Tag: ali palacios broker

Asian Style Pork Belly

 

INGREDIENTS

  • 1.5 lbs pork belly, cut in 1 in pieces
  • 1/2 cup Chinese rice wine
  • 4 tbsp soy sauce
  • 1 tsp grated ginger
  • 2 tbsp of brown sugar
  • 1 tbsp fish sauce
  • 1 tsp sesame oil
  • 2 cloves garlic (whole)
  • 2 star anise
  • 1 bunch Green onions (sliced)

Serve with steamed white rice

DIRECTIONS

Brown the pork belly pieces in small batches (do not crowd the pan) until brown. I used an electric pressure cooker, the sauté function. Once all pieces have been browned add them back to the pot and toss in all the rest of the ingredients except the green onions. Add 2/3 cup water. Cover the pressure cooker and set for stew setting.

Once the setting is complete, uncover the pressure cooker and turn the sauté function back on. Cook until the sauce reduces and becomes as thick has honey. Stir several time so that the pork is even coated.

VARIATIONS

  1. I make a cuban style pork belly. Pork is cut into 1in pieces and browned as stated above. Add the pork back into the pan with 1/2 cup orange juice, the juice of 1 lime, 5 cloves of garlic, 3 packages of saloon Goya, 1/4 tsp dried oregano, 1 small sliced onion, 1 tsp salt, 1 tsp black pepper. Once the pork is cooked in the pressure cooker you will once again open the pot and set it to sauté. Cook until the pork is dark brown, stir often.

Italian style burgers

Makes 4 patties

INGREDIENTS

  • 1 lb beef or turkey
  • 1 egg
  • 1/2 cup of Italian style bread crumbs
  • 1 tsp garlic salt
  • 2 tbsp tomato pesto (or sun-dried tomato pesto)
  • 1 cup grated cheese (I’ve used parmesan, provolone, mozzarella or a combination of these)
  • 1/2 tsp black pepper
  • 1 tbsp olive oil
  • 4 buns
  • 1 tomato sliced
  • 1 small red onion sliced
  • Green leaf lettuce or arugula
  • Pesto or basil leaves (optional)
  • 4 cheese slices – Mozzarella or provolone

DIRECTIONS

Mix ground meat with egg, bread crumbs, garlic salt, tomato pesto, grated cheese and black pepper. Mix well and found 4 patties. Heat a sauce pan with olive oil, place patties in pan and cook for 5 minutes on each side or until done to taste. Add sliced cheese and cook until melted. Toast buns, add condiments as desired. Enjoy!

VARIATIONS

  1. This same mixture can be turned into a meatloaf. Mix the same ingredients and top with a 1 cup of ketchup or tomato sauce. Place in greased loaf pan. Cook for 30 mins or until done. Serve with parmesan potatoes!
  2. This same mixture makes amazing meatballs. Mix the same ingredients and form 16 small meatballs. Brown the meat balls in olive oil and add your favorite spaghetti sauce.

 

 

The Home Equity Playbook

 

What is Home Equity?

Home equity seems to be a very simple calculation — the total amount of mortgages owed subtracted from the current market value of a home. Here is a simple example:

Current Home Market Value         $325,000

Existing Mortgage                           $225,000

Homeowner Equity                         $100,000

One side of the equation is well defined, and it is found on the monthly mortgage statement, the loan balance. The other side is less obvious — the current market value of the property.

As a homeowner, your down payment purchases your initial equity, and your monthly (or additional) principal payments increase your equity. In strong real estate markets and in-demand locations, equity can increase quite rapidly as the property value increases, but the inverse can also happen — too much available inventory and market down-cycles can lead to falling home values and a reduction in homeowner equity.

It can be difficult to put an accurate value on something that you have emotional and monetary vesting in. It is safe to say that most people think their home is worth more than then it is.

Homeowners can make savvy assessments about their home’s current market value by following the sales of similar properties in the neighborhood, but should stay away from websites such as Zillow and Trulia, which provide inaccurate and outdated estimates. The most accurate measurement requires a comparative market analysis from a real estate professional or having the home professionally appraised. But, the bottom line — your home is worth as much as someone is willing to pay for it.

Creating Value is in Your Hands

Maintaining the condition of a home is vitally important to retaining and increasing value. Homes are judged against their peers: how they compare to similar homes in the neighborhood. Another way to retain value is to not over upgrade, since it is rare to ever recoup the money spent if you exceed neighborhood value. Keep up the landscaping and do the little things to add curb appeal.

Putting Home Equity to Work

Home equity represents the largest single asset of millions of people, and because it represents so much of an individual’s net worth, it must be treated with respect. Home equity is not a liquid asset until a property is sold, or it is borrowed against.

There are two types of loans that tap into homeowner equity as collateral.

Home Equity Loans

Many home equity plans set a fixed period during which the person can borrow money, such as 10 years. At the end of this “draw period,” the person may be allowed to renew the credit line. If the plan does not allow renewals, the homeowner will not be able to borrow additional money once the period has ended. Some plans may call for payment in full of any outstanding balance at the end of the period. Others may allow repayment over a fixed period, for example, of 10 years.

A home equity loan, sometimes called a second mortgage, usually has a fixed rate and a set time to pay it back, generally with equal monthly payments.

Home Equity Line of Credit

A home equity line of credit is similar to a credit card. The lender sets a maximum amount you can borrow, and you can draw money as you need it, though many home equity lines of credit require an initial draw. The interest rate varies daily, and is usually prime plus a set number, but the required payment is usually interest only. Once the loan has been paid down, the payment is reduced, and it can be paid off and initiated as many times as a homeowner requires.

How Much Equity can be Accessed?

Since the financial institution is lending money and using a home as collateral, they will not lend 100% of the home’s equity. The bank does not want to take the risk that if the house price drops, they would be carrying a loan for more than its market value. Therefore, most banks will allow a qualified homeowner to borrow approximately 80% of their equity.

It’s Important to Use Your Home Equity Wisely

Because it is likely the biggest asset most people have, losing your home equity is hard to overcome. It must be used in prudent ways, and the payments against the loan must be affordable. Using equity money to make the loan payment is only acceptable for a short-term solution.

There are number of good reasons to use money from a home equity loan… and some really bad ones. First, let’s cover smart uses.

  1. Invest in Your Home

The best way to use the money is create more equity in the home. Among the very best returns on your investment (ROI) include kitchen and bathroom remodels, adding square footage or an extra bath, enhancing curb appeal and repairing/keeping the existing structure sound. Making prudent investments in your home is a wonderful win-win: you enjoy the upgrades and the repairs can add value to the home.

  1. Invest in your Children’s Education

Using your home equity to finance a child’s higher education may be the greatest payoff of all. Not only is the rate much lower than a student loan, it is an investment in the child’s future.

  1. Supplement Retirement Needs

Older homeowners spent their working lives paying down their mortgage. At retirement, when monthly income is reduced, a home equity loan could pay for a dream vacation or an unexpected major expense.

  1. Augment the Impending Sale of a Home

If you’re planning to sell soon, a home equity line of credit may be the best way to finance improvements, and you can pay it off entirely when you sell. Investing wisely on upgrades and repairs may even reap a profit on your investment.

Here are some examples of some not very wise choices.

Adding luxury amenities like a swimming pool, a hot spa, lavish landscaping, expensive appliances and exotic countertops and flooring rarely pay off.

Purchasing a car or boat or most any personal luxury items is a poor use of the funds, since these items quickly depreciate in value.

Also stay away from using money on risk-heavy investments. Financing stock purchases, start-up businesses and paying routine bills is not financially smart. If you cannot afford to purchase those items with available funds, using equity from your home means they should not be in your budget.

You should treat a home equity loan as an investment and not as extra cash when making financial decisions. If your intended use of the money doesn’t pay you back in some way, it’s not the best use of your valuable equity.

We Are Happy to Assist You

If you would like an assessment of the market value of your home and the current equity you can access, give us a call for a comparative market analysis.

 

 

 

 

 

 

 

 

8 Smart Home Technology Trends that Can Save You Money

8 Smart Home Technology Trends that Can Save You Money

 

The ‘smart home’ is the new ‘internet of things’, or objects that can serve you better by communicating with each other or directly with you through apps on your smart phone. In the ideal version of the wired future, all of our appliances and gadgets talk to each other seamlessly.

What could living in a smart home look like? Picture something like this:

The lights in your bedroom slowly illuminate to quietly awaken you in the morning, replacing the typical blaring alarm. The aroma of fresh brewing coffee drifts in and stirs your senses. Once the lights are all the way up, the heating system kicks on, just in time to warm up your room so you’re not shocked once you crawl out from underneath the duvet.

When you step into the shower, it turns on automatically and remembers your preferred temperature and water pressure. And it will shut off right when you’re finished as it knows how long you take to bathe.

Once you’ve driven out of your garage, your home alarm system arms itself. And it will only unlock automatically when it “sees” and recognizes someone else from your family approaching through programmed in biometrics.

Do smart homes really work this way right now? Not exactly…while you may find some of these smart features in certain homes, we haven’t reached the point where every feature intuitively knows what you want and when you wanted. However, each year we’re getting closer and closer toward that shiny, idealized ‘Jetson’ future.

Here are some trends that we see for smart homes, many of which may also help you save money:

Smart Thermostats

Programmable thermostats that are synchronized with the clock have been around for decades. However, they’re often difficult to set and aren’t necessarily efficient; they simply turn on or off as programmed, whether or not you are there.

With the newer models, smart thermostats can be programmed to adjust the temperature when they sense you are present. And once you leave, they can kick back to standby mode so that you’re saving energy and money. Nest does all of this, and it also allows you to check your usage from your cell phone so that you can adjust the temperature remotely and save even more.

Smart Smoke Detectors

Having a working, effective smoke detector saves lives. But unfortunately, many of us still have those battery-run smoke detectors that make that annoying, piercing beep when their batteries are running low on power. And instead of replacing batteries right away, it’s often easier to pull them out and disable the detector (while risking our lives).

Many of the new smart smoke detectors, like the Birdi, monitor smoke, carbon dioxide, as well as air quality. With this new sensor technology, they know the difference between a real fire and burnt toast.

Smart Sprinkler Control

Weather in our area is predictably unpredictable. Often, especially during the summer months, we fall into a severe drought. But then we might have one season that brings extreme amounts of rain, like we did this past spring.

A smart sprinkler controller like Rachio Iro can not only help save you lots of money on your water bill but also help protect our precious resources.

Programmable by computer or smart phone, it can automatically adjust how often you water your lawn based on the season and the weather forecasts. You can also remotely adjust the settings through a mobile app.

Smart Solar Panels

You can put the sun to work for you by using solar technology to power your home. It’s green and renewable, and can save you money over the long term. A recent study conducted by the NC Clean Energy Technology Center determined that Austin customers who invested in a solar system saved an average of $66 per month during the first year that they owned the system.

With smart solar panels, you can program the technology to monitor their performance and even turn them off in case of a weather emergency or fire.

Smart Home Security Systems

Home monitoring has become much more sophisticated in recent years. With the old-style security systems, you had to call in contractors to wire your home with monitoring sensors.

With new smart technology, you can simply place a few smart devices in your home to monitor movement and sense whether doors and windows are closed or opened. Some systems include audio and video monitoring, as well as sirens to scare off intruders. You get real-time feedback on security breaches through an app. And, because you’re alerted as soon as the system senses an intruder, it’s more likely that they will be caught.

Canary is one popular all-in-one audio-video security system, complete with sirens and night vision.

Smart Locks

Go beyond the standard key locks, which can often be compromised by burglars. The new smart lock systems give you more control over those who can gain access to your home.

Some systems, like the Kwikset Kevo, include encrypted virtual keys that you can program for access for a limited amount of time—for example, allowing guests over for a weekend, or cleaning service in during a specific window of time.

Other door locking systems include biometric technology. The Ola smart lock allows you to program your lock to recognize your family member’s fingerprints. Other systems use facial recognition to greet you and unlock your door.

The new August smart lock integrates with Apple’s technology so you can ask Siri to open your door for you.

Smart lighting systems and light bulbs

A well-lit home feels warm and welcoming, and good lighting can instantly increase the value of your home.

However, annual lighting costs can account for up to 12% of your overall electric bill, or over $200 per year according to Energy Star. You can easily reduce this expense simply by using smart lighting technology to add efficiency.

The Philips Hue wifi-enabled lights make it easy to add to your home without installing specialized equipment. Smart lighting dimmers and sensors can give you more control over how much energy you use and allow you to turn them on and off through your smart phone.

New smart light bulbs can give you control over the warmth or coolness levels of your lighting. With the Lifx LED light bulbs, for example, you can program your light bulbs to turn on or off when you want, to slowly wake you up with increasing illumination, or to change from daytime work lighting to entertainment-friendly shades for parties.

Smart Appliances

Programmable slow cookers and coffee makers are the quaint, old-fashioned versions of these home conveniences. Newer, smart appliances give you more control over how your food is kept and prepared, and make it easier for you to complete pesky household chores.

  • Newer coffee makers, like the Smarter coffee machine, let you ‘order’ your coffee exactly to your liking, adjusting everything from bean grind to temperature to strength to time that it’s ready to drink.
  • Smart refrigeration technology can help you store your food at just the right temperature, adjusting the thermostat during peak usage times. For example, the LG THINQfridgecan alert you via smart phone app if a door is accidentally left open.
  • Smart ovens can ensure that your food is cooked to the right level of done-ness, and alert you when your meal is ready to eat. June, a new counter oven invented by former Google, Apple, Go-Pro and Path employees will give you even more control—it will contain cameras, thermometers, and other technology to ‘learn’ what you like to eat and make menu suggestions.
  • Smart washers and dryers have customizable controls so that you can safely wash any type of fabric. Some units include controls to increase drying time to save energy. And soon, connected appliances from GE, Oster, Samsung, and other makers, will be able to re-order soap and fabric softener directly from Amazon, so you won’t even have to think about running to the store at the last minute.

Have you tested any of these technologies in your home? Did we miss any of your favorite home technologies? Let us know in the comments!

Don’t Get Burned – Get a Home Inspection to Save Money on Your Next Purchase

 

Okay, you made one of the most important decisions in your life: you’re buying a home! You found your ideal home. It’s in your desired neighborhood, close to everything you love, you dig its design and feel, and you’re ready to finalize the deal.

But, whoa … wait a minute! Buying a home isn’t like buying a toaster. If you discover something’s wrong with your new home, you can’t return it for a refund or an even exchange. You’re stuck with your buying decision. Purchasing a home is an important investment and should be treated as such. Therefore, before finalizing anything, your “ideal” home needs an inspection to protect you from throwing your hard-earned money into a money pit.

A home inspection is a professional visual examination of the home’s roof, plumbing, heating and cooling system, electrical systems, and foundation.

There are really two types of home of inspections. There is a general home inspection and a specialized inspection. Most general inspections cost between $267 and $370. The cost of the specialized inspection varies from type to type. If the inspector recommends a specialized inspection, take that advice because buying a home is the single most important investment you’ll make and you want extra assurance that you’re making a wise investment.

By having your prospective new home inspected, you can:

  • Negotiate with the home seller and get the home sale-ready at no cost to you
  • Prevent your insurance rates from rising
  • Opt-out of the purchase before you make a costly mistake
  • Save money in the short and long run

How Much Money Can a Home Inspection Save You?

A home inspection helps to find potential expenses beyond the sales price, which puts homebuyers in a powerful position for negotiation. If there are any issues discovered during the home inspection, buyers can stipulate that the sellers either repair them before closing or help cover the costs in some other way. If the sellers do not want to front the money to complete the repairs, buyers could negotiate a drop in the overall sales price of the home!

Perhaps even more importantly, a home inspection buys you peace of mind. Your first days and months in a new home will set the tone for your life there, and you don’t want to taint that time with worries about hidden problems and potential money pits.

To help you understand how much money a home inspection can save you, here are some numbers from HomeAdvisor to drive the point home … so to speak.

Roof – Roofing problems are one of the most common issues found by home inspections. Roof repair can range between $316 and $1046, but to replace a roof entirely can cost between $4,660 and $8,950.

Plumbing – Don’t underestimate the plumbing. Small leaks can cause damage that costs between $1,041 and $3,488 to repair. Your home inspector will look for visible problems with the plumbing such as leaky faucets, water stains around sinks and the shower, and noisy pipes. Stains on walls, ceilings, and warped floors show plumbing problems.

Heating and Cooling – Ensuring the home’s heating and cooling system is working properly is very important. Your home inspector will make you aware of any problems with the existing system and let know you whether the system is past its prime and needs replacing. You don’t want to throw down $3,919 to replace an aged furnace. Nor do you want to spend $5,238 replacing an ill-working air conditioner. Replacing and repairing a water heater gets pricey too. Wouldn’t you rather use your savings for a vacation?

Electrical Systems – When thinking of the electrical system, no problem is better than even a small problem. Electrical problems might seem small, but they can blossom into thousand-dollar catastrophes. Make sure your home inspector examines the electric meter, wires, circuit breaker, switches, and the GCFI outlets and electrical outlets.

Foundation – If your home inspector sees that the house is sinking, that means water is seeping into the foundation; cracks in walls, sticking windows, and sagging floor also indicate foundational problems. The foundation is so important that if the general inspection report shows foundation problems, lenders will not lend money on the home until those issues are solved. Foundation repairs can reach as high as $5,880 to repair.

As you can see, a small investment of a few hundred dollars for a general home inspection can save you tons of money and future headaches. To save even more money, you might consider investing in a specialized home inspection as well. A specialized inspection gets down to the nitty-gritty of all the trouble spots the general home inspection might have located.

How Much Money Can a Specialized Inspection Save You?

A general home inspection can trigger a need for a specialized inspection because the general home inspector spotted something off about the roof, sewer system, the heating and cooling system, and the foundation. If humidity is high where you’re buying your home, a pest inspection is recommended. Usually, a pest inspection will check for mold as well as pests. Most homebuyers have a Radon test done to ensure air quality.

Roof – Roof specialists examine the chimney and the flashing surrounding it. They also look at the level of wear and tear of the roof. They can tell you how long the roof will last before a new one is needed. They’ll inspect the downspouts and gutters. The average cost of a roof inspection is about $223. Most roof inspections will cost between $121 and $324.

Sewer System – Making sure your sewer system has no problems should happen before the closing because what might look like a small problem can turn into a large problem in the future. If any issues pop up, you can negotiate with the seller about needed repairs or replacements before closing. Cost of inspection will vary; on the low side, it might cost you around $95, and on the high side, it might cost you $790. Compare these numbers to repairing a septic tank, which can cost, on average, $1,435 (though it could reach as high as $4,459), and you can see that the cost of an inspection is worth it when you catch the problem before you buy.

Heating and Cooling System – A HVAC specialist will check the ducts for blockage and for consistent maintenance of the unit. The repairs needed might be small or they might be big, but this small investment will save you headaches and lots of money down the road.

Foundation – A foundation specialist will pinpoint the exact problem with the foundation. The specialist will look at the grade or slope of the home. The ground should slope away from the home in all directions a half inch per foot. Most homeowners have spent between $1,763 and $5,880 to repair their foundation. And the average cost to re-slope a lawn is at $1,705. Most homeowners paid between $933 and $2,558 to re-slope their lawn.

Pest Inspection – Termites eat a home’s wood structure from inside out and can cause thousands of dollars worth of damage to your home. Other pests can turn your dream home into a nightmare. Depending on the humidity of where you live, you should a pest/termite inspection every two years or so. You can start with your potential new home. Most inspections are extensive and cost between $109 and $281. The good news is that most pest management company will guarantee the past inspection if bugs show up.

Radon Test – Radon is a naturally occurring invisible odorless gas that is the second leading cause of cancer. A radon test is a good test to have done as a good habit. The cost of radon test is low and its cost varies from state to state. Here’smore information about Radon.

Steps You Can Take to Save Money Using a Home Inspection

To help yourself save with a home inspection, you will need to:

Attend the inspection – Attending the inspection is important because it’s an opportunity for you to ask questions.

Check utilities – Checking utilities let’s know the energy efficiency of your potential home.

Hire a Qualified Home Inspector – We can recommend bona-fide home inspectors to you. You can compare our recommendation with all inspectors who belong to the American Society of Home Inspectors. While the decision of who you work with is always yours, we can educate you so that you make a wise homebuying decision.

 

Should You Buy a New or Existing Home?

Should You Buy a New or Existing Home?

Maybe your dream home has the intricate details that you usually find only in older construction – wainscoting and crown molding in the interior, the front porch with a swing, an older tree shading the back yard, and the white picket fence.

Or maybe your dream home has all the conveniences of modern living – open floor plan in the living and dining spaces, large windows, connected, “smart” appliances and security systems, and minimalist design elements.

Whether you go for a brand new construction or an existing home, both types of properties have their pros and cons when it comes to purchasing. What type of home is right for you will depend on which factors are most important for your lifestyle.

Build your dream home with new construction

If you’re making a home purchase that’s still in the pre-construction phase, you may be able to customize many of the details. Many home builders will give you the option to add design elements that will give you the exact dream home you desire. If it’s a new subdivision, you may even be able to pick which lot you like best.

Very early in the building process, you may have more room to customize. For example, if the walls aren’t complete, you may be able to add extra outlets in each of the rooms or custom wiring for surround sound in the media room. Perhaps you could move the laundry room to the top floor instead of the basement. You might be able to get a separate mudroom entrance.

Later in the building process, you may be able to add marble countertops, an island, and custom cabinets in the kitchen. Your master bathroom could be upgraded with a steam shower, spa tub, and European fixtures. You will want to check with the builder to understand which features are included, and which ones are extra.

New homes save money with fewer repairs and more efficiency

Once your home is complete, all you’ll need to do is move in. New appliances will be under warranty for a few years if they need repairs, and will likely work well for several years without needing fixes. Often, new construction is under a builder’s warranty, so any repairs needed in the first year should be covered.

New homes often contain energy efficient and green appliances, like high-efficiency stoves, refrigerators, washing machines, heaters, or air conditioning units. These energy-saving appliances, along with good insulation and energy-efficient windows, will help you save money on monthly utility bills.

New homes also often use new building materials that require less maintenance — for example, using composite siding instead of wood, which doesn’t need annual repainting. You won’t need to spend as much to maintain your new home.

If you customized it during pre-construction, you won’t need to spend any money on renovations or upgrades for several more years. You can just enjoy it and not worry about saving for major home repairs.

What you need to do to make a good new home purchase

Before you put in your offer, do some research on the builder. Do they have a good reputation? What else have they built? Did their other new properties have issues such as poor construction or unfinished details?

You like the model home, but will you like where it’s situated? After you look at the home itself, come back to the neighborhood to see what it’s like at different times of the day. Walk around during the day and in the evening, and see how you like the area.

Brand new communities usually attract similar types of buyers—urban professionals, couples, or young families, for example. These will be your neighbors, so you’ll want to make sure that you want to be part of this new, homogeneous community.

You may also need to be flexible with your move-in date. Builders will only be able to let you move in if they can meet their construction schedule. If the wiring is delayed, the walls can’t be finished. And because there are so many construction tasks that are dependent on the completion of prior tasks, schedules tend to slip.

Get more variety and established neighborhoods with an existing home

Existing homes are those that have generally been built and lived in between the 1920’s and 1970’s. With existing homes, you will get more variety in home styles, as different types of construction have gone in and out of style throughout the decades. Within one neighborhood, you may be able to find a mix of different styles like Victorian, modern Tudor cottages, tract style, ranch or split-ranch, or contemporary homes.

Existing homes are situated in established neighborhoods, which may have more amenities nearby that a new home in a brand new subdivision may not have. Your new neighborhood may have restaurants, cafes, and boutiques within walking distance.

You might also have access to more supermarkets, dry cleaners, discount stores, and gas stations nearby. An established neighborhood might have a nice park, running path, or playground for the kids to enjoy. You might also be closer to a library or the post office.

Resale homes can be a less expensive purchase

If you’re considering a resale home, you may be able to get into a beautiful, unique property at a lower purchase price than a new home.

There are many more resale homes available than there are new homes — according to theNational Association of Homebuilders, about 10 times as many. With such a large pool to buy from, the market for resales can be more competitive. You may have more room to negotiate the  selling price of the home. With a brand-new construction, you won’t likely be able to have the same kind of negotiating power.

Before putting a home on the market, sellers often make home renovations or remodel parts of their homes to make them more attractive to buyers and to be able to potentially increase the list price. If the resale home has a brand new, modern kitchen, an updated bathroom, or even a new roof or upgraded windows, you could end up getting a home that’s comparable to new construction without having to pay the potential more expensive new-home list price.

Existing homes have already been inspected at least once on the last sale, so you will know about any potential structural problems or repairs that have been made on the home. Knowing the track record on your potential home will help you avoid purchase mistakes—you’re much less likely to end up with a property that has a rotting roof, dangerous electrical wiring, or a crumbling foundation. With a new home, you could end up with incomplete construction or major issues that you didn’t know about because they weren’t yet documented.

What you need to do to make a good resale purchase

Before you go too far down the road to a purchase, you can protect your purchase by first having the home inspected. A good home inspector will document all flaws, no matter how small they appear. If the inspector finds any major problems, like foundation cracks or leaky roofs, you may be able to counter offer and get the seller to either fix it or reduce the selling price.

Even if the inspection doesn’t uncover any major issues, you will need to expect the unexpected. Older homes will eventually need replacement appliances, a new air conditioning unit, or a plumbing repair. As long as you know that before you buy a resale home, you can plan for surprise repairs.

With an older home, you may want to eventually remodel parts of it. Will you be happy living in your house while you’re doing major work on the living room or the kitchen? If you know that it would disrupt your lifestyle too much, you may want to consider whether you really want to buy an older property.

Whether you choose to buy a new home or an existing home, the best way to get started is to speak with your trusted real estate professional. We will have access to both new properties and resale homes that may fit your goals, and will know which neighborhoods will serve your needs.

 

A Beginner’s Guide to Real Estate Investing

A Beginner’s Guide to Real Estate Investing

Despite the grim economic outlook for some industries, one sector is gaining viability — real estate. According to the 2016 Emerging Trends in Real Estate, which was released by the Urban Land Institute earlier this year, trends such as “18-hour cities” and millennial parents increasing moving from urban areas out into the suburbs signal that real estate as an industry is gaining strength every passing day in 2016. One lending officer at a large financial institution even went to far as to say that “the next 24 months look doggone good for real estate.”

These trends means that real estate is a smart place to make an investment and grow your wealth. A housing shortage means that flipped homes tend to sell quickly and for high prices, and an increased demand across all age groups for rental properties means that finding tenants for your buy-and-hold properties should be a breeze.

Of course, these trends also mean that the real estate market is highly competitive right now. If you want to make a foray into real estate investing, you’ll need to educate yourself and be strategic in who you work with and where you look for investment opportunities. Read on for our beginner’s guide to real estate investing.

Assemble your real estate team before you buy

Building relationships with your team will empower you to make serious offers that will more likely get accepted by sellers. Among your team members, you will want to include:

  • A mortgage broker or banker, who can help you get the financing for your deal
  • A real estate attorney to protect you by reviewing and revising contracts
  • An appraiser who can help you get a correct appraisal for your potential property
  • An accountant who is well versed in real estate investments
  • A good contractor, for repairs whether you’re rehabbing or buying rental property

How to find rehab or wholesale deals

You can buy properties to fix up and resell (flip) or you can buy and hold properties that you rent out for monthly cash flow.

The advantage of flipping properties is that you can end up with a good return on investment (ROI) in the short term. For example, you buy a property for $100,000, and invest $50,000 into repairs. Once it’s rehabbed, your property is valued at $200,000, and you sell it for a $50,000 profit.

This is an extremely simplified version of ROI. There are many other factors that you need to determine to see if the numbers work in your favor — that is, you’re not overpaying initially when you buy the properties or for the renovations or holding costs.

Flipping properties means that you will need to spend more time looking for fixer uppers that may be under market value. These may be more difficult to find in a hot market with rising property prices. Beyond the actual purchase price, you will also need to factor in fixed purchase costs for inspections, closing, and lender fees.

You’ll also need to factor in holding costs. Your budget should include funds for making repairs, whether you are doing them yourself or hiring contractors. While you’re upgrading the property, you’ll need to carry mortgage payments, property taxes, utilities, and insurance.

Because of rising property values, fix-and-flip deals in good neighborhoods can be hard to find. But once you know where to find rehab opportunities, you can easily repeat the process by reinvesting proceeds from a previous flip into the next property, which can be bigger, in a more desirable neighborhood, or finished out more luxuriously, and therefore sold for more cash!

Working with the right real estate professionals will help you learn which neighborhoods to consider and determine where you should focus your search. We can help you find the right fixer-uppers that may be under market value. Also, a Realtor will have access to many properties that may not be publicly available.

Finding buy-and-hold rental properties

A buy-and-hold rental property is one that your purchase with the intent of renting it out to tenants. If you find the right long-term buy-and-hold rental property, you can earn consistent cash flow each month, which can be a great source of supplemental income.

You’ll need to carefully review the operating expenses on the property and what tenants are willing to pay for the space to know if you’ll make or lose money each month. For example, say your total costs to buy a duplex was $20,000, including down payment and closing costs. You can rent each of the units for $600. Assuming your building is 100% occupied, you’ll make $1200 per month in income. Your expenses include mortgage payments, taxes, insurance, utilities, and management fees, and you want to set aside some cash each month for capital expenditures and routine repairs. You calculate that your expenses add up to $1100 per month. Once you subtract your expenses from your income, you’ll have a positive cash flow of $100 per month.

Of course, this is a very simplified example, and it doesn’t take into account that problems will inevitably arise. Emergency roof repairs, heating system breakdowns, broken windows that need replacing, and other unexpected expenses can eat away at your profits. One of your units may be vacant for a month or more — for example, vacancies are high in the summer months in buildings around universities — or you could have a tenant who fails to pay their monthly rent.

The more you can anticipate problems before they happen, however, the easier it will be for you to recover from setbacks! Moreover, rent isn’t the only way to make money on a buy-and-hold property. You can also add amenities, such as coin laundry and vending machines, to increase your potential monthly income. If your property has space to add a billboard, you can earn advertising revenue from renting that space, too. And when you decide to sell, your property’s value will likely have increased both from the overall rising property values and by the improvements you made to increase the cash flow.

Once you find and invest in your rental property, you’ll need to decide how you want it managed from month to month.

Getting the right property manager

Do you want to manage your own property or hire a manager? Property management can become a full-time job. As a property manager, you’ll have to deal not only with maintenance, repairs and tenant issues, but also with insurance, fair rental regulations, and building code compliance. So if you’re not an expert in these areas, managing your own properties may not be worth your time and effort.

Hiring a professional manager can save you headaches over the long term. While you’ll have to factor in management as a fixed expense, your property manager will likely know how to better take care of routine repairs, tenant issues, and keeping your property near 100% occupancy.

Your real estate professional can refer you to reputable property management companies to help you take care of your investment.

Where should I start investing in local real estate?

Work with a knowledgeable real estate professionalwho knows about the different neighborhoods. We can help you find properties that will fit into your budget and your overall goals. Whether you’re seeking a duplex or multifamily property so you can maximize your rental income or whether you want a condo or single-family home to improve for resale, we can guide you to the best property to suit your needs.

Contact your us to learn more about investment properties in our area.

Get Your Credit Score in Shape Before Buying a Home

Get Your Credit Score in Shape Before Buying a Home

How strong is your credit? Cleaning up your credit is essential before you make any major financial moves. Having a bad score can hurt your chances of being able to open a credit card, apply for a loan, purchase a car, or rent an apartment.

It is especially important to have clean credit before you try to buy a home. With a less-than-great score, you may not get preapproved for a mortgage. If you can’t get a mortgage, you may only be able to buy a home if you can make an all-cash offer.

Or if you do get preapproval, you might get a higher mortgage rate, which can be a huge added expense. For example, if you have a 30-year fixed rate mortgage of $100,000 and you get a 3.92% interest rate, the total cost of your mortgage will be $170,213. However, if your interest rate is 5.92%, you’ll have to spend $213,990 for the same mortgage  – that’s an extra $43,777 over the life of the loan! If you had secured the lower mortgage rate, you could use that additional money to fund a four-year college degree at a public university.

So now that you know how important it is to maintain a good credit score, how do you start cleaning up your credit? Here, we’ve collected our best tips for improving your score.

Talk to a loan professional

You can protect your score from more damage by getting a loan professional to check your credit score for you. A professional will be able to guide you to whether your score is in the ‘good’ range for home buying. Plus, every time that you request your own credit score, the credit companies record the inquiry, which can lower your score. Having a professional ask instead ensures that you only record one inquiry. Once you know your score, you can start taking action on cleaning up your credit.

Change your financial habits to boost your score

What if your score has been damaged by late payments or delinquent accounts? You can start repairing the damage quickly by taking charge of your debts. For example, your payment history makes up 35% of your score according to myFICO. If you begin to pay your bills in full before they are due, and make regular payments to owed debts, your score can improve within a few months.

Amounts owed are 30% of your FICO score. What matters in this instance is the percentage of credit that you’re currently using. For example, if you have a $5000 limit on one credit card, and you’re carrying a balance of $4500, that means 90% of your available credit is used up by that balance. You can improve your score by reducing that balance to free up some of your available credit.

Length of credit history counts for 15% of your FICO score. If you’re trying to reduce debt by eliminating your credit cards, shred the card but DO NOT close the account. Keep the old accounts open without using them to maintain your credit history and available credit.

Find and correct mistakes on your credit report

How common are credit report mistakes? Inaccuracies are rampant. In a 2012 study by the Federal Trade Commission, one in five people identified at least one error on their credit report. In their 2015 follow-up study, almost 70% thought that at least one piece of previously disputed information was still inaccurate.

Go through each section of your report systematically, and take notes about anything that needs to be corrected.

Your personal information

Start with the basics: often overlooked, one small incorrect personal detail like an incorrect address can accidently lower your score. So, before you look at any other part of your report, check all of these personal details:

  • Make sure your name, address, social security number and birthdate are current and correct.
  • Are your prior addresses correct? You’ll need to make sure that they’re right if you haven’t lived at your current address for very long.
  • Is your employment information up to date? Are the details of your past employers also right?
  • Is your marital status correct? Sometimes a former spouse will come up listed as your current spouse.

Your public records

This section will list things like lawsuits, tax liens, judgments, and bankruptcies. If you have any of these in your report, make sure that they are listed correctly and actually belong to you.

A bankruptcy filed by a spouse or ex-spouse should not be on your report if you didn’t file it. There shouldn’t be any lawsuits or judgments older than seven years, or that were entered after the statute of limitations, on your report.  Are there tax liens that you paid off that are still listed as unpaid, or that are more than seven years old? Those all need to go.

Your credit accounts

This section will list any records about your commingled accounts, credit cards, loans, and debts. As you read through this section, make sure that any debts are actually yours.

For example, if you find an outstanding balance for which your spouse is solely responsible, that should be removed from your report. Any debts due to identity theft should also be resolved. If there are accounts that you closed on your report, make sure they’re labeled as ‘closed by consumer’ so that it doesn’t look like the bank closed them.

Your inquiries

Are there any unusual inquiries into your credit listed in this section? An example might be a credit inquiry when you went for a test drive or were comparison shopping at a car dealer. These need to be scrubbed off your report.

Report the dispute to the credit agency

If there are major mistakes, you can take your dispute to the credit agencies. While you could send a letter, it can be much faster to get the ball rolling on resolving a mistake by submitting your report through the credit agency’s website. Experian,Transunionand Equifaxall have step-by-step forms to submit reports online.

If you have old information on your report that should have been purged from your records already, such as a debt that has already been paid off or information that is more than 7 years old, you may need to go directly to the lender to resolve the dispute.

Follow up

You must follow up to make sure that any mistakes are scrubbed from your reports. Keep notes about who you speak to and on which dates you contacted them. Check back with all of the credit reporting companies to make sure that your information has been updated. Since all three companies share data with each other, any mistakes should be corrected on all three reports.

If your disputes are still not corrected, you may have to also follow up with the institution that reported the incident in the first place, or a third-party collections agency that is handling it. Then check again with the credit reporting companies to see if your reports have been updated.

If you can keep on top of your credit reports on a regular basis, you won’t have to deal with the headaches of fixing reporting mistakes. You are entitled to a free annual credit report review to make sure all is well with your score. If you make your annual credit review part of your financial fitness routine, you’ll be able to better protect your buying power and potentially save thousands of dollars each year.

How to clean up your credit now

Does your credit score need a boost so you can buy a home? Get in touch with me. I can connect you with the right lending professionals to help you get the guidance you need.

How to Amp Up The Resale Value of Your Home

How to Amp Up The Resale Value of Your Home

Whether you’re putting your home on the market this year or in the next five years, it is a smart decision to start building your home’s resale value now. Here are some ways to create a comfortable home while making it easier to put more money into your bank account on closing day.

Small Maintenance and Repairs

If you think that home maintenance on the weekends waste your time and energy, think again. The small chores you do around your home prevents it from losing value. Neglecting small maintenance and repairs causes 10% of your home’s value to walk out your door and slip through your windows. Most appraisers claim that homes showing little to no preventative maintenance can depreciate from $15,000 to $20,000.

study conducted by researchers at the University of Connecticut and Syracuse University shows that regular maintenance boosts your home value by about 1% per year. However, ongoing maintenance costs offset that value, which means that regular maintenance actually slows down your rate of depreciation. Furthermore, because homebuyers generally notice any repairs needed upon buying a new home, proactive maintenance lets the homebuyer know that he or she will not have to spend extra money to maintain the basics. This makes your home more attractive, and thus more likely to get higher priced offers.

Maintaining the basics can cost you little money and certainly some effort, but there’s a way to accomplish this very important activity smartly. This article by HouseLogic, for example,shows you how to keep home maintenance below $300 a year.  Planning ahead will also help make maintaining your home easier. Most professional appraisers and real estate agents recommend a proactive maintenance schedule that includes:

  • Keeping enough cash on hand to replace systems and materials
  • Creating and following a maintenance schedule
  • Planning a room redo every year
  • Keeping a notebook of all your maintenance and repairs

Landscaping

The Virginia Cooperative Extension at Virginia Techpublished a study that shows landscaping can increase a home’s value by 15%.  The study claims that a home valued at $150,000 could increase its value between $8,300 and $19,000 with the addition of landscaping. Particular landscape elements add different value. For instance, landscape design can increase your home’s value by 42%, plant size can increase your home’s value by 32%, and diversity in plants can increase your home’s value by 22%.

Replace Entrance Doors

If your entry doors are wood, consider switching them out for either fiberglass or steel doors. Steel doors add style and architectural interest to your home while improving security; you can add a deadbolt and electronic keypads to keep out intruders. Unlike wood doors, steel doors do not rot or splinter.

Alternatively, fiberglass doors can be designed to look like wood doors and give your home a modern look. Fiberglass doors conserve more energy than steel doors.

Pricewise, a steel door will cost you $1,335 with a 91% return on investment whereas a fiberglass door will cost you $3,126 with an 82.3% return on investment.

Garage Door Replacement

 At first, you might not think that your garage door increases the value of your home. However, your garage door distinguishes your home from the other homes on your block. As the largest entryway of a house, garage doors get noticed first because they’re the focal point of your home. If you want to quickly increase the resale value of your home, you need to make the most of this space.

Some interesting things being done with garage doors include:

  • Increased Size:Bigger garage doors help homes stand out more, and homeowners can do more creatively with them.
  • Bold Colors:Bright and bold colors now can complement the color of your home, or you can build a concept around the color of your home.
  • Faux Wood:You can install fiberglass or steel garage doors that look like wood garage doors. This gives your home a new level of sophistication.
  • Windows:Large Windows on your garage door improve the aesthetic of your home, and provide light into your garage so that it’s no longer a dark space.

 More importantly, a garage door replacement will cost you $1,652 and add $1,512 to the value of your home; that’s a return on your investment of 91.5%.

Fiberglass Attic Insulation

While energy efficiency is still not the sexiest selling point of your home, installing fiberglass attic insulation saves energy and garners a big payback on your investment. According to Remodeling Magazine’s 2016 Cost vs. Value top trends report, fiberglass attic insulation gained the top return on investment among the 30 projects in this year’s report. Using Remodel/Max as the cost source, a fiberglass attic insulation project cost $1,268 nationwide. Real estate professionals surveyed estimated that the work would boost the price of a home at resale, within a year of its completion, by $1,482. That’s a 116.9% return on investment.

Replacing Windows

Replacing your windows is another way to save energy and increase your home’s resale value. Replacing your old windows with energy saving models will beautify your home, keep it comfortable, and ease the workload of your HVAC system. According to HGTV, you’ll see a reduction in your utility bill by 7% to 15%. However, if you’re selling your home, you could expect a 60% to 70% recoupment of your investment. The two types of replacement windows that fetch the best returnare vinyl and wood.

Remodeling Your Kitchen

Kitchen remodeling can get expensive, but small renovations can make your home more buyer friendly. Changing your kitchen’s texture and color using a matte finish and neutral colors such as putty or grey enhances your home’s resale value. Because matte finishes have transitional qualities, your potential homebuyer can easily match his or her stainless steel or black and white appliances. Also, refinishing cabinetry, or switching to Energy Star™ appliances provide comfort you like and pizazz buyers adore.

Flow is important to any interior design of a home. If you feel that your kitchen hinders a good flow, change it. A small investment to knock out a non-structural wall or remove a kitchen island creates space and provides flow that buyers love.

A minor kitchen remodel can cost you $20,122 while putting $16,716 of resale value into your home; that’s an 83% payback on the project. If you want to do a major kitchen model, this can cost you about $60,000 and put about $39,000 of resale value into your home, which is only about a 65% payback on the project. Therefore, consider a minor kitchen remodel first.

Bathroom Addition or Remodel

Likewise, carefully consider adding a bathroom or remodeling your bathroom. Switching out your frosted glass shower doors for glass doors, cleaning the grout, replacing the shower and floor tiles, switching out your sink or toilet, or replacing your sink and shower fixtures can cost you little money.

Adding a bathroom can get expensive, but it can reduce congestion during hectic times and provide your guests with a bathroom. Consult with your real estate agent or a local appraiser before deciding whether a full remodel or addition is right for your situation. While a bathroom remodel will cost you about $18,000 with a return on investment of about 66%, a bathroom addition will cost you about $42,000 with a return on investment of about 56%. Therefore, it’s best do your due diligence before working on your bathroom.

Your Needs and Buyers’ Wants

On that note, if you need to renovate your home, be sure to consider how those changes will affect its appeal to future buyers. Knowing design trends will give you the opportunity to make changes to your home based on where your needs and your potential buyer’s desires intersect, thus increasing your property’s resale value drastically.

Designers and design websites provide great ideas when you’re brainstorming home renovations. Keep in mind as you research, however, that you don’t want to sacrifice your needs for a comfortable home just for the sake of what you think a future buyer will want!

Therefore, before you begin making any changes to your home, consult your real estate agent. Real estate agents, because we are constantly working with new buyer clients, have insider insight into what home buyers are looking for now and in the future. We’ll be able to help you make smart choices when remodeling or renovating your home.

If you think you might want to remodel or renovate your home in the near future, or if you are just curious about other ways you can increase its resale value, please reach out to me!

The Home Buyer’s Guide to Getting Mortgage Ready

The Home Buyer’s Guide to Getting Mortgage Ready

Don’t wait until you’re ready to move to start preparing financially to buy a home.

If you’re like the vast majority of home buyers, you will choose to finance your purchase with a mortgage loan. By preparing in advance, you can avoid the common delays and roadblocks many buyers face when applying for a mortgage.

The requirements to secure a mortgage may seem overwhelming, especially if you’re a first-time buyer. But we’ve outlined three simple steps to get you started on your path to homeownership.

Even if you’re a current homeowner, it’s a good idea to prepare in advance so you don’t encounter any surprises along the way. Lending requirements have become more rigorous in recent years, and changes to your credit history, debt levels, job type and other factors could impact your chances of approval.

It’s never too early to start preparing to buy a home. Follow these three steps to begin laying the foundation for your future home purchase today!

 

STEP 1: CHECK YOUR CREDIT SCORE

Your credit score is one of the first things a lender will check to see if you qualify for a loan. It’s a good idea to review your credit report and score yourself before you’re ready to apply for a mortgage. If you have a low score, you will need time to raise it. And sometimes fraudulent activity or erroneous information will appear on your report, which can take months to correct.

The credit score most lenders use is your FICO score, a weighted score developed by the Fair Isaac Corporation that takes into account your payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%), and credit mix (10%).1

Source: myFico.com

Base FICO scores range from 300 to 850. A higher FICO score will help you qualify for a lower mortgage interest rate, which will save you money.2

By federal law, you are entitled to one free copy of your credit report every 12 months from each of the three major credit bureaus (Equifax, Experian and Transunion). Request your free credit report at https://www.annualcreditreport.com.

 

Minimum Score Requirements

To qualify for the lowest interest rates available, you will usually need a FICO score of 760 or higher. Most lenders require a score of at least 620 to qualify for a conventional mortgage.3

If your FICO score is less than 620, you may be able to qualify for a non-conventional mortgage. However, you should expect to pay higher interest rates and fees. For example, you may be able to secure an FHA loan (one issued by a private lender but insured by the Federal Housing Administration) with a credit score as low as 580 if you can make a 3.5 percent down payment. And FHA loans are available to applicants with credit scores as low as 500 with a 10 percent down payment.4

 

Increase Your Credit Score

There’s no quick fix for a low credit score, but the following steps will help you increase it over time.5

 

  1. Make Payments on Time

At 35 percent, your payment history accounts for the largest portion of your credit score. Therefore, it’s crucial to get caught up on any late payments and make all of your future payments on time.

If you have trouble remembering to pay your bills on time, set up payment reminders through your online banking platform, a free money management tool like Mint, or an app like BillMinder.

 

  1. Avoid Applying for New Credit You Don’t Need

New accounts will lower your average account age, which could negatively impact your length of credit history. Also, each time you apply for credit, it can result in a small decrease in your credit score.

The exception to this rule? If you don’t have any credit cards—or any credit accounts at all—you should open an account to establish a credit history. Just be sure to use it responsibly and pay it off in full each month.

If you need to shop for a new credit account, for example, a car loan, be sure to complete your loan applications within a short period of time. FICO attempts to distinguish between a search for a single loan and applications to open several new lines of credit by the window of time during which inquiries occur.

 

  1. Pay Down Credit Cards

When you pay off your credit cards and other revolving credit, you lower your amounts owed, or credit utilization ratio (ratio of account balances to credit limits). Some experts recommend starting with your highest-interest debt and paying it off first. Others suggest paying off your lowest balance first and then rolling that payment into your next-lowest balance to create momentum.

Whichever method you choose, the first step is to make a list of all of your credit card balances and then start tackling them one by one. Make the minimum payments on all of your cards except one. Pay as much as possible on that card until it’s paid in full, then cross it off your list and move on to the next card.

 

Debt Interest Rate Total Payoff Minimum Payment
Credit Card 1 12.5% $460 $18.40
Credit Card 2 18.9% $1,012 $40.48
Credit Card 3 3.11% $6,300 $252

 

  1. Avoid Closing Old Accounts

Closing an old account will not remove it from your credit report. In fact, it can hurt your score, as it can raise your credit utilization ratio—since you’ll have less available credit—and decrease your average length of credit history.

Similarly, paying off a collection account will not remove it from your report. It remains on your credit report for seven years, however, the negative impact on your score will decrease over time.

 

  1. Correct Errors on Your Report

Mistakes or fraudulent activity can negatively impact your credit score. That’s why it’s a good idea to check your credit report at least once per year. The Federal Trade Commission has instructions on their websitefor disputing errors on your report.

While it may seem like a lot of effort to raise your credit score, your hard work will pay off in the long run. Not only will it help you qualify for a mortgage, a high credit score can help you secure a lower interest rate on car loans and credit cards, as well. You may even qualify for lower rates on insurance premiums.6

 

STEP 2: SAVE UP FOR A DOWN PAYMENT AND CLOSING COSTS

The next step in preparing for your home purchase is to save up for a down payment and closing costs.

 

Down Payment

When you purchase a home, you typically pay for a portion of it in cash (down payment) and take out a loan to cover the remaining balance (mortgage).

Many first-time buyers wonder: How much do I need to save for a down payment?The answer is … it depends.

Generally speaking, the higher your down payment, the more money you will save on interest and fees. For example, you will qualify for a lower interest rate and avoid paying for mortgage insurance if your down payment is at least 20 percent of the property’s purchase price. But what if you can’t afford to put down 20 percent?

On a conventional loan, you will be required to purchase private mortgage insurance (PMI) if your down payment is less than 20 percent. PMI is insurance that compensates your lender if you default on your loan.7

PMI will cost you between 0.3 to 1.5 percent of the overall mortgage amount each year.8So, on a $100,000 loan, you can expect to pay between $300 and $1500 per year for PMI until your mortgage balance falls below 80 percent of the appraised value.9For a conventional mortgage withPMI, most lenders will accept a minimum down payment of five percent of the purchase price.7

If a five-percent down payment is still too high, an FHA-insured loan may be an option for you. Because they are guaranteed by the Federal Housing Administration, FHA loans only require a 3.5 percent down payment if your credit score is 580 or higher.7

The downside of getting an FHA loan? You’ll be required to pay an upfront mortgage insurance premium (MIP) of 1.75 percent of the total loan amount, as well as an annual MIP of between 0.80 and 1.05 percent of your loan balance on a 30-year note. There are also certain limitations on the types of loans and properties that qualify.10

There are a variety of other government-sponsored programs created to assist home buyers, as well. For example, veterans and current members of the Armed Forces may qualify for a VA-backed loan requiring a $0 down payment.7Consult a mortgage lender about what options are available to you.

 

TYPE MINIMUM DOWN ADDITIONAL FEES
Conventional Loan 20% Qualify for the best rates and no mortgage insurance required
Conventional Loan 5% Must purchase private mortgage insurance costing 0.3 – 1.5% of mortgage annually
FHA Loan 3.5% Upfront mortgage insurance premium of 1.75% of loan amount and annual fee of 0.8 – 1.05%

 

Current Homeowners

If you’re a current homeowner, you may have equity in your home that you can use toward your down payment on a new home. We can help you estimate your expected return after you sell your current home and pay back your existing mortgage. Contact us for a free evaluation!

 

Closing Costs

Closing costs should also be factored into your savings plan. These may include loan origination fees, discount points, appraisal fees, title searches, title insurance, surveys and other fees associated with the purchase of your home. Closing costs vary but typically range between two to five percent of the purchase price.11

If you don’t have the funds to pay these outright at closing, you can often add them to your mortgage balance and pay them over time. However, this means you’ll have a higher monthly payment and pay more over the long term because you’ll pay interest on the fees.

 

STEP 3: ESTIMATE YOUR HOME PURCHASING POWER

Once you have the required credit score, savings for a down payment and a list of all your outstanding debt obligations via your credit report, you can assess whether you are ready and able to purchase a home.

It’s important to have a sense of how much you can reasonably afford—and how much you’ll be able to borrow—to see if homeownership is within reach.

Your debt-to-income (DTI) ratio is one of the main factors mortgage companies use to determine how much they are willing to lend you, and it can help you gauge whether or not your home purchasing goals are realistic given your current financial situation.

Your DTI ratio is essentially a comparison of your housing expenses and other debt versus your income. There are two different DTI ratios that lenders consider:

 

Front-End Ratio

Also called the housing ratio, this is the percentage of your income that would go toward housing expenses each month, including your mortgage payment, private mortgage insurance, property taxes, homeowner’s insurance and association dues.12

To calculate your front-end DTI ratio, a lender will add up your expected housing expenses and divide it by your gross monthly income (income before taxes). The maximum front-end DTI ratio for most mortgages is 28 percent. For an FHA-backed loan, this ratio must not exceed 31 percent.13

 

Back-End Ratio

The back-end ratio takes into account all of your monthly debt obligations: your expected housing expenses PLUS credit card bills, car payments, child support or alimony, student loans and any other debt that shows up on your credit report.12

To calculate your back-end ratio, a lender will tabulate your expected housing expenses and other monthly debt payments and divide it by your gross monthly income (income before taxes). The maximum back-end DTI ratio for most mortgages is 36 percent. For an FHA-backed loan, this ratio must not exceed 41 percent.13

 

Home Affordability Calculator

To get a sense of how much home you can afford, visit the National Association of Realtors’ free Home Affordability Calculator at https://www.realtor.com/mortgage/tools/affordability-calculator.

This handy tool will help you determine your home purchasing power depending on your location, annual income, monthly debt and down payment. It also offers a monthly mortgage breakdown that projects what you would pay each month in principal and interest, property taxes, and home insurance.

The Home Affordability Calculator defaults to a back-end DTI ratio of 36 percent. If the monthly cost estimate at that ratio is significantly higher than what you’re currently paying for housing, you need to consider whether or not you can make up the difference each month in your budget.

If not, you may want to lower your target purchase price to a more conservative DTI ratio. The tool enables you to scroll through higher and lower price points to see the impact on your monthly payments so you can identify your ideal price point.

(Note: This tool only provides an estimate of your purchasing power. You will need to secure pre-approval from a mortgage lender to know your true mortgage approval amount and monthly payment projections.)

 

Can I Afford to Buy My Dream Home?

Once you have a sense of your purchasing power, it’s time to find out which neighborhoods and types of homes you can afford. The best way to determine this is to contact a licensed real estate agent. We help homeowners like you every day and can send you a comprehensive list of homes within your budget that meet your specific needs.

If there are homes within your price range and target neighborhoods that meet your criteria—congratulations! It’s time to begin your home search.

If not, you may need to continue saving up for a larger down payment … or adjust your search parameters to find homes that do fit within your budget. We can help you determine the right course for you.

 

START LAYING YOUR FOUNDATION TODAY

It’s never too early to start preparing financially for a home purchase. These three steps will set you on the path toward homeownership … and a secure financial future!

And if you are ready to buy now but don’t have a perfect credit score or a big down payment, don’t get discouraged. There are resources and options available that might make it possible for you to buy a home sooner than you think. We can help.

Want to find out if you’re ready to buy a house? Give us a call! We’ll help you review your options, connect you with one of our trusted mortgage lenders, and help you determine the ideal time to begin your new home search.

The above references an opinion and is for informational purposes only.  It is not intended to be financial advice. Consult a financial professional for advice regarding your individual needs.

 

 

Sources:
  1. Quicken Loans Blog – 
    
    https://www.quickenloans.com/blog/how-does-your-credit-score-affect-your-mortgage-eligibility
  2. myFICO – 
    
    https://www.myfico.com/credit-education/credit-report-credit-score-articles/
  3. Bankrate – 
    
    https://www.bankrate.com/mortgages/what-is-a-good-credit-score-to-buy-a-house/
  4. Bankrate – 
    
    https://www.bankrate.com/finance/mortgages/7-crucial-facts-about-fha-loans-1.aspx
  5. myFICO – 
    
    https://www.myfico.com/credit-education/improve-your-credit-score/
  6. The Balance – 
    
    https://www.thebalance.com/having-good-credit-score-960528
  7. Bankrate – 
    
    https://www.bankrate.com/mortgages/how-much-is-a-down-payment-on-a-house/
  8. Bankrate – 
    
    https://www.bankrate.com/finance/mortgages/the-basics-of-private-mortgage-insurance-pmi.aspx
  9. Bankrate – 
    
    https://www.bankrate.com/finance/mortgages/removing-private-mortgage-insurance.aspx
  10. The Balance – 
    
    https://www.thebalance.com/fha-home-loan-pitfalls-315673
  11. Investopedia – 
    
    https://www.investopedia.com/terms/c/closingcosts.asp
  12. Bankrate – 
    
    https://www.bankrate.com/finance/mortgages/why-debt-to-income-matters-in-mortgages-1.aspx
  13. The Lenders Network – 
    
    https://thelendersnetwork.com/fha-debt-to-income-ratio/