May 16, 2018 | Mortgage
Buying a home is an exciting and exhilarating time. Between the time your offer is accepted, and when you finally have keys in hand and you are ready to step into your new home, it can be stressful. The escrow period, also known as the closing, can take the most easygoing home buyer to the brink of insanity.
After you have negotiated your best price and come to an agreement, there are ways to make the escrow process less anxiety-provoking. Here are some tips from top real estate agents to help you get through the escrow process without losing your cool.
Utilize Your Professionals
Trust your real estate agent and home financing professional to walk you through the entire process is key to a smoothly closing escrow. Rely on them to do their job, but don’t be afraid to express any anxieties, and lean on them during negotiations and inspections. They are the experts, so ask questions and ask for advice, but try not to second guess their guidance or recommendations.
Your additional trusted partner is your mortgage professional. They know how important the financing piece is to this equation and they will be sure to know your timeline and be available to answer questions and assist you throughout this process.
Stay Organized
Chaos rarely inspires confidence. Stay on top of all paperwork and make sure you sign and return everything to your lender promptly to eliminate delays. The lender and escrow company want the sale to close in a timely fashion, too, so don’t slow them down by being disorganized or failing to return important documentation such as income tax information or bank statements.
Maintain A Healthy Perspective
No home is perfect, so be prepared for inspections that bring some daunting news. Ask to be present when the inspections are performed. The more information you have about your prospective home, the better you will be prepared to negotiate for repairs before they surprise you in the future.
Ask for credits and repairs as needed, but try to remain objective. Some seemingly minor fixer projects can lead to a much longer time table. You may decide that, when considering the bigger picture and a timely transaction, a couple thousand dollars might not actually be a worth negotiating.
Be Flexible
Retain as much flexibility as possible during the closing process and focus on the big picture, rather than all of the details. When opening escrow, ask your agent to give you an overview of the expected timeline from beginning to end. Knowing what to expect, and when as well as being aware of projected milestones goes a long way in reducing anxiety. You can, and should, ask to be notified when important milestones are reached.
While you might have it penciled in on your calendar, it’s common for closing dates to change. Instead of thinking of your closing date as set in stone, think of it as a flexible target. Do not book movers until the last minute, so you won’t be stressed if your belongings are all packed in a truck and the escrow date is set forward a day or two.
Don’t forget to breathe!
This is an important time to take care of yourself. Take a run, meditate, or do yoga. Read a book or enjoy a hobby. Moving can be a physically taxing event, so take the time now to relax before the big move.
Before you know it, you will be moving into your new home. Being informed, staying organized and taking care of yourself are key elements. Most important, though, is to rely on your trained professionals to guide you through this process and help to ensure a stress-less closing.
May 15, 2018 | Mortgage
According to the 2017 Home Buyer and Seller Generational Trends Report, Millennials bought 34% of the homes sold; the largest of any generation last year.
Millennials looking to buy their first, or second, home need to ready themselves for a surprisingly competitive market. Lack of supply causes attractive homes to garner multiple offers in just a few hours!
What can a Millennial buyer do to appeal to sellers and be the one who ends up with the home? Here are 5 ways they can snag their dream home in this seller’s market.
Get Pre-Approved
Figuring out what a home buyer can afford is a crucial step and no different for these savy Millenial home buyers. Sellers like to avoid nasty surprises. Being pre-approved shows the seller that the homebuyer is serious and financially able to purchase their home.
Meeting with a mortgage originator and getting pre-approved is how it’s done. This professional will pull credit history and look at current financial infomation to determine precisely how much of a mortgage is affordable. The pre-approval can then be used as part of their offer letter.
Be Decisive
A hot real estate market is no time for cold feet. Millennials should proactively create a list of must-haves and be ready with an offer when they find a home that meets their requirements.
Taking too long to mull over whether they like the house, the neighborhood, or the price can result in a dream house being sold right out from under them.
Get Real
Millennials should research pricing in the neighborhoods they like, and lean on their real estate agent for helpful guidance. Low-balling an offer is not likely to be received well in this competitive market. Making a fair, reasonable offer close to, or even above, the asking price is the best course of action to land the home they want.
Show Personality
If sellers feel like they know the buyer, they are more likely to choose them over a faceless offer. Include a personal letter with the offer. Go into detail about why the house is appealing. Add personal details about what the Millennial buyer wants to do in the house like raise children, plant a garden, or enjoy baking in the kitchen.
If all buyers are equal, a heartfelt letter just might tip the scales.
Agree to the Seller‘s Timetable
Some sellers prefer unloading their house fast. Others may want to wait to move until their kids are out of school or the new home they are building is ready.
Millennial buyers may need to dig to get this information but it can be used to their advantage. Being flexible might just set them up to be the best choice for the seller.
While challenging, it’s not impossible for Millennials to end up with the house of their dreams. With a bit of planning, decisiveness, flexibility, and a preapproval from their trusted mortgage professional, Millenials can make homeownership a reality in the very near future!
Apr 25, 2018 | Mortgage
One of the challenges you will face when deciding how much money to put down on your new home is whether to put down a larger down payment or to take a bit of money from your down payment and use it to buy “discount points” to lower your interest rate.
There are pros and cons to doing both and each borrowers situation will be different so it’s important to understand which option is best for your individual situation. Some factors you should consider include:
- Cost of borrowing – generally speaking, to lower your interest rate will mean you pay a premium. Most lenders will charge as much as one percent (one point) on the face amount of your loan to decrease your rate. Before you agree to pay points, you need to calculate the amount of money you are going to save monthly and then determine how many months it will take to recover your investment. Remember, closing points are tax deductible so it may be important to talk to your tax planner for guidance
- Larger down payment means more equity – keep in mind, the larger your down payment, the less money you have to borrow and the more equity you have in your new home. This is important for borrowers in a number of ways including lower monthly payments, better loan terms and potentially not having to purchase mortgage insurance depending on how much equity you will have at the time of closing
- Qualifying for a loan – borrowers who are facing challenges qualifying for a loan should weigh which option (points or larger down payment) is likely to help them qualify. In some instances, using a combination of down payment and lower rates will make the difference. Your mortgage professional can help you determine which is most beneficial to you
There is no answer that is right for every borrower. All of the factors that impact your mortgage loan and your overall financial situation must be considered when you are preparing for your mortgage loan.
Talking with your real estate professional and where appropriate your tax professional will help you make the decision that is right for your specific situation.
Apr 19, 2018 | Mortgage
Mortgage lenders weigh the risk of getting their principal and interest paid back by looking at the qualities of the prospective borrrower. And due to the amount of money being requested and lent to purchase homes, those requirements can become daunting. Working with a trusted and qualified mortgage professional makes this sometimes confusing process a little clearer.
To this end, there are three things that a potential homebuyer can do to prepare for the mortgage approval process.
Manage Debt And Credit Levels
For many homebuyers, managing their credit score is the biggest challenge. Mortgage lenders like buyers with strong credit. While getting strong credit usually isn’t something that can be done overnight, paying bills on time, all of the time can help to build a positive profile.
Using as little credit as possible is also helpful, since high utilization of existing credit lines can harm a borrower’s score. Having less debt can also reduce monthly payments, making it easier to qualify for a larger mortgage.
Manage Income And Qualifying Ratios
Lenders look for two things when it comes to a borrower’s income:
- Stable incomes are preferred, so being able to prove the income with a W-2 form or other documentation is usually required. Self-employed people will typically need to prove their income with their tax returns, so taking high write-offs can make it harder to qualify.
- A borrower’s income should be significantly higher than his total monthly debt payments. Lenders divide a borrower’s monthly payments — including their proposed mortgage — into the gross monthly income. If the payments exceed a set percentage, the lender will shrink the mortgage until it considers the payment affordable.
Collect Required Paperwork Early
To qualify for a mortgage, borrowers typically need to submit a comprehensive file of supporting documentation. This can include tax returns, pay stubs and bank and investment account statements.
Since lenders frequently want some historical data, it can be a good idea for people considering applying for a mortgage to start collecting documentation before they actually begin the mortgage application process. Once again, working with a qualified finance professional will make this process a lot more comfortable.
Apr 13, 2018 | Mortgage
US homeowners now have over 5 trillion dollars in home equity which is a very large amount of money! So this year may be the year for a lot of cash out refinances and other home equity mortgage products. Most often, when you are purchasing a home, you are buying at or below the appraised value and you are making a down payment.
The good news is this means you have “instant equity” in your home. And over time you build more equity as you make your monthly mortgage payments as well as any potential home price appreciation.
This build up of equity gets some homeowners thinking about taking cash-out from your home to pay off credit card bills, purchase a car or pay for college expenses. However, it is important understand, there are rules as to what can and can’t be done.
Cash out refinance, equity loan or second mortgage
There are three basic ways to access the equity in your home which are common these include:
- Cash out refinance – you refinance your current mortgage and you request cash-out for the equity. For example, if your home is worth $200,000 and you have a current mortgage of $100,000 you may be able to access an additional $60,000 to $70,000 in cash depending on your lenders requirements
- Home equity loan – a home equity loan is typically a line of credit that you take out with your local bank. These loans are typically what are known as “revolving” where you can access the funds over and over again as you make payments. Home equity loan interest payments are not tax deductible after the recent tax reform plan
- Second mortgage – in order to qualify for a second mortgage on your home, the lender would require you to meet specific credit requirements as well as certain debt-to-income ratios.
In most cases, lenders will require borrowers to have had their mortgage at least one year before they are allowed the option of any type of cash-out refinance. However, Ginnie Mae (GNMA), the investor for FHA and VA home loans allow cash out transactions after 6 monthly payments and a minimum of 210 days in the home.
While you may already have a substantial amount of equity in your home, lenders are taking an additional risk if you are allowed to “tap into” that equity. Before you make the decision to access the equity, talk to your trusted real estate professional regarding possible restrictions.
Apr 12, 2018 | Mortgage
When the chatter was at its peak on the 2018 tax law changes being proposed, one of the big areas of concern for homeowners was the elimination of the mortgage interest deduction. Right behind that issue was a similar treatment with regards to property tax deductions.
As the rumors swirled and Congress moved, many feared both deductions had finally met their day and were going to be entirely eliminated, resulting in a major financial hit that many homeowners and particularly those in high real estate cost states would have felt painfully. As it turned out, there’s no reason to panic or suddenly dump titled real estate just because it has been bought with a mortgage.
Yes, both issues were impacted by the 2018 tax law changes, but neither the mortgage interest deduction nor the property tax deduction were eliminated entirely. Instead, they were modified.
The changes include:
- Mortgage interest deduction – the new laws cap the eligible debt to $750,000. While old loans originated prior to the law change date are still eligible up to $1 million, new mortgages created after the enactment date are caught in the lower universe. However, being realistic, most homebuyers are not in the bracket that afford a $750,000 plus priced home except maybe in a few communities such as New York City or the San Francisco/Bay Area in California. So the change basically means business as usual for 9 out of 10 homeowners in the U.S.
- Real estate property taxes – total state and local taxes eligible for deduction are now capped at $10,000. This is where some homeowners could feel a pinch as a typical home in higher cost states easily generates property tax levels of $5,000 to $7,000 for a $300,000 home. So those units assessed a higher value by tax auditors will likely feel this new limitation take effect.
- The standard deduction increase – remember, the above items are only useful to the extent that a tax filer itemizes his deductions. With a standard deduction now at $12,000 for an individual and $24,000 for a married couple, filing jointly, the option to itemize could go away entirely if the standard deduction provides a higher level of tax savings overall. And then that makes the above two deductions entirely moot and useless. Of course, it’s not entirely a plus since the personal exemption is also eliminated, thus reducing the benefit of the higher standard deduction by as much as $4,150 per person. In essence, the change is a wash, but could be enough to bar use of itemization, which would hurt greatly.
So the changes did not wipe out any benefit entirely (except the personal exemption). Instead, the real impact depends on which change applies to a specific taxfiler’s situation.
This is why two homeowners in the same town with the same house and market value could end up having very different tax results with the 2018 changes. Because there is so much variance.
As always, work with a trusted tax professional in order to understand how these changes will affect your personal tax situation.
