Author Archives: Make your Home your Haven!

Build Equity Faster

13 Monday Jul 2015

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Equity is an asset and an appreciating home is an investment. While some people have resolved themselves that a mortgage payment is a normal part of life, others have set goals to get their home paid for as soon as possible. There are several strategies that will work but they all require persistent vigilance.

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A shorter term mortgage such as 20, 15 or even 10 years will not only pay off sooner, it will generally have a lower interest rate. A recent comparison at Freddie Mac’s Primary Mortgage Market Survey showed a 30 year fixed-rate mortgage at 4.04% compared to a 15 year fixed-rate at 3.20%. The fees for the shorter term were even .1% less. The shorter term with the lower rate would have a higher payment but some people consider it forced savings.

Additional principal contributions to any length fixed-rate mortgage will save interest, build equity and shorten the term of the loan. Some homeowners may apply lump sums at various times during the year such as when bonuses are paid or a tax refund is received.

Other owners might increase their payment by $100, $200 or more each month. Setting the increased payment through electronic banking would insure that you consistently make the extra amount.

Bi-weekly payments make 26 half-payments in a year which equals 13 full-payments. Because of the frequency, it reduces the interest that is due. This might work well for borrowers who are paid every two weeks but could present cash flow problems for those who are paid on schedules that don’t coincide.

Making one extra payment a year will have almost the same effect as a bi-weekly payment. The 13th payment would be completely applied to principal.

Before embarking on one of these strategies, it would be wise to verify with your lender that it complies with their policies. Check out the Equity Accelerator to see how it could affect your loan.

Take Pictures Now

08 Monday Jun 2015

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Preserve the memories you’re making by taking photographs of your home now. The pictures will remind you of the role your home played with your family and life.

Reminiscing is easier when scrolling through pictures to remind you of people and times. One of the least heard regrets is that we

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should have taken more pictures.

Shots to consider:

  • The front of the home from across the street
  • Times when your yard and plants looked exceptional
  • Holiday decorations
  • Special occasions in the homes like birthdays, anniversaries, graduations, etc.
    Home improvements
  • Major purchases for the home
  • Times when the home looked the best and the worst
  • Family, friends and pets in the home
  • Your children’s height marks on a door frame
  • The view from a favorite window

From an organizational standpoint, put the pictures in a folder with your address as the name. Even if you don’t take time to name each picture, you’ll have the file date to identify when it was taken. Since the cost of film and processing has disappeared, there is little reason not to chronicle your life in pictures.

Live the Dream

11 Monday May 2015

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Consumers are more easily living the American Dream of owning a home because of the incredibly low mortgage rates. Today, most buyers can get a much lower rate than their parents or grandparents got on their first home.
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In a recent housing survey, FNMA released information about consumers’ thoughts on the current market. Almost two-thirds would rather buy than rent and believe that now is a good time to buy. Half of the respondents expect rent and home prices will go up.

Top Ten reasons to move the dream to reality:

  1. It’s cheaper than renting in most cases
  2. Avoid rental increases in the future
  3. Equity build-up with amortization of each payment going to principal
  4. A home is a forced savings account
  5. Appreciation increases your equity and your overall investment
  6. Mortgage interest and property tax deductions
  7. Home equity interest deduction
  8. A place you can call your own
  9. A place to share with friends and family
  10. Capital gains exclusion on profit

Buyers need the confidence that they can afford a home and proof for the sellers when they’re ready to submit a contract. If a buyer has steady reliable income, a good record of paying their bills, money saved for a down payment and are prepared to pay the mortgage each month, the next step is to get pre-approved by a trusted mortgage professional.

Take a look at the Rent vs. Own to see what the real cost of owning a home for your price range.

Basic Legal Documents

23 Thursday Apr 2015

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Many times, young adults feel “bullet-proof” and don’t consider the urgency to get involved or spend the money to take care of certain legal aspects of their lives because they think they’re going to live forever.  Since no one is guaranteed longevity of life, if you want to be in control of who gets what and who is in charge now based on an untimely incapacitation or death, it is important to investigate these basic legal documents.

Will – This is a legal instrument that specifies your desires to care for your minor children and to distribute your personal property after you die and who will manage the process.  Anyone who has property and minor children needs a will.

Living Will – This legal instrument specifies your intentions regarding end of life decisions or to designate an individual to make those decisions on your behalf.  Many times, a person who had been diagnosed with a terminal condition or who is facing a serious surgery or hospitalization might feel a sense of urgency to have this document.

Power of attorney – This document allows you to appoint someone you trust, not necessarily an attorney, to handle important legal and financial matters for you if you are unable to make decisions for yourself.  The time limit can be for a specified period of time or indefinitely.

Trust – This arrangement involves an entity called a Trustee who takes control and manages property for someone else’s benefit called a beneficiary.  When property is placed in a trust, the trust becomes the owner of the property.  There are different types of trusts and a qualified advisor can explain and recommend which type would be best suited for your situation.

HIPPA Release Form – The Health Insurance Portability and Accountability Act, known as HIPPA, was created by Congress to protect the privacy of a person’s health information.  Health care providers are prohibited from discussing any aspect of your medical information with anyone who is not directly involved in your care.  To allow friends or family who do not have legal responsibility for you to have access to this information, this release form is necessary.

Most of the issues affecting these types of documents are determined by state law.  Since they are legal documents, it is recommended that you seek sound financial and legal advice.

Too Much House?

30 Monday Mar 2015

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Home Too Big Now?

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Once the kids are grown, have careers, relationships and get a place of their own, parents find that they may not need their “big” home like they did before. Their lifestyle may have changed and the house just doesn’t “fit” anymore.

Benefits of a smaller home:

  • Easier to maintain 
  • Lower utilities
  • Lower property taxes 
  • Lower insurance
  • More convenient location
  • Convenience of a single level
  • Possibly more energy efficient
  • Possibly lower maintenance

Moving from a larger home frees equity from the previous home that can be invested for retirement income, purchase a second home, travel, education or just to have a nest egg for unexpected expenses.  The profit on the home, in most cases, will be tax-free up to the exclusion limits set by IRS.

There will be expenses involved in selling a home as well as the purchase of a new home.  These will lower the amount of net proceeds available to invest in the new home.

Like any other big change in life, it is recommended that you take your time to consider the possible alternatives and outcomes.  Your real estate professional can provide information that can be valuable in the discernment process such as what your home is worth, what you will net from a sale as well as alternative properties for your next stage in life.

So, you want to buy a Home? “You’d Better Shop Around”

27 Friday Mar 2015

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Home Loan Center

When thinking of purchasing a home the first thing to consider is how much can I afford? Getting pre-approved is key in becoming a strong buyer, and one that the seller will take seriously when the time is right to make an offer. Having your pre-approval takes the stress off of wondering if the home you are looking at, and falling in love with, is within your means.  It also places your Realtor in a better position of knowing how to serve your needs and that of your family.  Put the joy into house shopping by taking the stress out first with a solid pre-approval.  Shop around and get acquainted with different lenders and loan programs that you may qualify for. Again, your Realtor is in the know on how to guide you in the right direction.  Make sure that you tap into the wealth of knowledge that your Realtor can offer.  After all, you do not shop for mortgages everyday, but your Realtor is always in touch with the best local providers.  Below is a consumer tool kit that can assist home buyers become educated on what is needed in purchasing a home.

http://www.consumerfinance.gov/owning-a-home/check-rates                                     

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FHA or Conventional?

23 Monday Mar 2015

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Buyers with a minimum down payment are generally faced with the decision of whether to get a FHA or a conventional loan.  With the new 3% down payment program on conventional loans, it may become more confusing which loan to pursue.

The two loan programs have mortgage fees that can differ greatly.  FHA has a 1.75% up-front mortgage insurance charge in addition to the monthly mortgage insurance charge which was recently lowered by .5%.

FHA’s mortgage insurance is a fixed amount where conventional mortgage insurance providers’ fees are determined by individual companies and according to the credit score of the borrowers.  A borrower with a good credit score will be charged less than a borrower with a marginal credit score.

Mortgage insurance on conventional loans can be cancelled when the equity in the property reaches 20%.  FHA mortgage insurance in most cases, is paid for the life of the mortgage.  Once a borrower has a 20% equity in their home, to eliminate the monthly FHA mortgage insurance, they would need to refinance the home with a conventional loan and would not be eligible for any refund of the up-front fee paid at closing or added to the mortgage.

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If a borrower has a low credit score, FHA may be the better choice because conventional underwriters may have a higher minimum score.  FHA loans also tend to be more lenient than conventional loans when a borrower’s total monthly debt exceeds 45% of their monthly income.  FHA tends to allow borrowers a shorter time frame after foreclosures and bankruptcies.

The decision-making factor is which mortgage will provide the lowest cost of housing including payment and all loan fees.  A lot of information is necessary to make a good decision and typically, the borrower isn’t able to acquire it on his/her own.

A trusted mortgage professional is very valuable in not only providing the information but guiding the borrower through the entire process.  Your real estate professional is uniquely qualified to make such a recommendation.

SO.. you want to buy a HOME.. check this out!

26 Thursday Feb 2015

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Home is Worth the Sacrifice 

house orange.jpgThere are many reasons people want a home with the most frequent responses being a place of their own, to raise their family, share with their friends and feel safe and secure.  These are all strong motivations fueling the American Dream of owning your own home.

The motivation is so dominant that buyers are willing to make sacrifices to have their dream come true.  According to the 2014 National Association of REALTORS® Home Buyers and Sellers Survey, 72% of first-time buyers cut spending on luxury or non-essential items.  They also cut spending on entertainment, clothes and even cancelled vacation plans.

The value of getting their own home is more important than the immediate gratification of things that are considered less important.  While qualifying guidelines were increased last year, there are still more buyers purchasing homes at near record-low mortgage rates.

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Homeowner’s Insurance Tips!

16 Monday Feb 2015

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Save on Homeowner’s Insurance

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Insurance is a way to hedge the risk of a possible loss on an asset that a person or entity cannot afford.  The cost of the coverage is determined by risk and exposure to the insurer and reflected in the premium.

Another way to say it is: don’t buy insurance when you can afford the loss.  If you have a mortgage on your home, you must have insurance.  It is probably prudent for most people to have property insurance but certain coverage might be avoided because you can afford the loss if you were to have an occurrence.

  1. Call your current agent and review your insurance coverage.  Ask if there are any available discounts whether your property qualifies for now or after certain improvements are made.  Monitored alarm systems, dead bolts, smoke detectors, updated electrical, certain types and ages of roofs among other things may be eligible for individual discounts. 
  2. Compare the newly revised coverage and premium with other reputable agencies and insurers.  Shopping can be time consuming but experts agree that the exercise can be valuable and should be considered every few years. 
  3. Deductibles are an easy way to affect the premium based on the initial amount of loss that the insured wants to assume.  The higher the deductible, the lower the premium.  Determine the amount of risk you want to assume and select an appropriate deductible.
  4. Consider bundling your home and auto policies for possible discounts and leverage for better service.
  5. Don’t become a co-insurer.  Most policies stipulate that a building must be insured for at least a certain percentage, usually 80% of its insured value to be able to collect the full amount of a partial loss.  Insured value is not always the same as market value.  The land is not considered in the value but replacement cost of the dwelling is.

It isn’t possible to purchase insurance after a loss; it must be purchased before a loss is incurred.  Premiums are based on careful analysis of insurer’s loss and overhead expense plus a profit.  As a homeowner and an insured, it would be equally wise to analyze coverage, claim service, your risk tolerance and the premium you’ll pay for that coverage.

Converting a Home to a Rental

26 Monday Jan 2015

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A simple decision to rent your current home instead of selling it when moving to a new home could have far reaching consequences.

If you have a considerable gain, in a principal residence and you rent it for more than three years, it can lose the principal residence status and the profit must be recognized.

Section 121 provides the exclusion of capital gain on a principal residence if you own and use it as such for two out of the last five years.  This would allow a temporary rental for up to three years before the exclusion is lost.

Let’s assume there is a $100,000 gain in your principal residence.  If it qualifies for the exclusion, no tax would be owed. If the property had been converted to a rental so that it didn’t qualify any longer, the gain would be taxed at the current 20% long-term capital gains rate and it may incur a 3.8% surcharge for higher tax brackets.  At least $20,000 in taxes could be avoided by selling it with the principal residence exclusion.

Depreciation, a tax benefit of income property, is determined by the improvement value at the time of purchase or at the conversion to a rental whichever is less.  If the seller sold the home and took the exclusion and then, bought an identical home for the same price, he would be able to have 60% more cost recovery and avoid long term capital gains tax.

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It is always recommended that homeowners considering such a conversion get advice from their tax professional as to how this will specifically affect their individual situation.