago is no longer relevant. And like your health, it's important to make sure you evaluate your mortgage loan at least annually to ensure you've got the absolute best loan for your family's finances and long-term goals.
DOWNSIZING YOUR HOME WITH A PLAN
Selling your home and moving into a new house is often bittersweet. You are eager for change, but anxious to leave a home filled with so many memories. Downsizing can be even more difficult, but can be the right decision depending on your goals. People opt to downsize for many reasons, and in different stages of life. You may find that purchasing a smaller home makes sense if you want to save money and get rid of unused space, are moving from the suburbs to a big city, are an empty-nester, have recently been divorced or lost a spouse. A smaller home typically means not having enough space for all of your belongings and can lead to stress and anxiety, especially for those who have a great deal of stuff and may have a difficult time separating from it. However, downsizing is an opportunity to refresh and start anew. If you plan carefully, you can create a comfortable and stylish environment, without sacrificing meaningful belongings. CONSIDER YOUR FUTURE NEEDS & PLAN AHEAD In order to effectively downsize, you need to envision the big picture. You should have a general idea of your future space and lifestyle. How many bedrooms will you have? Do you need an office? Will you be entertaining and need a good-sized kitchen and living area? Knowing these details will help you determine what you should keep and eliminate. By knowing your intentions and setting your goals ahead of time, you’ll have a much clearer view of what items will fit into your new lifestyle and home. START EARLY AND PACE YOURSELF You are keenly aware that this is going to be a huge undertaking, but you don’t need to tackle it all at once. Simply start early and set goals; plan to do a little bit each day, giving yourself daily and weekly completion goals. Downsizing is a chance to reset and revamp, so don't wait to start making decisions. Start the downsizing process as soon as possible to give yourself time to properly sort through your home without feeling stressed. A general rule of thumb to guide you is to begin the process at least 3-5 months before you plan to move, but the sooner the better. In addition, try to document the progression by taking before and after photos. Aside from building good habits, it will encourage you to reminisce upon the memories you’ve made in your home. FOCUS ON ONE ROOM AT A TIME The thought of decluttering and organizing your entire home is exhausting, so it is crucial that you focus on one room at a time. By breaking the project into multiple, more manageable projects, you will feel less anxiety and more goal-oriented. Larger, more cluttered spaces can present unique challenges. So choose a room and create an open work space for you to begin. Then, break the room into even smaller tasks to ensure that you stay on track. For example, sort through the overabundance of DVDs and video games, tackle the dreaded “junk drawer”, pick the shoes you wish to give away and to keep, attack your dresser drawers, organize small kitchen items, and eliminate items for which you may have multiples. Decluttering: When it’s time to determine what items you are prepared to part with, be sure to use a strict “yes” or “no” strategy. Avoid “maybes”, as they add up quickly and then all you’ve accomplished is moving your items from one spot to another. You have opted to keep the “yes” items and then must decide how to handle the “no” items. Although you may no longer need or want these things, they would more than likely be useful to someone else. Therefore, a common set of “no” options would be to: Sell or Donate: Reusable furniture, housewares, clothing, and other items in good condition could be sold at a garage sale or online. Be sure you use proper safety and anti-fraud precautions when using apps to sell or buy items online (guidelines can be found on the organization’s website or app). You may also opt to donate to non-profits or charities, such as Goodwill, Salvation Army, ARC or Habitat for Humanity. Depending on your location, some of these organizations will pick-up your items, making the task that much easier. Trash or Recycle: Anything damaged or worn beyond repair should be thrown away or recycled. Pass Down: Sentimental furniture and décor can be passed down to family members or friends. Organization: Make the effort to leave your space more organized than you found it. Not only will it improve your day-to-day living, but it will also ensure that packing is much easier. Organize smaller items in your drawers by using trays and boxes. These will pack and transfer easily from one home to another. Don’t pack jewelry, money or other valuables, keeping those close by during your move or temporarily placed in a vault or bank lockbox. Documents: Paperwork and files can really build up over the years. Shred any statements or documents that you have online access to, as well as any tax-related paperwork more than seven years old. Other documents can be scanned and organized neatly into digital files, but be sure you back up these files on a separate drive. For important physical documents (birth certificate, passports, etc.), make sure you have a fireproof safe to store them in your new home. Preserving Memories: You will likely have many sentimental items that may not make sense to pass down or take to your new home. Therefore, do your best to preserve the memories. For example, photo albums take up a lot of room and photos deteriorate over time. Digitize the photos to save space and easily share them with family. Purchase a digital frame and enjoy all of your photos in a rotating slideshow. For other mementoes, take pictures of them and add relevant details (where it came from, what it signifies, etc.). Photograph or scan sweet notes and cards, paper mementos like tickets or playbills, and your child’s artwork. Create a “treasure” photobook of these items. Give keepsakes a new life by scrapbooking old movie stubs, letters, and photos, creating a fun record of your experiences. Put your memories in one place to enjoy by making three-dimensional artwork using a shadowbox. Or, repurpose or upcycle your keepsakes and incorporate into your new space. For example, turn your favorite t-shirt collection into a quilt that you can use or convert that old toy chest into usable seating or blanket storage. RECRUIT HELP Know what your strengths and weaknesses are. If you're a strong organizer and don’t need help to sort and pack your belongings, perhaps you’ll just need some muscle power on moving day. But if you feel that the downsizing and moving processes are too much for you to handle or you simply don’t have the time, don’t hesitate to recruit some help. If you have a hard time getting organized or letting go of items, ask friends or family members to assist you. Or, consider hiring a professional organizer who can offer an objective opinion when you're trying to decide what you really need to eliminate or donate to charity.> Downsizing your home is an emotional process, and you will discover items you haven’t seen in years. Give yourself some time to reminisce, and then start making decisions. Keeping your space limitations in mind, take with you what is truly valuable. Only you can decide what you can and can’t live without.> Once you’ve completed your move, you’ll be able to enjoy your new place surrounded by the feelings of newness and home.
THE IMPORTANCE OF YOUR CREDIT SCORE AND WAYS TO IMPROVE IT
Your credit score is one of the most important measures of your financial health. In a quick glance, your score tells lenders how responsibly you use credit and your likelihood of repaying new debt. Your credit score if checked for a variety of reasons, including home loans, property or auto rentals, a new job, credit card, insurance, cell phone service, and cable/utilities. The better your score, the more likely you will be approved for new loans or lines of credit. Individuals with higher credit scores are considered low-risk borrowers and are offered the best available interest rates, promotional fees, and perks, saving them hundreds of thousands of dollars over the course of their lifetime. On the contrary, individuals with poor credit scores are considered high-risk borrowers, receive higher interest rates and struggle to get approval for housing or even life insurance. It is vital to understand these scores, what factors impact you the most, and how you can improve your score. CREDIT SCORES AND RANGES Credit scores are three-digit numbers (on a scale of 300 to 850) calculated from information about your credit accounts. That data is gathered by credit bureaus, the three largest being Equifax, Experian and TransUnion, and built into your credit reports. Your score can vary depending on which credit bureau supplied the credit report data used to generate it. Not every creditor sends account activity to all three bureaus, so your credit report from each one is unique. Creditors set their own standards for what scores they'll accept, but these are general guidelines: 720 and up is considered excellent 690 - 719 is considered good 630 - 689 is considered fair 629 and below is considered poor Fortunately, when it comes to financing a mortgage loan, there are many programs that exist to meet a variety of credit requirements: VA, FHA, and USDA loans all have low- or no-down payment options, with flexible credit score minimums, enabling most people to have a credit score strong enough to buy a house. In addition to your credit score, your income and other debts may play a role in a creditor’s decision about whether or not to approve your application. FACTORS THAT AFFECT YOUR CREDIT SCORE The two main credit scoring models, FICO and VantageScore, consider many of the same factors, but weigh them a bit differently. For both scoring models, the factors that matter most are: Payment History (35%): Payment history, and your ongoing consistency in making on-time payments, has the biggest impact on your credit score. Late payments on all your previous and current credit accounts lower your score, and a mistake can be costly. Late payments of 30 days or more past the due date will stay on your credit history for years. If you pay your debts responsibly and on-time, it will work to your advantage in a significant way. Credit Utilization (30%): Credit utilization, or the amount you currently owe, is weighted almost as significantly as your payment history. The goal is to keep your balance-to-limit ratio to less than 30 percent, but the lower it is, the better. Length of Credit History (15%): Your credit score is also impacted by how long you’ve had your credit accounts. The longer you’ve had active credit and made timely payments, the better your score will reflect. Where you can’t necessarily control how long you’ve had credit, you can focus on being as responsible as possible with the way you manage your money. Credit Mix (10%): Having a variety of credit types such as, home/auto loans, credit cards, and personal lines of credit also have a minor positive influence in calculating your score. It’s not, however, advised to open several new accounts for this reason. New Credit (10%): Whenever you open a new line of credit, an inquiry is performed that can negatively affect your score. Shopping for a home, however, is the only exception. All mortgage inquiries within a 30-day period count as a single pull. WAYS TO IMPROVE YOUR CREDIT SCORE There are a number of fairly simple things that you can do to improve your credit score, but it takes time and effort. The length of time it will take depends on the reason your credit score is low. If the biggest negative factor is credit utilization, paying off your balances can drastically improve within a single month. If your credit is low due to multiple collections and poor payment history, then it will take several months of on-time payments to see any positive movement in your score. Review Credit Reports: Pull a copy of your credit report from each of the three major national credit bureaus and review them carefully. Check for incorrect or late payments, credit limits, missing accounts, and fraud so your credit history and FICO score accurately reflect your current financial activity. If you see any errors, notify the appropriate credit bureau within 30 days of the report date and have any inaccurate items removed (especially late payments). Pay Bills On-Time: Avoid late payments at all costs. As a reminder, outstanding debts more than 30 days past due account for 35% of your score. Use paper or digital filing systems to track your monthly bills, set due-date alerts or automate bill payments from your bank. If you are highly disciplined, charge all of your monthly payments to a credit card and pay the balance in-full monthly. Lower Credit Utilization: If possible, pay off your credit card balances each month. If you can’t always manage that, keeping your total outstanding balance at 30% or less of your total credit limit will help to lower your credit usage. Work toward reducing that to 10% or less, which is considered ideal for improving your credit score. In addition, asking for a credit-limit increase can help improve your credit utilization, provided your balance doesn’t increase as well. Limit Requests for New Credit: Soft inquiries, such as checking your own credit, giving a potential employer permission to check your credit, and checks performed by financial institutions you already do business will not affect your credit score. Hard inquiries, such as applications for a new credit card, loan or other forms of new credit will adversely affect your credit score for anywhere from a few months to two years. Keep Old Accounts Open: The older your average credit age, the more favorably you appear to lenders. If you have old credit accounts that you aren’t using, don’t close them. Though the credit history for those accounts would remain on your credit report, closing credit cards while you have a balance on other cards would lower your available credit and increase your credit utilization ratio. Shred those cards and leave the account balance at zero, even if a card is 10 or 20 years old. Deal with Delinquencies: If you have delinquent accounts, charge-offs or collection accounts, take action to resolve them. For example, if you have an account with multiple late or missed payments, get caught up on what is past due, then work out a plan for making future payments on-time. That won’t eliminate the late payments, but can improve your payment history going forward. Consider Consolidating Your Debts: If you have a number of outstanding debts, it may benefit to you to apply for a debt consolidation loan or balance transfer to a credit card with low or no interest rate options, leaving just one easy payment to manage. With a lower interest rate on the loan, or 0% interest on the balance transfer, you’ll be able to pay down your debt faster. Keep in mind, balance transfer fees are typically 3% to 5% of the transferred amount, but is often worth it to consolidate. Avoid Using Cash Only: As budget-savvy as it may sound, avoid cash-only spending. No credit = bad credit in the eyes of a lender. Therefore, use your credit cards for occasional purchases, being careful to not spend outside your budget, and pay the balance off monthly. Doing this will have the greatest positive impact on your score, again improving your credit utilization percentage. Track Your Progress: Using credit monitoring services are an easy way to see how your credit score changes over time. These services, many of which are free, monitor for changes in your credit report, such as a paid-off account or a new account that you’ve opened. They typically give you access to at least one of your credit scores from the three major credit bureaus, which are updated monthly. Many of the best credit monitoring services can also help you prevent identity theft and fraud. For example, if you get an alert that a new credit card account that you don’t remember opening has been reported to your credit file, you can contact the credit card company to report suspected fraud. Improving your credit score is an important goal to have, especially if you plan to apply for a home or auto loan or strive to qualify for one of the best rewards cards available. Be patient, as it can take several weeks, sometimes months, to see a noticeable impact on your score. Small as it seems, every change you make toward repairing your credit counts. Bumping up your score may get you an interest rate even 1 percent lower, with the potential to save you hundreds of dollars a month on your mortgage. Remember that scores will fluctuate. As long as you keep it in a healthy range, those variations won’t have an impact on your financial well-being.
WHAT IS EARNEST MONEY AND WHY IT’S IMPORTANT
When a buyer and seller enter into a purchase agreement, the seller will take the home off the market while the transaction moves through the entire process to closing, which can take several weeks. If the deal falls through, the seller has to relist the home and start all over again, which could result in a significant financial loss. Therefore, as you near the process of making an offer on a home, your real estate agent will want to discuss your Earnest Money, a form of security deposit also known as a “good faith” payment. Earnest money shows the seller that you’re acting in good faith and committed to buying their home, and provides them with some compensation in case you back out of the deal without a valid, contractual reason. ARE EARNEST MONEY DEPOSITS REQUIRED? Making an earnest money deposit is not a requirement when you submit an offer on a house. However, your offer won’t likely receive serious consideration without a good faith deposit of some kind, especially in a competitive real estate market. So although it's not required, be prepared to offer earnest money if you’re serious about the home. If you can’t afford an upfront earnest money deposit, let the real estate agent and seller know right away. If your purchase method and financing look solid, it is possible the seller will agree to move forward with the sale. If not, and you are serious about the purchase, you may be able to ask a family member or friend to assist with a gift or loan of funds for the good faith deposit. Do not, however, obtain an institutional loan or cash advance from a credit card for your deposit, as it could be detrimental to your mortgage loan approval. This payment is meant to secure the property, not put it at risk of losing it. HOW MUCH EARNEST MONEY IS ENOUGH? The amount of earnest money you should offer depends on the particular real estate market your desired property is in. A listing in a slow or moderate market may not need as much of a deposit as one in a hot market where there might be multiple buyers competing for the same property. Earnest money is typically around 1% to 3% of the sale price, but again, plan to pay more in a seller’s market so you do not lose the home to a stronger offer. Your real estate agent will be able to guide you on your good faith offer. HOW DOES EARNEST MONEY WORK? Your purchase agreement will outline how the earnest money is handled, but your deposit is typically paid to the escrow or title company, which is held until the transaction closes. You can pay via personal check, cashier’s check, money order or wired funds, depending on the terms of your contract. Once deposited, the listing will be flagged as pending, in effect removing the property from the active market. Following will be various inspections, appraisals, and any other contingencies outlined in your contract to move forward in finalizing the sale. WHO KEEPS THE EARNEST MONEY? Because buying a home is one of the largest purchases we may ever make, it is important to protect your investments along the way. Put everything in writing, detailing changes to the timeline and buyer/seller responsibilities. Have your agent thoroughly explain the purchase contract prior to signing it to ensure that you understand in what circumstances you would keep or forfeit the earnest money. If all goes smoothly, the deposit you paid is returned to you at closing and can be applied to your closing costs or down payment. Not all cases, however, are that smooth. Forfeited to the Seller If you break the terms of the purchase agreement, you will likely have to forfeit your earnest deposit to the seller. For example, the agreement typically includes a timeline of activity deadlines, such as dates for inspection completion or mortgage approval. If you miss these deadlines, there could be grounds for the seller to back out of the deal and take your earnest money with them. In addition, if you back out of the sale for any reason not listed as a contingency in the contract or decide not to buy the home because you find a better property, the seller will keep your deposit. In competitive markets, some buyers agree to non-refundable earnest money, which means the seller gets to keep the cash if the sale falls through, regardless of the reason. If you opt to use this strategy, be sure you understand the risks and don't offer money you can't afford to lose. Refundable to the Buyer: As a buyer, there are also a few exceptions in which you can recoup your earnest money. If the title company finds a lien against the property, you are entitled to your deposit. And, when you make an offer on a home and the seller accepts, the sale is only finalized when contingencies, or certain criteria, are met. If the seller doesn’t fulfill their side of the purchase contract (i.e., making repairs in a timely manner), it is considered a breach of contract allowing a buyer to walk away and receive a full refund of their earnest money. In addition, the purchase agreement will include contingencies that protect both the seller and buyer in certain situations, so work closely with your real estate agent to decide what contingencies you want included in the contract, understanding every scenario where you and the seller can back out and what impact that would have on your earnest money. Following are some common contingencies that enable you recollect your deposit: Mortgage: If you are unable to secure financing for your loan, a mortgage contingency can protect you and get your earnest money back, provided that this contingency was listed in the agreement. Appraisal: The appraisal contingency protects the buyer if the property is overvalued. If the fair market value of the home appraises less than the sale price, you can choose to terminate the deal and get your deposit back. Alternatively, you can use the appraisal to negotiate a new price. Home Inspection: When the home is professionally inspected and uncovers needed repairs, this contingency will allow you to walk away. If you still want the home, you can negotiate with the seller to have the repairs made or lower the purchase price so you can make the repairs yourself. Sale of Existing Home: Some contracts also include a contingency for the sale of your existing home before you can close. If you can't sell your current home within the given timeframe, this contingency lets you walk away from the deal with your earnest money. Earnest money can be a rather unexpected expense at the beginning of the mortgage loan process, but is proven to be a valuable asset. Knowing what it is and its importance will allow you to plan ahead.
FACTORS TO CONSIDER WHEN BUYING A HOME
Buying a new home is one of the biggest decisions you’ll ever make, and one that you may only make a handful of times in your life. When you are house-hunting, the price, number of bedrooms and bathrooms, and the amazing kitchen will certainly influence your decision, but there are many other significant factors to consider before making an offer. Depending on your personal needs and preferences, finding the “perfect” home that encompasses every one of the elements below may be challenging. Thus, it is imperative to prioritize your preferences to ensure that you don’t settle for anything less than what you’re willing to sacrifice. A home is much more than an investment, so focus on the aspects that will enrich your lifestyle, and at the very least add a level of convenience to your daily routine. THE LOCATION Prospective homebuyers all have their own set of priorities, must haves, and key elements when starting their home search. It must, however, begin with location, location, location. A good location will mean different things to different people, but no matter what you’re looking for, location will be the primary influencer in many of your deciding factors. What exactly does location entail, and why is it important? Safety: The safety of your family should be the number one priority. While no area is completely safe, some areas provide better protection and have less crime than others. Knowing which areas of the community are low-risk will help keep your family safer and more secure. The Lot: Many homebuyers purchase a home based on their love for the house, but it is also important to remember that you buying a piece of land. This lot cannot be relocated and its proximity to different elements may make it more or less desirable, therefore affecting the future resale value. For example, a home located on a busy road or backing to commercial property may be available at a lower price, but will be more difficult to sell later. Alternatively, a house with a wonderful view or near a body of water is likely to be more valuable, both now and when it comes time to sell it. The Site: Beyond the lot location, be sure to look at the site of the home. Is there a nice view or do you look directly into your neighbor’s windows? Is the backyard appropriate for children, pets, gardening or entertaining? Is the driveway elevation access to the property safe, and are there a lot of stairs to climb to get to the front door? Good Schools: Well-rated school districts are a must for homebuyers with children, as well as for the resale value. A safe walking distance that includes sidewalks, crosswalks, and crossing guards, or a reliable bus system is essential. Do the schools have good teacher-to-student ratios, test scores, special needs and gifted programs, family/student aid, and bi-lingual support? These are all important features you should inquire about when doing your home search of the area. Vital Services: Families may have a need to be near vital community services. For example, living a short ride from a police or fire station, hospital or urgent care facility in case of an emergency is important. Close proximity to a church or other religious facility may also be considered a priority. Public Transportation: In some areas, access to affordable public transportation is critical to keep commute times reasonable. Consider your distance to roads, bus stops, subway stations, and public bike-share locations. If going green appeals to you, then living near public transportation might be a consideration worth investing in. NEIGHBORHOOD AND COMMUNITY MATTERS Finding a neighborhood and a community that fits your lifestyle, matching a location you love, can make you can feel right at home. A neighborhood with a central gathering spot or planned social events and activities is perfect for cultivating new friendships. Finding one that appeals to you will be a matter of personal choice, but there are a few critical factors that most homeowners seek in their perfect community. Accessibility: The work commute is a big part of the day for many, so a home with easy access to roads may be more desirable than one tucked away that can only be accessed by one route. Appearance: It is exciting to visit new homes and areas, but be sure to pay close attention to the aesthetics. In a neighborhood that is visually pleasing, new buyers get a sense of belonging as well as a feeling that existing homeowners are a cohesive group taking pride in their homes and community. Paved roads, shady trees, quality landscaping, nearby parks or community spaces, and well-groomed homes can have a positive impact on prices, which is great for resale value. Amenities: Many homebuyers find that close proximity to shopping, dining, and entertainment is important when choosing a new neighborhood. If staying active is a priority, you may be looking for nearby fitness centers, pools or areas that offer hiking and biking trails, on-site playgrounds, and parks. These type of neighboring amenities will typically improve a home's value. Noise: Whether it’s a steady buzz of traffic or the commotion from nearby commercial centers, the presence of noise is often a big turnoff for buyers. If you find that the noise level is not going to lessen, and will be too uncomfortable to deal with on a continual basis, it may be best to walk away before you commit to the neighborhood and home. Future Developments: A location may seem ideal, but it is important to inquire as to whether there are plans to substantially change the area in the near future, such as any new businesses or residential construction. Then, consider how these additions might affect the desirability of the neighborhood and community. Some commercial development and plans for new schools, medical facilities, public transportation, and other civic infrastructure can dramatically improve property values in the area. YOUR HOME Your new home should reflect your lifestyle and goals. Do you have children, or plan to in the future? Do you like to entertain? Do you work from home and need a home office space? Size and Floor Plan: Think about how the new home space will be used and whether it will fit your lifestyle now and in the future. Bedrooms and Bathrooms: Decide how many bedrooms and bathrooms you need, and only look at homes that meet that criteria. An extra bedroom is always a plus, as it can be used for a home office, craft studio or guest room. Kitchen: If the kitchen is your gathering space and heart of your home, don't settle for a home where the kitchen doesn’t work. Remodeling is very costly, so this is one area you don’t want to sacrifice. Closets and Storage: Older homes tend to have small closets and very little storage space, where newer homes will have bigger closets and more storage space. If you have a lot of clothes, sports equipment, holiday decorations, etc., be sure to factor that into your decision-making process. Windows and Lighting: Look at a home with light and sunshine in mind, seeking out electrical outlets and fixtures. Do you prefer naturally bright and sunny, and will the lighting accommodate your needs? Upgrades: Sometimes the simplest home looks spectacular because of upgrades that have been installed, such as crown moldings, banisters and railings, and cabinetry hardware. If these elements are important to you, look for them while house hunting or be ready to add them after you move in. HOMEOWNERS ASSOCIATIONS The presence of a Homeowners Association (HOA) does influence a buyer’s decision to live in a particular neighborhood. Some are favorable to the idea that homeowners must keep a tidy yard, have structured paint, fencing and roof styles, etc. Others do not want an HOA having that much control over their property choices. Whatever your preference, it is important to be aware of the neighborhoods with HOAs in place to assist in your decision-making process. TAXES While most consumers expect to pay their share of taxes, they do not want to pay more than is necessary, especially when it comes to real estate purchases. Contact your local municipality and find out what the assessed value of the home you are considering is to determine the property taxes of the home over the next few years. Your local real estate agent can also obtain the information for you. Choosing the right location, neighborhood, and house to call home for a long period of time, perhaps the rest of your life, is a multi-layered and demanding process. It is not easy to find every element you desire, but make a list of your priorities and then calculate the pros and cons for the homes and the neighborhoods you are thinking considering. Whatever you choose, contribute to the community and do what you can to keep your home as valuable, or more so, as it was when you moved into it.
TOP TEN HOME IMPROVEMENT TIPS FOR THIS YEAR
If you're looking for home improvement tips for the upcoming year, you've come to the right place. The latest home improvement trends are all about making your home more efficient, stylish, and sustainable. There are always new trends emerging in the world of home improvement, and it can be tough to keep up with what’s popular. Whether you’re looking to update your home’s design or make some necessary repairs, here are a few home improvement trends to keep in mind. 1. INSTALL ENERGY-EFFICIENT APPLIANCES One of the best ways to save money and energy in your home is to install energy-efficient appliances. This includes everything from your fridge and oven to your washing machine and dryer. Not only will you see lower bills, but you'll also be doing your part to help the environment. 2. ADD SOLAR PANELS Solar panels are becoming increasingly popular, and for good reason. Not only do they help reduce your carbon footprint, but they can also save you money on your energy bills. If you're thinking about adding solar panels to your home, make sure to do your research and choose a reputable installer. 3. UPDATE YOUR WINDOWS Windows are another area where you can improve both your home's efficiency and its aesthetic appeal. Replacing old, drafty windows with new, energy-efficient ones will help keep heat in during the winter and cool air in during the summer. 4. SMART HOME TECHNOLOGY One of the biggest trends in home improvement is the integration of smart technology. From thermostats and security systems to appliances and lighting, there are now a number of ways to automate your home. This trend is only going to continue to grow as technology becomes more advanced and more affordable. 5. SUSTAINABLE MATERIALS More and more homeowners are looking for ways to be more environmentally friendly, and this is reflected in the materials they use for their home improvement projects. Sustainable options like bamboo flooring, recycled glass countertops, and low-VOC paints. Not only are these materials better for the environment, but they can also help improve indoor air quality. 6. BOLD COLORS AND PATTERNS In recent years, we’ve seen a shift away from neutral colors and towards bolder hues and patterns. This trend is especially popular in kitchens and bathrooms, where homeowners are using color to make a statement. If you’re not ready for a complete overhaul, consider adding a pop of color with accent pieces like rugs, towels, or wallpaper. 7. REVAMPING YOUR KITCHEN The kitchen is one of the most popular rooms in the house to renovate, and it's easy to see why. A new kitchen can make cooking and entertaining much easier and more enjoyable. If your kitchen is in need of an update, consider installing new appliances, countertops, and cabinets. You might also want to add some additional space by knocking out a wall or two. 8. ADDING ON A DECK OR PATIO Outdoor living spaces are becoming increasingly popular, and for good reason. They provide a great place to relax or entertain guests during the warmer months. If you have the space, consider adding a deck or patio to your home. 9. RENOVATING YOUR BATHROOM Like the kitchen, the bathroom is another room in the house that tends to see a lot of wear and tear over time. If your bathroom could use some work, consider replacing outdated fixtures, tiles, and toilets. You might also want to expand the space by adding another sink or bathtub. 10. FINISHING YOUR BASEMENT OR ATTIC CONVERSION PROJECT Basements and attics are often overlooked when it comes to home improvement projects but they can actually be turned into usable living space with a little bit of work. As we move into the future, there are a few home improvement trends that you can expect to see more of. These include energy-efficient appliances, sustainable building materials, and smart home technology. By keeping these trends in mind, you can make sure your home is on the cutting edge of style and function.
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