Tag: tips

Don’t Skimp On Preparing Your Home For Sale This Spring

Spring is already halfway over, so if you’re planning to sell your home this season, you should get on it quickly. Especially since you may need to do some sprucing up to get a good deal. If you bought your home during or shortly before the pandemic, this may be your last chance to benefit from the spike in prices. But buyers aren’t simply snatching up any home they see, like they were during the pandemic. They’re being more deliberate, so you need your home to be appealing.

This means all the standard procedures for increasing your home’s appeal apply. These include things such as repairs, upgrades, repainting, curb appeal, and staging. In some markets, you can get away with not doing these things, or only doing some of them, because the buyers are happy to purchase a cheaper home and perform the upgrades themselves. Not the case this spring. The seller will have to make the investment, which hopefully translates to a higher price as well.

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More: https://www.realtor.com/advice/sell/what-first-time-home-sellers-need-to-know-to-be-successful-this-spring/

When You Should And Shouldn’t Put 20% Down

Having a 20% down payment used to be a requirement for nearly all loans. That hasn’t been the case for quite some time, but it’s still touted as the conventional wisdom. In many cases, that may be true, but it’s not always the best idea. There are both advantages and disadvantages to putting 20% down.

If you have the money available already, it’s quite likely that the benefits heavily outweigh the drawbacks. Even though 20% down is no longer a requirement to get a loan, it is still a requirement to avoid mortgage insurance fees. Putting 19% down, for example, simply makes no financial sense at all, regardless of your financial situation. It’s also good to put down as much as you feasibly can in order to reduce the loan amount, thereby reducing your payments. The 20% mark is important if you can reach it.

If you still need to save money in order to achieve a 20% down payment, you’re going to need to crunch some numbers and also make some predictions in order to arrive at the correct solution. If you’re close to being able to put down 20%, it may be in your best interest to continue saving up to avoid mortgage insurance fees. But if you aren’t close, it may be best to simply forget about it. Even if you are definitely able to save money, by the time you get to the point that you can put down whatever 20% is now, home prices are likely to be significantly higher. In that case, it may be better not to wait. You also need to consider other costs and where you’re getting the money. If you need to take out a loan or draw on investments to reach 20%, this is probably not a good investment, unless it’s the only way you can viably make a home purchase.

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Cash-Out Refinancing A Solid Option For Home Renovations

If you’re planning to renovate your home, whether you intend to continue to live in it or to sell it at a profit, you need to think about how to pay for the renovations. Of course, it’s possible you have the cash on hand, which is great. But if not, there are a few financing options you can look into. It’s common to get a home equity line of credit (HELOC) or simply take out an additional loan. However, another option you may not be aware of is cash-out refinancing. It works by refinancing to a loan amount higher than your current loan balance, and taking the difference as cash.

The most important thing to consider when determining if you should get a cash-out refinance loan is the interest rate. It very likely won’t be the same as your current interest rate. If the rate is higher or even the same, it’s probably financially negative in the long run unless you can increase your home’s value significantly with the renovations. That’s why it’s a good option specifically for renovations. On the other hand, it’s entirely possible the rate is lower, or simply lower than traditional loans or HELOCs, in which case it’s a good financing option for any purpose. However, you may not want to use cash-out refinancing for large projects. Since you don’t receive the entire value of the new loan, but only the difference between the new loan balance and old loan balance, you’d need to increase the principal significantly to finance large projects. This could increase your interest payments by quite a bit even if the rate is lower.

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How To Prepare To Buy A Home In A Short Sale

Short sale is the term for the sale of a property when the seller owes more on their mortgage than the listing price. The extra regulations that apply to a short sale typically apply to the seller, but that doesn’t mean the buyer doesn’t need to do their research as well. Much of the homework that goes into buying a short sale property is best done ahead of time, so these types of transactions work most smoothly when the buyer is specifically looking for short sale properties.

If you know you’re looking for a short sale property to buy, make sure to find an agent that specializes in short sales, or at least has a large amount of experience with them. Expert short sale agents will have the best idea of a reasonable purchase price and what types of offers will be most attractive to the seller. You may have heard the common advice to get a pre-approval for your mortgage. In the case of a short sale, it’s best to go a step further and get a full approval. Nearly everyone who offers on a short sale will be pre-approved, so that alone won’t make you stand out, but a full approval will. And whether you’ve planned on purchasing a short sale property ahead of time or not, it’s important to be patient. Short sales typically take longer than traditional home sales. In fact, buyers often drop out of short sale negotiations because they simply don’t have the time, leaving you with less competition if you’re patient.

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What Is A Wrap-Around Mortgage?

Wrap-around mortgages are not very common, but it’s still a good concept to know in case you find it difficult to get a more traditional mortgage loan. A sale with a wrap-around mortgage has two important components distinguishing it from a regular sale: First, the seller retains the current mortgage on the property being sold. This differs from standard sales in which the seller normally pays off the remaining mortgage as part of the sale process. Second, the loan is not issued by a lender but rather by the seller. In this way, the seller is most likely planning to pay their mortgage using the money gained from payments the buyer makes to the seller on their new mortgage.

Wrap-around mortgages have both advantages and disadvantages. The primary reason to get a wrap-around mortgage is that they don’t have any standardized qualification requirements. This mostly benefits the buyer, but can also be useful to the seller if they’re having difficulty finding buyers. The primary drawback is that the buyer and seller must write up the contract themselves, since there is no lender involved. That means both parties need to be legally and financially savvy. It’s also impossible to wrap around a mortgage that doesn’t exist, so the seller needs to have a mortgage. There are also cons specific to the seller and buyer. The seller in this instance incurs the same financial risk that a lender would normally. The buyer is very likely paying a higher interest rate, since the arrangement is not worth the risk to the seller unless they are profiting.

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How To Baby-Proof Your New Home

A common reason to purchase a new home is needing more space because you are expecting kids. But just having more space isn’t going to prepare your home for all the trouble a baby can get into. By the time your kid is able to crawl, you’ll want to have finished baby-proofing your home.

Some things are probably pretty obvious, like using baby gates, locking drawers, keeping hazardous substances away, and covering up sharp edges. But some safety precautions are things you may not think about. While it’s true that babies often like soft and fluffy blankets, leaving them around loose can be a suffocation risk. When you’re in the kitchen, you’re probably used to having pot and pan handles turned towards you for ease of access. But once your kid can walk, there’s a good chance they can reach up there. Make sure to turn the handles inward. You should also acquire a latch for the oven. Bathrooms can be dangerous for both kids and adults, so you may already have taken precautions such as non-slip mats for your bathroom. But if not, make sure to get some. You may also want to get soft covers for the knobs and spouts.

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Honesty Is The Best Policy On Mortgage Applications

Some of the questions on a mortgage application may seem unnecessary, but they’re all there for a reason. Certain omissions can lower your interest rate and make your offer seem more appealing. But even if you haven’t done anything wrong — especially if you haven’t done anything wrong — you should always disclose all relevant information.

Money changes hands all the time, and the transfer doesn’t always leave a paper trail. But lenders will still find it odd for you to suddenly have additional money or fewer debts. It’s perfectly legal to ask a friend or family member for some cash to help you buy a home or pay off a debt. That money came from somewhere, though, and if you don’t list it, your lender could assume you are hiding something and deny your application.

A common lie that seems more innocuous but can actually have even more drastic consequences is stating that you plan to live in the home when you actually don’t. People do this because interest rate is lower on loans for primary residences, and they figure it’s fine because of course they can always change their mind. However, this is actually a crime. It’s considered a form of mortgage fraud.

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Preparing Your Home As A Vacation Rental

If you’re looking to earn some extra income over the summer, consider renting out your home as a vacation rental. It’s not too early to start thinking about it, especially if you want to buy a vacation rental house. Spring is the top of the real estate market and there will usually be more options available to buy. Even if you want to rent out your current house, there’s some prep work to be done first.

When marketing a short-term rental, think of it as a hotel. That’s where most people stay while on vacation, so you need to make sure it’s attractive to people who would otherwise simply book a hotel room. Advertise the amenities you have and the benefits of staying there over a hotel room. Price probably isn’t going to be one of them, but it’s still definitely something you need to think about. Pricing vacation rentals is difficult because they probably won’t be earning income all throughout the year, especially if you live there yourself most of the time. This means you may need to charge more to cover your monthly costs and retain a profit, unless you don’t have a mortgage. But you don’t want to charge so much that no one rents from you.

The other thing to consider is protecting yourself and maintaining your property. With the property changing hands between multiple tenants, you never know what could happen unless you keep an eye on it, which may be difficult if you are also on vacation yourself. Talk to property management companies to see what services they offer and for how much. You’ll want your home cleaned in between tenants, which may or may not require hiring cleaners separately from a property manager. Also take a look to see if you want additional liability insurance.

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Home Improvement Projects For The Upcoming Spring Season

Spring is the hottest season in the real estate market. If your home is in need of some improvements before selling, now is the right time. Or, even if you aren’t selling, some seasonal DIY projects can bring something new to your own enjoyment of your home.

Something that will always help sell your home is a fresh coat of paint. And if you have the time, it doesn’t require contractors. Painting is relatively easy and only takes a couple hours to learn online even if you’ve never done it before. Or maybe you aren’t selling, and simply want a new look for the spring season. In that case, pastel greens, blues, and creams are good spring colors. If you have a garden, a project that will only take up a weekend of your time is building DIY planters. Many planters are made of wood, but stone planters are more durable. Building a stone planter just requires four slabs of stone such as granite or marble, one to two tubes of stone adhesive, a ruler, and cement tape. All you need to do is make sure the slabs are positioned correctly with the aid of a ruler, apply adhesive to the inside edges, and use cement tape to hold it together while the adhesive dries. Something more on the fun than practical side is bird seed rings, which are a treat for birds, and for yourself if you enjoy feeding them. They are made by combining gelatin, corn syrup, and flour into a paste, mixing that with a bag of bird seed, then using a donut pan to mold them into a ring shape. You can then hang them outside where they will attract birds.

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What To Ask Lenders When Negotiating Mortgages

There’s plenty of advice out there telling you that negotiating your mortgage is important and that you should get multiple opinions. However, unless you know what you’re looking for, you’re probably not actually getting the best deal. On the surface, it may look like the lowest rate you can find, but it likely isn’t. You’ll often need to dig and ask the right questions.

So what are the right questions? Ultimately, you want to know the exact breakdown of the estimate. As you probably already know, interest rates aren’t based on just one factor. You may not realize that some of these factors are actually negotiable, or you may even have more information about it than the lender and be able to correct the estimate. Ask if the estimate includes any discount points. Discount points are an up-front payment that lenders aren’t going to tell you actually lowers your interest rate, rather than being just a standard fee. Discount points are negotiable, but lenders won’t mention that unless you bring it up. The estimate that a lender provides may or may not also include closing costs. Discount points and lender fees are part of closing costs, but a significant portion of them are not actually under the lender’s control. Lenders frequently underestimate escrow fees, so when it comes time for you to pay the closing costs, your fee may be higher than the estimate even if the rate is locked. Make sure to only compare costs the lender can control.

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More: https://www.cnbc.com/select/negotiating-mortgage-rates/

What A Pocket Listing Is, And Why You Should Avoid Them

Most agents are probably familiar with a pocket listing, but if you aren’t an agent, you may not know what that is. Even if you do know what it is, you may not realize why they’re a problem. A pocket listing is a listing that is temporarily exclusive, before a delayed release into the open market. At first glance, this can seem like a win-win-win situation. Sellers don’t need to do as much preparation and their agent can vet the buyers for them. Buyers don’t have to deal with nearly as much competition. The agent gets double the commission by representing both sides.

However, it’s not all upside. There are also plenty of cons to pocket listings, and they may outweigh the benefits. A big problem is that pocket listings simultaneously skew the market while not being governed by the market. Not listing the properties on the market reduces inventory values, which skews both competition and prices upward, significantly hurting buyers overall. You may think this benefits the seller, but it actually doesn’t. Because the pocket listing isn’t governed by this upwardly skewed market, the buyer of a pocket listing is likely to pay significantly less than the distorted high prices. In fact, because of the total lack of competition, they’re likely to pay less than the actual market value. For the agent, being a dual agent is a lot of work and stress, and it’s only increased by attempting to make it a pocket listing. In the event the seller suggests a pocket listing, this isn’t as much of an issue. But an agent truly can’t push for a pocket listing without breaching their fiduciary duties to the seller, which include taking reasonable steps to locate a buyer. Even if it’s on the seller’s suggestion, there will always be a conflict of interest when representing both sides that the agent will need to delicately navigate.

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More: https://journal.firsttuesday.us/the-many-pitfalls-of-pocket-listings/89065/

What Is A Seasoned Down Payment?

If you’ve just unexpectedly come into some extra cash, you may be tempted to immediately put it towards a home so you can start accruing equity as soon as possible. Unfortunately, this isn’t always possible. Most, but not all, lenders require at least a portion of your down payment to come from what they call seasoned funds. Typically, seasoned funds are those that have been in your possession at least 60 days. Lenders will require a paper trail to confirm how and when you acquired the funds used for your down payment.

Usually, at least half of your down payment must come from seasoned funds. However, rules vary by lender, both with the percentage of funds that must be seasoned and the length of “seasoning.” Fortunately, this mainly applies to windfall gains, and there are other methods of acquiring money that don’t need them to be seasoned. If the money was acquired via borrowing from your savings or retirement account, this is generally allowed, though you should discuss the tax implications of this with an accountant. Some lenders will allow gifts to be used for a down payment. Some don’t allow it at all, and those that do will probably require a written confirmation from the person gifting the money.

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Important Terms All Real Estate Investors Need To Know

Even with all its ups and downs, real estate has always been one of the safest investments. But as with any type of investment, you need to know your stuff to get the best deal. That means being familiar with some of the terms used in investment. Three important ones are hard money loan, net operating income or NOI, and debt-to-income ratio or DTI.

A hard money loan is any loan backed by real property. While this is the actual definition, there’s another aspect of most hard money loans that is what investors are most interested in. Usually, a hard money loan is an immediate, short term loan used for the purchase of commercial or investment property. However, they are typically offered only by private lenders, and often have a higher interest rate due to the shorter term length.

NOI is the net amount of revenue you gain from your investment, after deducting related expenses. These expenses could include such things as mortgage payments, property taxes, insurance, and property management fees. At first, NOI may appear to be the same as return on investment or ROI. In common parlance, the terms may be synonymous. However, in investment real estate, ROI actually refers to the length of time it takes to get positive NOI.

DTI is a term you need to know if you are getting any loan, not only an investment loan. Fortunately, the name doesn’t hide what it is. It is simply the ratio of your total debt to your monthly gross income. Lenders use DTI to determine the loan’s interest rate. A lower DTI will give you a better rate on mortgage loans.

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How To Prepare For The Spring Real Estate Market

Spring is almost always the hottest season for real estate. It’s very likely that it will be this spring, as well. However, things are going to be a bit different. The market feels somewhat volatile at the moment, with prices having plummeted rapidly immediately after a dramatic increase. Mortgage rates, having reached their peak, are now beginning to tick down over time, but it’s hard to gauge rates on a day-to-day basis. Sales can’t be predicted at all based on job growth, since the job growth is primarily reduced unemployment. This uncertainty is going to make buyers more cautious than usual this spring.

That’s not necessarily a bad thing if you are looking to buy, though. Prices may not be at their lowest point, but they don’t have much farther to fall given inflation. Mortgage rates are no longer inordinately high. And importantly, competition isn’t going to be as high as it is most spring seasons. That means you have time to shop around, look for the best deals, and watch how the market pans out. If you get out there looking now, you’ll have a better idea of where the market stands by the time you find something that’s right for you. But make sure you’re prepared to buy and have a pre-approval. If you wait too long, demand will start to go back up as mortgage rates continue to fall, and suddenly you have competition.

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More: https://www.cnn.com/2023/02/09/homes/preparing-to-buy-a-home-2023/index.html

ITIN Loans: An Option For Non-Citizens

Those who are not citizens or possibly not even residents of the US may have trouble qualifying for mortgage loans. Fortunately, there is an option available, so you don’t necessarily have to be stuck renting if you have just recently moved to the US. ITIN stands for Individual Taxpayer Identification Number, and is a number that the IRS can assign to taxpayers who cannot get a Social Security Number. If you apply and are assigned an ITIN, this can help you qualify to get an ITIN loan.

While you don’t need to be a resident or citizen, there are still some requirements for ITIN loans. You do need to provide tax returns and may have to fill out Form W-7. It’s possible that you will also be asked for additional forms of identification, such as a driver’s license or birth certificate. As with any mortgage loan, you will be expected to provide proof of income, assets, or employment.

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Benefits Of A Senior Living Community

The prevailing narrative is that senior living communities are designed for elderly retired people. However, they are generally open to anyone over the age of 55. Most people age 55 aren’t retired yet, and this certainly isn’t very old. You may not think you need to live in a senior living community yet, but it isn’t about necessity. There are benefits to it that you may want to take advantage of as early as possible.

Even if you don’t consider yourself in poor health, certain laborious tasks can become more difficult — if not impossible — at a relatively early age. Many senior living communities have full time maintenance staff, so you don’t need to worry about it at all. There will probably also be a dining hall, so you may not need to cook. Because the community will be expecting that some members have reduced physical capabilities, there will be some small benefits that can make your life more convenient even if you don’t strictly need them. This includes no or fewer stairs, more railings, and slip-resistant flooring. But these communities haven’t forgotten about their physically fit residents; many senior living communities have their own gym.

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Should You Get A Home Equity Loan?

With home prices having skyrocketed and now starting to slow, many homebuyers are curious whether it’s a good time to get a home equity loan. In a survey of 1000 homeowners by MeridianLink, 21% stated they were considering getting a home equity loan at some point during the year, compared to just 8% last year. However, a little under half — 48% — aren’t even confident they know what a home equity loan is, or definitely don’t know, which encompasses 13% of respondents. Rising prices have, in fact, increased total equity by 15.8%. But that’s not the only thing you need to know.

The most important factor to keep in mind is whether it’s actually a home equity loan you’re interested in, or the similar but distinct home equity line of credit (HELOC). The answer will depend what you need the funds for and how quickly you want to repay it. A home equity loan has a fixed interest rate that is locked when you take out the loan. They’re relatively safe if you have good credit, but with current interest rates being high, they’re most useful for short-term uses, such as funding home improvement projects with a solid return on investment. HELOCs, on the other hand, have a variable interest rate that is based on the benchmark rate. The benchmark rate is currently still increasing, but that should change in the not-too-distant future. Therefore, a HELOC can be useful if you want to take advantage of high equity now and aren’t particularly worried about paying it off any time soon.

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More: https://www.foxbusiness.com/personal-finance/more-homeowners-consider-home-equity-loans

Financial Checklist For Before You Buy

Buying a house is a tough financial decision, but it’s a lot easier if you know where you stand right now. Perhaps you check your bank balance regularly enough to know how much you currently have — but do you know how much you spend, and where the spending goes? Before buying a house, especially if you need to take out a mortgage loan, make sure you know what you can afford.

The first thing you should do is organize your budget. This doesn’t necessarily even mean you need to make changes, but you’ll need to figure out whether you do or not. List all your sources and amounts of income and expenses. No one is going to remember what all they purchased, but you can use your credit and debit card statements to help. There is software that can help with arranging all the numbers. Those of you who regularly itemize your tax returns will be familiar with this and may be already up to date, but it’s common to take the standard deduction instead, so you may not be used to it.

Step two is to get a copy of your credit report. Not only does this show you where you stand with credit — and therefore whether or not you can afford to take on more debt — but it’s the same information mortgage lenders will be looking at. You’ll want to make sure you and the lender are on the same page with your credit history. This can be done once per year for free from government-approved websites. Be careful, though — there are a lot of scam credit reporting websites out there.

Finally, ensure that you have enough for a down payment. While a down payment isn’t strictly necessary, some lenders have a minimum down payment for loans. Even if there is no minimum, both the interest rate and the initial balance due will be higher with a lower down payment. A down payment of 20% of the purchase price or more is ideal; however, that doesn’t mean it’s a problem to put down less. Many buyers can’t afford to spend that much upfront.

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Low-Income Housing Actually Increases Property Values

Much of the slow progress of zoning reform can be attributed to Not-in-my-backyard advocates, or NIMBYs for short. This refers to the homeowners that are resistant to reform because they believe it will decrease their home’s value, thus reducing their future sale profit. One big target for NIMBYs is low-income housing. It’s true that low-income housing is probably less valuable itself than the NIMBYs’ homes; however, to assume that it would drag down the value of nearby homes is simply inaccurate.

In fact, the addition of low-income housing actually increases the value of mid- and high-tier housing within a half mile radius by about 4%. There are a few different reasons for this. First, low-income housing in mid- or high-income areas generally also translates to multi-family residences. Higher density housing means an uptick in population density, which also usually increases home values. In addition, new multi-family housing construction is most often replacing either tear-downs or vacant lots. The area’s average value would actually increase just with that new construction alone, without any change to nearby home values. Finally, in areas that are already experiencing price growth, low-income housing further accelerates it by increasing existing high demand in that area.

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More: https://journal.firsttuesday.us/nimbys-judge-low-income-housing-by-its-sound-and-judge-wrong/88650/

Converting Your Residence To Rental Property

If you are considering purchasing rental property and also thinking of moving, one possible option is to not sell your home when you move and instead rent it out. There are various pros and cons to doing this, and whether it’s the right option for you will depend on your situation.

The most obvious benefit is that there are fewer transactions involved. You don’t need to list your home for sale and you don’t need to find rental property to purchase, though you may still be purchasing a new residence if you don’t already have somewhere else to move. You may not even need to pay an agent at all — though an agent can still be useful in guiding you to the right choices for your situation. It could also be financially better for you to simply buy once rather than buy twice and sell once. This will depend greatly on several factors, including such things as the market conditions, neighborhood, property size and condition, budget, and mortgage balance. Even if you know you can afford to buy one property, you may not be able to afford to buy two properties and pay off your current mortgage, even with the income from selling.

However, converting a primary residence to a rental property is also a process, especially if you still have a mortgage. If you purchased the property as your primary residence, that was taken into account in your interest rate. The rate is probably lower than if you purchased it as rental property. Because mortgage companies don’t want you to lock in a lower rate then immediately decide you don’t want to actually live there, your mortgage contract may have a stipulation that you must have lived there for a certain length of time to convert it to rental property. Even if you don’t have a mortgage, property taxes are also lower for primary residences. There’s no time restriction on conversions for property taxes, but the rate will change.

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