Consider These Questions Before Buying a Home

If you are thinking about purchasing a home right now, you are surely getting a lot of advice. Though your friends and family have your best interests at heart, they may not be fully aware of your needs and what is currently happening in real estate. Let’s look at whether or not now is actually a good time for you to buy a home. 

Buying a home is a big decision, as you most likely know. And, oftentimes family and friends want to offer a lot of advice, some which can be great and some of which can be lacking. It’s very important to look at your needs, as well as the state of the current market, in order to make an educated decision.

When Buying a Home There are 4 Myths You Should Make Sure to Unmask

Harvard University recently concluded a study in which the Joint Center for Housing Studies evaluated why renters do not always have plans to own in their future. The chief reason was financial concerns, rather than any lifestyle perks they feel are linked to renting. Below is hopefully some information that can ease fears and remove myths about buying.

Before Winter Hits Consider 4 Reasons to Buy

As you start thinking about being with family and friends to celebrate the holidays, while eating good food and having a warm fire, take some time to read below and see why it might be a good time to make a move into a new home. 

The Importance of a Real Estate Agent

Buying or selling a home is not for the faint of heart as it is quite daring. Many think that the ease of access to information throughout the internet negates the need for a realtor. However this cannot be further from the truth as you need someone to guide you throughout this courageous experience.

5 Sound Reasons to Buy a House- Per Harvard’s Recent Study

Harvard University’s Eric Belsky, who is the Managing Director of the Joint Center of Housing Studies at Harvard University and also serves on the editorial board of the Journal of Housing Research and Housing Policy Debate, shared a paper on home ownership last year. It is entitled - The Dream Lives On: the Future of Homeownership in America and within it he explores five financial reasons he thinks people should keep in mind when shopping for a home.

Now is the Time for Buyers to Have Cash Ready

Recently there was a downturn in existing home sales. Some are speculating that this is a result of fewer individual cash investors. However, this can easily be a great entry point for other buyers, according to the National Association of Realtors.

Is it Wise to Access your 401(k) to Purchase your first Home?

Many are looking at the money in their 401(k) along with the increase in home prices and wondering if they should use some of those funds.

How Do You Define Earnest Money?

It is a deposit paid toward the purchase of a home, to illustrate to the seller how serious you are about buying the property.

Problems Associated With Excessive Debt

Many Americans, including myself, carry a small and manageable amount of credit card debt. There is nothing wrong with this. It is when you have an excessive level of debt in relation to your monthly income, that you can hurt your chances of getting approved for a mortgage loan.

Your Debt-to-Income Ratio (DTI)

This ratio can make or break your loan approval, as it is one of the largest qualification criteria used for home loan applicants. When you apply for a mortgage, one of the first things the lender will do is check your debt-to-income ratio, or DTI.

Mortgage Insurance - What Does it Cost?

There are two basic types of coverage. The first type is private mortgage insurance (PMI) policies, which are applied to conventional home loans. The federal government does not insure Conventional or “regular” loans. The second type is for those borrowers who use government-insured FHA loans.

The Affects of Credit Card Debt on Mortgage Approval

As a home buyer, you should be concerned with the amount of credit card debt you have as it can directly affect your ability to get a home loan.

You and your real estate agent should be prepared

It is important to follow all the steps in the correct order when considering purchasing a house. Inventory is currently tight, which means the market is good for sellers, and a little bit more difficult for buyers. In this market buyers have to be on top of their game when choosing a house; if they wait to make an offer, chances are the house will be gone and under contract with someone else.

The proper steps to purchasing a house are to meet with the lender that you are comfortable with. If you don't have one, speak to a Realtor first and they can direct you to a trustworthy lender. I caution you to stay away from searching online for lenders — it is much better to meet in person with a lender who is local to your market and is knowledgeable about your area. Online lenders can have higher fees that are often not easily spotted from their websites. A local lender can help you get the right loan program, the right rate and can answer any questions that you have. Quickly turn in all the paperwork your lender asks for so they can fully pre-approve you on the loan amount, and then all you have to do is find the property and you're ready to go.

Once you meet with your agent and complete your paperwork, it's time to go out and look for houses because you are fully prepared. Ideally, you should only look at the houses you would possibly purchase — there is no point in looking at homes that you know you won't like or are in areas in which you don’t want to live. Your goal is to streamline the process, look at five or six homes that you are comfortable with, and make a decision on those homes.

After you find a house you like, it’s time to make an offer. You have already decided that you're going to buy a house, so why wait and risk losing it to another buyer? Your agent should then do a market analysis to find a fair market value on the home, and then begin putting together an offer that is favorable for you. Remember that our market is good, so there is a possibility that you will compete with other offers. I would encourage you to go in with a strong offer and a reasonable earnest money amount. If you choose to ask for personal items, a home warranty, or closing costs, your asking price needs to be as close to list price as possible, typically. The seller may choose to not accept your initial offer and make a counter offer. This is still a rejection of your offer. At that time, another offer may come in and beat your offer. I encourage you to respond to any counter offers as quickly as possible and get signatures as soon as possible. There is no contract until all parties have signed the contract. This is extremely important and your agent should discuss this with you during the buyer consultation. You should be prepared at all times to make an offer, counter offer, and know exactly what you're willing to pay and concede on each property that you look at. If you are properly prepared the process will go smoother and less stressful.

Smart Tips for First Time Homebuyers

As a first time homebuyer, it’s important to take the time to research and plan every step of the home buying process. From confirming that you are financially ready down to making the final offer, here are a few things to keep in mind that may help you along the way.

1. Get (and Stay) Organized

You’ll need to gather your financial information to get started. Collect pay stubs, bank statements, W-2s, and any other financial information for the past two years. This will allow for your financial statements to be readily available when you meet with your lending officer. It’s also a good idea to organize your statements monthly to help stay organized in the years to come.

2. Check Your Credit Score

…and get in the habit of doing so at least once a year. In case you didn’t know, you can access your credit report for free, once a year, through annualcreditreport.com. Your credit report can make or break the final decision on your home loan so be aware and be sure to fix any errors that may appear. You can also receive your FICO score, which will cost you a small fee.

3. Figure Out What You Can Afford

You can start by tracking your daily expenses over the course of a month to see exactly where and how much money you’re spending. Also be sure to track your savings since you may want to start sacrificing the daily stops to your local coffee shop and transfer those expenses into your savings to add a little more cushion to your down payment ability.

4. Use a Mortgage Calculator

Many can be found online and can tell you exactly what your expenses will be. They may not always account for every single penny, but they give you a pretty good idea of what your monthly payment will be. Keep in mind, depending on your home market, your mortgage payment will increase once your taxes and insurance escrow are added.

5. Be Realistic

Before you sign on the dotted line, be sure that you can easily make the monthly mortgage payments. Chances are that if you’re losing sleep about being able to pay your mortgage on top of your current expenses, you’ll need to reconsider the amount you want to borrow.

6. Your Sales Associate Can Help with Lenders

Whether you’re building a home or buying a resale, your sales associate may have existing relationships with preferred lenders to help get you pre-approved for a mortgage. If not, you might want to check your bank or credit union.

7. Do Your Research

We all have our dream homes, but in most cases, our first home may not be the dream home you pictured. When you’re putting together your home wish list, focus less on the marble countertops and extravagant chandeliers and focus more on functionality. Do you need lots of storage? Perhaps walk-in closets and a two car garage should be on your list. Start your home search by researching homes recently sold and homes currently on the market.

8. Get Pre-Approved

You can compare several loans before making the final decision. Be sure to compare and figure out pros and cons. Keep in mind that you should ask about up-front costs as some lenders will charge for pre-approval. Once approved, you’ll receive a letter from the bank explaining how much they have decided to lend you.

9. Not Approved? Look into FHA Loans

The Federal Housing Administration has a lending program specifically for first-time home buyers and only requires 3% to 3.5% for the down payment. Banks recommend spending up to 28% of your gross monthly income on your mortgage, taxes and homeowners’ insurance premium. If you move forward with an FHA loan, you can go even higher to 50% percent of your gross monthly income but keep in mind that just because you are eligible for a larger loan; it’s not necessarily a smart financial move to take it. Remember that 50% will have a larger effect on your income especially if you are enrolled in a 401k savings plan.

10. Don’t Rush

…but keep in mind that you are on a deadline. Typically, pre-approvals are only good for 60 to 90 days. If you don’t find your home within that period, you may need to re-qualify with your lender. While you shouldn’t settle or buy the first home you see, doing some research and only seeing the homes that are in your budget can save a lot of time and make room for more visits to homes that will be a better fit for you and your family.

Professional Moving and Packing-Tips

Aside from it being spring cleaning season, it’s also moving season. At the end of the school year, everyone is scrambling to move and get settled. I jokingly call it "Christmas Season" for professional organizers. Why? Because you don't know what you are getting yourself into when you arrive to unpack and set up a house.

Bad packing and lack of planning can cost you hours in your move process. If you are hiring movers and organizers to unpack you, it could get expensive.

Here are some helpful tips for moving in an efficient manner:

1. Pack like with like.

2. Clearly label your boxes with a black marker.

3. Color code your boxes by room. This will help the movers get them in the right area or room. A big time waster is having to relocate items. Also post a color grid at the front door and give a copy to your movers.

4. If you are hiring help and have specific ideas about placement of items, put post it notes on the cabinets. This will save you from answering a lot of questions from the movers.

5. Before you move in, purchase any containers you might need for the bathroom or pantry. It will save time to handle things once and do it the right way.

6. Measure your floor space and make sure that all your furniture will work in the new home. There are several computer programs that will even let you lay out a home floor plan.

7. Make sure the movers set up your furniture in the correct spot.

8. Carry your linens in the car if possible. When you are tired from a day of moving, the last thing you want to do is search for sheets for your bed.


And most importantly, enjoy your new home!!

The Prequalification and Preapproval Processes

Prequalification begins when you speak with a loan originator who calculates your debt ratios to find out how much money you can afford to borrow and repay. Before you make your call to a loan originator, you’ll need to be ready to answer the following questions:

How much money do you make every month?

How’s your credit?

How much money do you have available for a down payment and closing costs?

Calculating Debt Ratios

Prequalification is first determined by calculating a debt ratio. To do so, the loan originator will take your gross monthly income, estimate a mortgage payment then add any other regular credit obligations such as a car loan, credit card payments, or student loan payments.

Your loan originator will ask about your credit and how much money you have available to buy a home and give then you a general range of how much house you can qualify for.

The Preapproval Process

A mortgage loan prequalification is simply an estimate of how much house you can afford and how much money a lender would be willing to loan you. When you spoke with a loan originator over the phone and they ran your numbers, you probably came away with a general idea of what you are able to afford. However, you didn’t find out if a lender would actually approve a loan for you. That’s because loan originators need more than just verbal confirmation that your credit is good and that you have a steady income. They’ll want to verify that information by reviewing your credit report, paystubs and tax returns.

In a sense, the preapproval process begins the process of getting everything in order so that all you need to do next is find a home to buy. The first step is to complete a loan application. This can be done, over the phone, in person, or most often today, online. Once complete, the lender will review the information and verify the income and assets. Your credit report will be reviewed as well and merged into your loan application.

Experienced loan originators should know in advance whether or not the loan will receive preapproval. Some tipping points would most likely be a high debt ratio, or a low credit score. Most loan originators will be able to give you a fairly accurate idea even before you complete the loan application.

Once approved, you should receive a preapproval letter that you can present to a seller with your offer to let them know that you have the financial capability to purchase their home.

Get a Copy of Your Credit Report

Most people have a pretty good idea of their credit standing and whether or not they have good or, credit issues. But the only way to really find out about your credit is to get your hands on your credit report. This will enable you to see the same information a lender will.

Many privacy or fraud protection services offer ways for you to get a copy of your report online. For a small fee, you can enroll in a program with a company who will monitor your year-to-date credit activity.

If anything suspicious comes up, you’ll be notified of the possible breach. In exchange for subscribing to the service, you’ll typically be offered a copy of your credit report for no additional charge. However, if credit monitoring and fraud protection, while certainly important, aren’t really part of your home buying plan, there is a free alternative. The website www.annualcreditreport.com is sponsored by the three main credit repositories: Equifax, Experian and TransUnion. These three credit bureaus hold the credit information for almost every consumer credit transaction in the U.S. Each year, you can access the website, answer a few questions and get a copy of the same report that displays the same information a mortgage lender will review.

There are two main reasons to get a copy of your report before you shop for a home. The first is to find out if there is any fraudulent activity on your report. Is there a credit card listed that you didn’t know about? Identity theft is becoming more and more common. In fact, according to the U.S. Department of Justice, 7% of U.S. households reported some type of identity fraud. It is entirely possible that someone has used your identity to open up credit accounts under your name without your knowledge. In fact, identity theft is so rampant these days that even if you’re not looking to buy a home, you should regularly review your credit report.

The second reason to get a copy of your report is to check it for any errors. For example, say you paid off your car several months ago but the balance is not only shown as outstanding on your report, but that payment is also months past due. You know that’s an obvious error as the car is paid off and you have a copy of the title stating so. Or, maybe there’s a late payment on a credit card, but you know the late payment report is false because you’ve set up auto-payment on that card each month. Getting your hands on your credit report will help you catch and correct these mistakes.

Finding the Right Agent

Now that you’re ready to start house hunting, you’re probably wondering if you really need a real estate agent or if you can just do all the work yourself. Well, you can look all you want on the internet and go to open houses every weekend but you really don’t know the real estate market like an agent does. Just as you know your job inside and out, a good agent knows the ins and outs of finding a home. Your best bet for finding the right home is finding the right agent.

To clarify, you should know that the agent representing you is called the buyer’s agent and the agent representing the seller is called the selling or listing agent. You’ll be working with your agent during one of the most exciting times in your life, so it’s important to find not only the best agent you can but someone that you connect with and trust. While you can certainly shop for a home and make an offer to a listing agent on your own, understand that the seller’s agent’s loyalty lies with the seller, not with you. The listing agent may be very kind and provide advice as to the condition of the property as well as the sales price, but do you want the seller’s agent giving you advice? No. You want your own agent.

Okay, you’re convinced that you need an agent. But how do you find the best one when all agents claim they’re the best? When you are online you find that not one agent claims, I’m Sam Real Estate and I’m good at what I do and don’t make very many mistakes! Or I really don’t sell that many houses! But most agents will say they provide superior service or are power negotiators that belong to the Million Dollar Club. In other words, it can be a challenge to find an agent that’s right for you simply by finding a website or receiving a postcard in the mail.

Here are the qualities you should look for in an agent:

Experience - The first thing you want to look for is experience. This is not to say that a newly licensed agent wouldn’t do a good job, but because you don’t buy a new home every day, you want someone who knows their job inside and out from years of experience. A real estate agent that has several years of first-hand experience has been there, done that before and understands the industry in a way that no beginner understands it. You want to get the best deal possible so you want someone who will pull out all the stops.

A Full-time Professional - An experienced agent is also a full-time professional. There are many real estate agents who work part-time and can’t truly give real estate their all. A full-time agent focuses on one thing: buying and selling houses. For example, does your father-in-law have his real estate license but works as a full time automobile mechanic? Would you use him as your agent? Don’t even entertain the thought. Not only is he not completely focused on real estate, he’s related to you. Buying a home will not only be a decision with long-term effects, but one of the biggest financial decisions you will ever make so keep personal and professional relationships separate, and stick with a full-time professional agent.

Has Good References from People You Know - You’ve searched the internet and found hundreds of so-called perfect agents, but there’s nothing like getting a good referral for a real estate agent from a friend or colleague. Start asking around. You’ll always get an honest answer when someone truly appreciated the job their agent did for them. You also might learn who you don’t want as an agent. Good or bad, get referrals from someone you know and trust. You might even ask your lender because most lenders have experience working with agents on a regular basis.

Responsive to Your Initial Query - Once you have some good referrals, you can call a few agents to let them know you’re on the hunt for an agent to help find you a new home. If you make phone calls to five different agents and two of the agents don’t respond until the day after tomorrow, you have a good indication that they won’t be very responsive agents on your behalf. You want an agent who responds promptly, stays in touch and communicates with you clearly.

Feels Like a Good Fit for You - At this stage, you’ve probably got two or three possible agents that will all do a good job. But now it’s a matter of compatibility. Face it, there are some professionals that you might encounter that are decent enough, but they simply rub you the wrong way. They may not have done anything offensive to you but you just didn’t hit it off. A good buyer’s agent will spend some time with you to understand your needs and your goals. Take some time to visit with more than one agent. You want someone you’re comfortable working with, and who compliments your personality.

Is LPMI best for me?

Thinking of purchasing a home with less than 20% down? In this article, we will explain Borrower Paid Mortgage Insurance (BPMI) and Lender Paid Mortgage Insurance (LPMI) to help you determine which type of mortgage insurance is a better choice for your specific financial situation.

What is BPMI? 

Borrower paid mortgage insurance is paid on a monthly basis to the loan servicer of your mortgage. Essentially, BPMI is a monthly insurance payment, charged to the borrower for putting less than a 20% down payment. Borrower paid mortgage insurance eventually ends or is canceled when the LTV (Loan-To-Value) falls below 78-80% or the loan is paid in full. 

What is LPMI?             

Lender paid mortgage insurance is different than BPMI since the borrower pays no monthly mortgage insurance payment. Instead, borrowers agree to a slightly higher interest rate and the monthly PMI payment is bought out. For example, with lender paid mortgage insurance, a borrower might take a slightly higher rate of 4.75% instead of an interest rate of 4.5%. 

How To Determine The Type Of Mortgage Insurance That Is Best For You? 

There is much debate about which is better, BPMI or LPMI. Since everyone has unique scenarios, there is no clear cut answer as to which is best. The benefit of BPMI is there will be a point where the monthly (MI) mortgage insurance payments will stop. This occurs when the LTV reaches 78-80%. In a growing housing market, it might be better to take BPMI if you expect rapid appreciation in a short amount of time.

With LPMI, it may be advantageous to have a lower mortgage payment, while taking a slightly higher interest rate. LPMI may be the better choice, especially in our current condition of record low interest rates. It might also be beneficial if you don't anticipate being in your mortgage for the life of the loan. At the end of the day, everyone has different financial goals and scenarios, so we urge you to call your mortgage advisor to discuss which home loan options best fit your financial goals.

Putting together your Homebuying Team

Home may be where the heart is, but the house-buying process can easily become a headache.

To keep trouble to a minimum, take time to independently evaluate each professional you'll need on your team, from lender to real estate agent to home inspector to title agent. Choose client-focused, experienced pros…preferably referred by trusted sources.

Here are more tips, based on my interviews with consumers and highly rated service providers:

Mortgage lender

Before you start looking at homes, find a reliable lender to pre-approve you for financing. This is especially important now, given the strict government regulation of home financing.

Seek a responsive bank or mortgage professional who keeps the terms of the agreement consistent, and who communicates well so that paperwork flows in a timely fashion.

Real estate agent

Look for an agent who will communicate with you promptly throughout the process.

Avoid an agent who steers you only to his or her own listings or those of the company. Be wary of hiring relatives or friends with limited experience or agents who work only part time. Make sure the agent you hire has the computer skills and web savvy to set up automated searches so you're notified quickly of new listings.

Confirm that an agent is properly licensed and in good professional standing. All states require that real estate agents be licensed. Most states have sites that provide information on disciplinary action taken against licensed agents.

If you end up under tied to an agent you're unhappy with, ask to be released from the arrangement. If that fails, consider asking a local real estate attorney for advice.

Home inspector

Look for home inspectors who go beyond state regulatory requirements (though not all states require inspectors to be licensed), receive continued education and belong to a professional organization, such as the American Society of Home Inspectors.

ASHI requires that members follow a code of ethics that prohibits receipt of referral fees. Ethical inspectors don't take kickbacks from contractors who repair problems an inspection uncovers, or receive money from real estate agents who refer their clients.

Be sure to schedule an inspection early enough in the process that there's time to deal with any repair issues or other problems.

To prevent last-minute problems at closing, check that the sellers take care of any agreed-upon repairs.

Closing Attorney

Lenders or real estate agents may recommend a closing attorney, but to avoid hiring someone with a conflict of interest, be sure to ask about affiliations between parties. Keep in mind that the closing attorney represents the lender at closing, but is obligated to be fair and honest with all parties.

How to Save Money on Homeowners Insurance

In today’s economy, many people are looking for ways to save money on their expenses, and one of the big costs is homeowner’s insurance. This is particularly true as homeowner’s insurance costs continue to rise in most places throughout the country. Here are some ways people can decrease their homeowner’s insurance costs:.

1. Increase deductibles. Homeowner’s insurance isn’t designed to cover the small things. It’s better used for catastrophic events, so increasing deductibles can save money on premiums and will probably still provide suitable coverage in case of a real emergency.

2. Location plays a huge role in homeowner’s insurance costs. For a buyer on the market for a new home, it’s best to choose areas that aren’t close to regions susceptible to floods, earthquakes, etc.

3. Don’t use insurance for small claims. This is going to increase insurance costs. Instead, rely on homeowner’s insurance for the really big stuff, and you’ll end up paying less in premiums.

4. Consider combining several insurance policies with one provider. For example, combine auto and homeowner’s insurance for significant savings.

5. Make smart home improvements. Not only can some home improvements, like roof strapping, improve a home’s value, but they can lower insurance costs.

6. Installing a top home alarm system is a great way to cut homeowner’s insurance premiums. Contact a home alarm company to find a good value on a system. Many alarm companies offer numerous discounts and special pricing deals. Not only will an alarm system reduce homeowner’s insurance costs, but it can also be a potentially life-saving addition to a home. Installing a security system can actually save as much as 15 to 20 percent on the cost of homeowner’s insurance.

7. Understand the importance credit rating plays in the cost of homeowner’s insurance. Many policy holders don’t know that a less than perfect credit score can mean higher premiums, so clean up that credit before shopping for a policy.

8. Assess policy coverage on a yearly basis. There may be things covered in a homeowner’s policy that no longer hold the same value, so eliminating coverage for these items can save a lot of money.

9. Shop around. Consumers shouldn’t just go with the first company they contact. Instead, compare rates and use comparisons as leverage with other companies to negotiate rates.

How a REALTOR Can Help?

A real estate agent can help you understand everything you need to know about buying a home.

Almost Too Good to Be True - Tax Benefits of Home Ownership

Uncle Sam helps you in three ways when you own your home.
1. Purchase - When you buy your home, most of the cost are not tax deductible. But there is one exception that is worth finding. The IRS says you can deduct interest in the year that it is paid, and that is usually part of each monthly payment.

Should I use an Agent?

Especially for first-time homebuyers, using a seasoned agent is a smart move.
As a first-time homebuyer, you should seriously consider getting your own agent. Although the Internet makes some aspects of finding homes easier than it was 20 years ago, a good real estate agent has access to lots of market information