Loans & Lending Terms to Know

When you make the decision to buy a home, you'll start to hear all sorts of words that may seem strange. Here are some tips to put you in the "know."

Loan Term.
Mortgages are generally available at 15-, 20-, or 30-year terms. In general, the longer the term, the lower the monthly payment. However, shorter terms mean you pay less interest over the life of the loan.
Fixed vs. adjustable interest rates.
A fixed rate allows you to lock in a low-interest rate as long as you hold the mortgage and, in general, is a good choice if interest rates are low. An adjustable-rate mortgage (ARM) usually offers a lower rate that will rise as market rates increase. ARMs usually have a limit as to how much and how frequently the interest rate can be increased. These types of mortgages are a good choice when fixed interest rates are high or if you expect your income to grow significantly in the coming years.
Non-traditional mortgages.
Also sometimes called exotic, portfolio or in-house loans. These mortgage types were common in the run-up to the housing crisis, and often featured loans with low initial payments that increase over time.
Balloon payment mortgage.
This is a form of non-traditional financing where your interest rate will be very low for a short period of time—often three to seven years. Payments usually only cover interest so the principal owed is not reduced. This type of loan may be a good choice if you think you will sell your home at a large profit in a few years.
Government-backed loans.
These loans are sponsored by agencies such as the Federal Housing Administration or the Department of Veterans Affairs. They offer special terms, including reduced interest rates to qualified buyers. VA Loans are open to veterans, reservists, active-duty personnel, and surviving spouses and are one of the only options available for zero down payment loans. FHA loans are open to anyone, and while they do require a down payment, it can be as low as 3.5%. Drawbacks include a slower loan process and—for FHA loans—the need to pay mortgage insurance.
However… As the housing market shifts, so do lending practices. A mortgage broker—an independent professional who acts as an intermediary between you and lending institutions—may be able to help you find a better rate than you can on your own. Also, be sure to shop around; slight variations in interest rates, loan amounts, and terms can significantly affect your monthly payment. But make sure you get all the details.
Source: Realtor.org

Thinking of buying or selling? Send me an email through the link on the right. I’d be happy to help you get happily moved to your new home!

How to Hold a Successful Garage Sale

Garage sales can be a great way to get rid of clutter and earn a little extra cash before you move. But make sure you plan ahead; they can take on a life of their own.
1. Don’t wait until the last minute.
Depending on how long you’ve lived in your home and how much stuff you want to sell, planning a garage sale can take a lot of time and energy. And that’s on top of the effort of putting your home on the market!
Contact your local government.

Some municipalities will require you to obtain a permit in order to hold a garage sale. They’re often free or cheap, but the fines for neglecting to obtain one can be hefty.
See if neighbors want to join in.

You can turn your garage sale into a block-wide event and lure more shoppers. However, a permit may be necessary for each homeowner, even if it’s a group event.
2. Schedule the sale.
Sales on Saturdays and Sundays will generate the most traffic, especially if the weather cooperates. Start the sale early — 8 or 9 a.m. is best — and be ready for early birds.
Advertise.

Place an ad in the newspaper, free classified papers, and websites, including the date(s), time, and address of the garage sale. Add information about what will be available, such as kids’ clothes, furniture, or special equipment. On the day of the sale, use balloons and signs with prominent arrows to grab attention.
3. Price your goods.
Clearly mark rounded prices (50 cents, 3 for $1, or $5, for example) with easily removable stickers.

4. If it’s junk, recycle or donate it.
If it’s truly garbage, throw it away or place it in a freebie bin. Don’t try to sell broken appliances, and have an electrical outlet nearby in case a customer wants to try plugging something in.

5. Display items nicely.
Organize by category, and don’t make customers dig through boxes.
6. Stock up on wrapping supplies.
Having a stock of old shopping bags that can be reused encourages people to buy more items. Newspapers are handy for wrapping fragile goods.
7. Keep track of your money.
Obtain ample change for your cashbox - that means a minimum of 20-30 $1 bills, 10 $5 bills, and a $10 roll of quarters. Have a calculator on hand for multiple sales. Assign one person to handle the “register,” keeping a tally of what was purchased and for how much.
Source:Realtor.org

Thinking of buying or selling? Send me an email through the link on the right. I’d be happy to help you get happily moved to your new home!

How to Prepare to Finance a Home

When you decide you want to buy a home, it makes sense to plan ahead. Here are some tips to get you started. 

Develop a budget.
Instead of telling yourself what you’d like to spend, use receipts to create a budget that reflects your actual habits over the last several months. This approach will better factor in unexpected expenses alongside more predictable costs such as utility bills and groceries. You’ll probably spot some ways to save, whether it’s cutting out that morning trip to Starbucks or eating dinner at home more often.

Reduce debt.
Lenders generally look for a debt load of no more than 36% of income. This figure includes your mortgage, which typically ranges between 25 and 28% of your net household income. So you need to get monthly payments on the rest of your installment debt—car loans, student loans, and revolving balances on credit cards — down to between 8 and 10% of your net monthly income.

Increase your income.
Now’s the time to ask for a raise! If that’s not an option, you may want to consider taking on a second job to get your income at a level high enough to qualify for the home you want. And don't think of that income as spending money - it's savings for your down payment.

Designate a certain amount of money each month to put away in your savings account. Although it’s possible to get a mortgage with 5% down or less, you can usually get a better rate if you put down a larger percentage of the total purchase. Aim for a 20% down payment to save on monthly private mortgage insurance.
Stay at your job.
While you don’t need to be in the same job forever to qualify for a home loan, having a job for less than two years may mean you have to pay a higher interest rate.

Establish a good credit history.
Get a credit card and make payments by the due date. Do the same for all your other bills, too. Pay off entire balances as promptly as possible.
Start saving.

Besides your down payment, don’t forget to factor in closing costs, which can average between 2 and 6% of the home price.
Know your credit score.
Make sure it is accurate and correct any errors immediately. A credit report provides a history of your credit, bad debts, and any late payments.
Get Pre-approved for a mortgage. Know what you can afford.Generally, you want to look for homes valued between two and three times your gross income, but a financing professional can help determine the size of loan for which you’ll qualify. Find out what kind of mortgage (30-year or 15-year? Fixed or adjustable rate?) is best for you. Also, gather the documentation a lender will need to preapprove you for a loan, such as W-2s, pay stub copies, account numbers, and copies of two to four months of bank or credit union statements. Don’t forget property taxes, insurance, maintenance, utilities, and association fees, if applicable.

Review options for down payment assistance.
Check with your state and local government to find out whether you qualify for a special mortgage or down payment assistance programs. If you have an IRA account, you can use the money you’ve saved to buy your first home without paying a penalty for early withdrawal.
Source: Realtor.org

Thinking of buying or selling? Send me an email through the link on the right. I’d be happy to help you get happily moved to your new home!

What to Consider Before Putting Your Home up for Sale

Here are a few items to take care of before listing your home. This can make the sale process quicker and easier in the long run.

Consider a pre-sale home inspection. 

An inspector will be able to give you a good indication of the trouble areas that will stand out to potential buyers, and you’ll be able to make repairs before open houses begin.

Organize and clean. 
Pare down clutter and pack up your least-used items, such as large blenders and other kitchen tools, out-of-season clothes, toys, and seasonal items. Store items off-site or in boxes neatly arranged in the garage or basement. Clean the windows, carpets, walls, lighting fixtures, and baseboards to make the house shine.

Get replacement estimates. 
Do you have big-ticket items that will need to be replaced soon? Find out how much it will cost to repair an older roof or replace worn carpeting, even if you don’t plan to do so. The figures will help buyers determine if they can afford the home, and they’ll be handy when negotiations begin.

Locate warranties. 
Gather up the warranties, guarantees, and user manuals for the furnace, washer/dryer, dishwasher, and any other items that will remain with the house. It may seem like this task can be left until closing, but you don’t want lost paperwork or last-minute scrambling to cause the deal to fall through.

Spruce up the curb appeal.
 
Walk out to the front of your home, close your eyes, and pretend you’re a prospective buyer seeing the property for the first time. As you approach the front door, what is your impression of the property? Do the lawn and bushes look neatly manicured? Is the address clearly visible? What do you see framing the entrance, if anything? Is the walkway free of cracks and impediments?
Source: Realtor.org

Thinking of buying or selling? Send me an email through the link on the right. I’d be happy to help you get happily moved to your new home!

6 Home Buying Myths

Most home buyers get a lot of advice from friends and family – some good, some bad. A lot of myths can pop up and negatively guide your home purchasing experience. Make sure you don’t fall for one of these common buying falsehoods.

1. The only upfront cost is the down payment.You need to be prepared for several expenses – everything from fees, taxes, costs for inspections, credit reports, insurance, and others. Closing costs can be anywhere from 3 percent to 6 percent of the purchase price. Those costs can fluctuate greatly depending on the state you live in too.

2. Just looking for a house casually is not a big deal.
If you think you want to start looking at homes to get a feel for the area, before you even sit down with a REALTOR®, you may be setting yourself up for a major heartbreak of falling for a home you can't afford. Home shoppers – even at the earliest stages – should get pre-approved for a mortgage so you know your budget from the get-go and don’t waste time looking at homes that are out of their price range.

3. You must have a 20% down payment.
Yes, a 20% down payment will help a buyer avoid paying private mortgage insurance. But 20% down isn’t required. Many lenders will still qualify a buyer for home loans with 10% or 5%. Some buyers can even qualify for only 3.5%. There are many options for down payment assistance that lenders can explore with a buyer who has a limited amount to put down.

4. Schools shouldn’t matter if you don’t have kids.
The neighborhood you choose matters – even if you don't have school-age children. When you want to sell later on, that could be a big factor to your buyer and the timing to sell your home. Good schools are a sign of a good neighborhood. You should explore all the neighborhood factors that could influence your home's appreciation and desirability.

5. You don’t need a home inspection.When the housing market is extremely competitive, some home shoppers may be willing to waive the home inspection in order to get the home they want. But as the saying goes, buyer beware. It means you’ll get the home as is, including any and all problems that come with it. And sometimes those problems aren’t exactly visible with a simple walk-through of the home. Hire an expert. It will pay off in the long run. 


6: A 30-year mortgage is the best option
If you think that the longer you agree to invest in your home, the cheaper the mortgage payments will be, think again.

Most people opt for 30-year fixed-rate mortgages and for a valid reason: Monthly payments for a 30-year fixed-rate mortgage are lower than its 15-year counterpart.

But consider this: You could end up paying more during the life of the loan if you pick the 30-year option instead of the 15-year mortgage. That’s because essentially, with a 30-year loan, you’re borrowing the same amount of money for twice as long—at a higher interest rate.

Source: Realtor.org

Thinking of buying or selling? Send me an email with the link to the side. I'd be happy to help you find the home that best suits your needs. 

The Tax Benefits of Owning

The tax deductions you’re eligible to take for mortgage interest* and property taxes greatly increase the financial benefits of home ownership. Let’s work through a hypothetical situation to see how it works.
Let's do an example and use the following information:
   $9,877 Mortgage interest paid (a loan of $150,000 for 30 years, at 7 percent, using year-five interest)
+$2,700  Property taxes (at 1.5 percent on $180,000 assessed value)
 $12,577 Total deduction

Then, multiply your total deduction by your tax rate.**  
For example, at a 28 percent tax rate: $12,577 x 0.28 = $3,521.56
$3,521.56 = Amount by which you have lowered your federal income tax

*Mortgage interest may not be deductible on loans over $1.1 million. In addition, deductions are decreased when total income reaches a certain level.
**The rate at which you’re taxed is determined by your tax bracket, which in turn is determined by how much you earned in a given year along with your filing status (single, married filing jointly, married filing separately, or head of household). IRS Publication 501 will help you determine your rate.
Changing Real Estate Dreams Into Realty Since 1985
Christine Henderson - BH&G Bradfield Properties 210-827-2858

Worksheet: Calculate Capital Gains

When you sell a stock, you owe taxes on the difference between what you paid for the stock and how much you got for the sale. The same holds true in home sales, but there are other considerations.
How to Calculate Gain
Your home’s original sales price when you bought it (not what you brought to closing).

Additional costs you paid toward the original purchase (include transfer fees, attorney fees, and inspections but not points you paid on your mortgage).
+
Cost of improvements you’ve made (include room additions, deck, etc. Improvements do not include repairing or replacing existing items).
+
Current selling costs (include inspections, attorney fees, real estate commission, and money you spent to fix up your home to prepare it for sale).
+
Add the above items to get your adjusted cost basis:
=
       
The final sale amount for your home.

The adjusted cost basis figure from above.
-
Your capital gain:
=

A Special Real Estate Exemption for Capital Gains
Up to $250,000 in capital gains ($500,000 for a married couple) on the home sale is exempt from taxation if you meet the following criteria: (1) You owned and lived in the home as your principal residence for two out of the last five years; and (2) you have not sold or exchanged another home during the two years preceding the sale. You may qualify for a reduced exclusion if you otherwise qualify but are short of the two-out-of-the-last-five-years requirement if you meet what the tax law calls “unforeseen circumstances,” such as job loss, divorce, or family medical emergency.
This is not meant as tax or legal advice. For complete details on capital gains on your home, consult a tax attorney or CPA.
Changing Real Estate Dreams Into Reality Since 1985

Christine Henderson   210-827-2858   
BGH&G Bradfield Properties

How to Improve Your Credit

Credit scores play a big role in determining whether you’ll qualify for a loan and what your loan terms will be. So, keep your credit score high by doing the following:

Check for errors in your credit report.

Thanks to an act of Congress, you can download one free credit report each year at annualcreditreport.com. If you find any errors, correct them immediately.

Pay down credit card bills.

If possible, pay off the entire balance every month. Transferring credit card debt from one card to another could lower your score.

Don’t charge your credit cards to the max.

Pay down as much as you can every month.

Wait 12 months after credit difficulties to apply for a mortgage.

You’re penalized less severely for problems after a year.

Don’t order items for your new home on credit.

Wait until after your home loan is approved to charge appliances and furniture, as that will add to your debt.

Don’t open new credit card accounts.

If you’re applying for a mortgage, having too much available credit can lower your score.

Shop for mortgage rates all at once.

Having too many credit applications can lower your score. However, multiple inquiries about your credit score from the same type of lender are counted as one if submitted over a short period of time.

Avoid finance companies.

Even if you pay off their loan on time, the interest is high and it may be considered a sign of poor credit management.
Changing Real Estate Dreams Into Realty Since 1985

Christine Henderson - BH&G Bradfield Properties 210-827-2858