Three Excellent Reasons to Buy a Home So You Can Get out of the "Renting Rut"

Renting a home is a good option for some, but buying a home just might be the best thing for you. When you rent a home, you send money to someone else every month in exchange for knowing that you can call on your landlord when the roof leaks, an appliance stops working or your bathroom faucet breaks.

There are some big advantages to buying a house that will help you get out of your renting rut and focus more on your future.

Build Equity

Did you know that when you rent a home, you help someone else build equity? Any changes that you make with your landlord's approval puts money back in his or her pocket. Keeping the yard clean and taking care of routine maintenance builds equity in that property. When you buy a home of your own, you have the chance to build equity of your own, which you can use to obtain a loan later.

Save On Your Taxes

When you rent a house, you cannot deduct the money you spend on your taxes. Though some states will let you make a small deduction based on the total amount you spend in rent each month, you cannot make any deductions on your federal taxes. When you buy a home, you can save with a few different types of deductions.

The federal government lets you make a deduction if your home is worth more than what you currently owe on your taxes. If you purchased your first home, you can make a deduction in regards to your property taxes. You can also deduct money that you spend on some renovations and energy saving appliances.

Put Your Personal Touch On Things

As long as you continue renting, you live in a home that belongs to someone else. Your landlord has final say over what you do and do not do. This often means that you cannot make repairs or significant changes without seeking approval first.

Renting a home lets you put your personal touch on things. You can paint the walls any colors you want, rip out the carpet to add hardwood flooring or even make significant changes outside to turn your new home into your dream home.

Now that you know more about the benefits of buying a home and how that purchase can get you out of the rental rut you're in currently, turn to a mortgage professional for assistance.

Are You Ready to Make the Leap into Home Ownership? Here's How You Can Tell

Are you ready to make that leap from living at home or renting to owning a home of your own? While everyone moves at their own pace, here are some signs that you can use to determine if it is time to own your own home. Let's take a look at some of the reasons you can use to justify your decision.

Are You Sticking Around?

If you plan on moving soon for a job or think that you won't be in town much longer, it may be better to rent. However, if you are thinking about living in the same town or within the same county for years to come, it is time to put down roots.

The stability that comes with home ownership may make you more prepared for a marriage and/or a family if that is something that you want. This stability may make you more attractive if you are single and searching for a long-term relationship.

Do You Have a Steady Job?

Those who have a steady job and know that they have a stable salary may want to make the move to home ownership. As long as there aren't any other major debts eating into your income, you can probably handle a mortgage and other costs associated with home ownership.

The equity that you build in your home can help you build wealth for the future if and when you want to retire. Your home may also make a great rental property in the future, which can help you diversify your portfolio and keep you solvent for years to come.

You Are Spending More Time Watching Television Shows Related to Home Ownership

You may have caught yourself recently watching shows revolving around people or couples who are looking for homes. You may also be watching programs dedicated to giving tips as to how you can upgrade your home. If you watch these shows frequently, it may be a sign that you are ready to move out on your own and take on the exciting challenge of being a homeowner.

Are you ready to be a homeowner in the near future? Only you can say for sure if it is time to make that leap. However, those who are looking for a long-term housing solution may be ready to make that move. For more information, it may be worthwhile to talk to a mortgage professional to see what you can afford to do.

Buying a New Home? Follow These Three Tips to Ensure a Stress-Free Transaction

Buying real estate and or taking out a home loan is a significant milestone in life. Frequently, it means that a new phase is starting, whether it's a new job, a new relationship, or moving to a new area. However, when the most basic steps are missed, this transition can be fraught with stress and disaster. To ensure a smooth transaction, home buyers should be sure to mind the following tips.

#1: Always Be Honest

Honesty and clear communication need to be a two-way street. Home buyers expect their mortgage professional to be honest with them, and likewise it is always necessary for a home buyer to be honest with their mortgage professional.

Hiding details or covering up potential problems by either party will only cause more issues when everything comes to light. When important information is withheld, it's possible for delays to occur, costs to rise, or even for the deal to fall through.

It's much better to disclose all necessary information upfront so the situation can be handled appropriately. An expert mortgage professional will be able to guide home buyers through any problems and issues to a workable solution.

#2: Hire A Professional Team

Buying real estate and taking out a mortgage is not an easy process, so it's never a good idea to try to proceed without a professional who can be trusted.

Far too often, people let friends or family members represent them in real estate transactions. In these cases, it's likely for feelings to be hurt, relationships to be damaged, and trust to be compromised.

Rather, it's recommended for home buyers to use a real estate agent and mortgage professional they do not have a close personal relationship with. That way, they can stand confident that their agent or mortgage professional is looking out for their best interests, and nothing else.

#3: Understand The Market

Far too often, home buyers fail to understand the market and their finincial situation.

Failing to identify this crucial information will waste time for buyer and mortgage professional. However, this is where a real estate agent or mortgage professional comes in: he or she will know the market inside out and be able to offer valuable counsel for all financial situations.

Home buyers should call their mortgage professional if at any time they have questions about taking out a mortgage; this professional is the key to a smooth real estate purchase.

Looking for Luxury? How to Upsize Your Next Home Without Upsizing Your Costs

Size matters when you are buying a new home. Whether you plan to expand your family, need more room for your stuff, or are concerned with resale value, you want to get the most space for your money. Also, if you want to add a feel of luxury to your home, one of the best ways to do it is to create open spaces rather than cramming all your furniture in rooms so tiny you can barely walk around without knocking something over.

Traditionally speaking, the larger a home is, the more it costs. If there are two newly built houses side by side in a subdivision, the bigger one is likely to cost more. However, there are some tricks to finding spacious houses that are affordable.

Choose Emerging Neighborhoods

Houses in this year's trending neighborhood are at their peak prices. Clever buyers look for neighborhoods that are in the process of being gentrified, buying at the bottom rather than the top of the market, to get more house for their money.

Fix It Up

Houses in perfect condition, that show well, sell for a premium. If you want to get more house for your money, choose something that needs a bit of TLC. A house that has pink walls and orange shag carpet might appear just too ugly to consider when you first view it, but it might just need a few coats of paint and some new carpet to become a spacious dream home.

Do Some Finishing

Unfinished areas such as attics and basements can be finished to create additional living spaces. The basement could become a family room and the attic an extra bedroom or study. An unfinished space can become the extra bathroom you need to make morning more manageable.

Consider an Addition

Contractors can add rooms to a house. If you have a large lot, you can build an extra wing. With a one story ranch house, it may be possible to raise the roof and add a second story.

The more stuff you have, the smaller your home appears. Reduce clutter and invest in smaller condo size furniture to give even the smallest home the appearance of spaciousness.

Don't Be That Guy or Gal: 3 Easy Ways to Ruin Your Relationship with Your Real Estate Agent

Are you thinking about buying or selling a home? If you don't know a real estate agent or have a referral to one, you may end up working with someone unfamiliar who you will need to build a relationship with. Of course, as with any relationship there's always a chance that things can go sour.

In today's blog post we'll share three easy ways that you can ruin the trust and rapport that you've built with your real estate agent.

#1: Lie or Embellish the Facts

When you ask a real estate agent to represent you in the home buying or selling process they're going to need accurate information to help you make the best decisions. Lying or embellishing the facts can cause significant issues and should obviously be avoided.

For example, if your agent asks you how much you can afford for your new home, give them an accurate figure based on your mortgage pre-approval, your income and your current financial situation. If you're selling your home and your real estate agent asks you about the home's maintenance history, be honest and don't try to cover anything up.

#2: Cheat on Them with Another Agent

Once you have a real estate agent searching for that perfect new home, they may need to expend quite a bit of effort in order to find exactly what you're looking for. Imagine how hard they would work if they discovered that you're having another real estate agent perform the same job, but only one of them will be paid for their work?

Don't cheat on your real estate agent. If you feel that your agent is doing a poor job or you could find someone better, let them know. It's better to move on than to have professionals working behind each other's backs.

#3: Fail to Be Trusting or Respectful

If you fail to show trust and respect for your real estate agent you can rest assured they're not going to bend over backwards to help you squeeze out that extra discount or get your home sale closed as quickly as possible. Treat your real estate agent as you wish to be treated and they'll be more than willing to do their job.

Whether buying or selling, an experienced real estate agent is the best way to ensure that your transaction goes according to plan and that you accomplish your goals. When you're ready to discuss buying a new home or selling your current one, contact your real estate agent and they'll be happy to assist, or contact us for a referral if you don't already have an agent you trust. Don't forget to keep the above points in mind!

First Time Buyers: Understanding How Property Taxes Work and What You Can Expect to Pay

Are you about to buy a house or condo for the first time? Congratulations!

Owning your own piece of real estate is a liberating experience and one that will provide you with the foundation to build your personal wealth and equity. Once you own your own home you'll be responsible for a variety of new costs, including property taxes which are assessed by your local government to pay for municipal services.

In this blog post we'll share how property taxes work and what you can expect to pay for them when you buy your new home.

It All Begins With a Local Property Tax Assessment

As mentioned above, local governments assess property taxes as a means for paying for police officers, fire fighting services, road maintenance and the other various costs that come with running a town or city. Whether you're buying a house, a townhouse or a condo, the property that your home sits on is inside of an area known as an "assessment area".

When the local government determines what your local tax levy or tax rate will be, they will assess your home based on the real estate market value of similar homes in the area. You can multiply your tax rate by the assessed value of your home to determine how much you'll owe in property tax.

Property Taxes As Part of Your Closing Costs

When you close on your new home you'll have to pay property taxes, and your real estate agent will help you to understand how much these taxes will be and how they will be paid. In most cities and counties you'll pay a pro-rated amount of property tax that covers the time span from the date you purchase the home until the end of the year, after which time you'll be paying your full assessed rate.

Don't Forget Your Overall Tax Picture

Finally, don't forget that property taxes can be factored in to the rest of your overall tax picture. Check with your accountant or another financial professional to determine whether or not you can write your property taxes off against your income tax to save some additional money. There are numerous tax benefits to owning a home, so it's best to start using them from day one.

As with all other taxes, property taxes are a fact of life that every homeowner faces. When you're ready to buy a new home and to learn more about how property taxes will affect your purchase, contact your mortgage professional for expert advice.

Trying to Save on Your Closing Costs? Here Are Three Tips That Can Help Lower Them

Whether you're about to close on a lovely new house for your growing family or a stylish beachfront condo so you can retire close to the ocean, one thing is certain: you're going to face a variety of closing costs. Insurance, taxes, financing fees, title fees, attorney fees and other costs will need to be paid, and if you're a savvy buyer you'll do everything you can to save on them.

In today's post we'll share three quick tips that can help you reduce your closing costs when you buy your next home.

Tip #1: Include Closing Costs in Your Negotiations with the Seller

As closing costs are a part of the real estate transaction they're an excellent item to include in your negotiations with the seller.

For example, if you consider that closing costs might be 3 or 4 percent of the home's value you can try to bring the seller's asking price down to get those costs included. Or, you may be able to entice the seller with the prospect of a quick sale if they are willing to pay your closing costs in order to get you to sign on the dotted line.

Tip #2: Compare All of Your Mortgage Options

If you're using mortgage financing to cover some of the up-front purchase cost of your home you'll have other closing costs to pay including lender fees, mortgage insurance and more. Be sure to compare all of your options with your trusted mortgage advisor to ensure that you're getting the best possible deal and paying the least amount in fees and interest.

You may also be able to save a bit on your closing costs by choosing a "no points" mortgage. In this type of mortgage you'll end up saving on closing costs but you'll be left paying a higher interest rate. Spend a bit of time doing the math to determine the best course of action.

Tip #3: Ask About Every Fee You're Required to Pay

Finally don't forget that you're the customer and that you have the right to know about each one of your closing costs and why you're expected to pay them. Being informed about all of the various items in your transaction will help ensure that you're not paying something you could have avoided.

There you have it – three excellent tips for reducing your closing costs when you purchase your next home. For more information and advice about mortgage closing costs and how to best manage them, be sure to get in touch with your local mortgage professional.

Buying an Investment Property? Here's How You Can Maximize Your Rental Revenue

Whether you're buying a ski-in/ski-out condo at your favorite resort or you're thinking of picking up a small home in a busy tourist area, buying a property for short-term rental purposes can be an excellent investment that quickly begins to provide additional revenue.

Let's take a quick look at a few steps that you can take to maximize the revenue that your investment properties bring in each month.

Upgrade Your Home to Give It a Luxurious Feel

It should go without saying that if you want your home to rent for a high price it has to have a significant amount of value behind it. After you purchase the home, spend some time on upgrades that help to enhance the home's beauty and usability. If possible each sofa should be a sofa-bed so that additional guests can stay the night. Upgrade the televisions, have Wi-Fi internet access available and provide a phone number that guests can call if anything goes awry.

Professional Photos and Copywriting

If you're renting your property out to short-term or vacationing tenants you're most likely going to use online services like VRBO, HomeAway or AirBnB to attract new business. While these sites have a lot of visitor traffic you're also going to face a high level of competition from other property owners in the area. It's worth paying a professional photographer to take pictures of your home as well as having a professional copywriter handle the sales copy for your listing. These are one-time costs that can help you to defeat your competition and close high-ticket clients.

Cater to Large Groups or a Niche Crowd

There are a number of "niche" travelers out there and if you can cater to these groups you'll find that you're able to charge more than the average vacation property. For example, you may be buying a home in a popular wedding destination that can be marketed to couples who are being married. If you're buying a larger 3 or 4 bedroom home, be sure to note that it can house large groups who may be traveling together.

Referrals and Repeat Business

Finally, don't forget to ask your clients to refer you to their friends and family who many want to stay in your unit, and always invite them to return in the future. You may want to consider offering a discount to repeat visitors to encourage them to visit annually.

Renting out your vacation home or investment property can provide a lucrative income stream as long as you have a professional approach and focus on providing a high level of customer service.

You Ask, We Answer: Should I Consider a Warranty when Buying a New Home?

Are you buying a new home? If so, you've likely pondered whether or not you should invest in a warranty to protect your investment. In today's blog post we'll briefly explore home warranties including some of the pros and cons of buying one and how they differ from homeowner's insurance.

The Benefits of Buying a Home Warranty

Home warranties are an excellent solution if you're buying a brand new home which has a lot of new appliances and fixtures inside of it, or if you're not really the "do it yourself" type and would prefer to make a service call if something inside of your home breaks down.

For example, imagine that you have a home warranty that covers your central air conditioning system and one day it stops working. You simply call the warranty provider to book a service call and as long as the problem falls within the scope of your warranty the repairs are completed without any additional cost to you.

How a Home Warranty Differs from Homeowner's Insurance

Home warranties and homeowner's insurance are vastly different but work together to protect your investment. Insurance policies cover your home against unexpected damage – fires, crime, wind storms, water damage and more, depending on your policy. A home warranty tends to cover items inside of the home – the furnace, the plumbing, electrical wiring and appliances – and will provide you with discounts on repairs or replacement should the covered items break down or otherwise stop working.

Cost and Other Home Warranty Downsides

Of course, there are a few downsides to buying a home warranty. You'll need to pay the up-front purchase cost of the warranty unless you're buying a brand new home in which the warranty is included. You'll also find that warranties generally won't cover a lack of maintenance due to the previous homeowner, which can be a bit of an issue if something breaks down and you find out it's not going to be covered. Finally you may find that any necessary repairs are actually less costly than the warranty itself.

Negotiation Tips: How to Ask the Seller to Pay the Closing Costs

You've found the perfect new house or condo, and you are now preparing an offer that you believe the seller will find tempting enough to accept. However, you know that there are going to be thousands of dollars in closing costs that need to be paid before the sale is completed and you become the home's new owner.

The question is, should you ask the seller to pay some or all of the closing costs? In today's blog post we'll address this question and list a few scenarios in which you may want to consider having the seller pick up the tab.

Ask if You're Offering the Full Listing Price

If you're prepared to offer the full asking price for the home you can certainly include the caveat that the seller assist with some or all of the closing costs. Many sellers will price their home slightly higher than they expect to receive as they believe that buyers will submit low initial offers which need to be negotiated.

For example, if a home is listed at $275,000 a seller might actually be expecting $260,000 or $265,000 for it. You can offer $275,000 but ask that they take care of the closing costs.

Ask if You're Confident the Seller Has Few Other Options

If the home has been on the market for a number of months or if you're fairly confident that the seller isn't going to find much luck elsewhere you can ask them to pick up the closing costs as one of your purchase conditions. You'll obviously want to negotiate in good faith, but if you're coming from a position of strength you can leverage this in to some additional savings.

Ask if You're Ready to Close Immediately

Are you ready to sign on the dotted line today? If you're sure that this is the right home for you, let the seller know that as long as they're willing to assist with the closing costs and accept your bid that you'll start the closing process today. Nearly all sellers will be willing to make a small sacrifice to get the deal done.

As you can see, there are a number of situations in which it makes sense to ask the seller to shoulder some of the closing costs. If you have found a home that you wish to purchase and you'd like advice on how to proceed, contact a real estate agent today. An experience real estate professional can help you craft an offer that the seller won't be able to refuse.

Pros And Cons Of Adjustable Rate Mortgages

When you are in the market for a new home, you may be faced with numerous options for financing your home. One of the choices you will have to make is whether to apply for a fixed or adjustable rate mortgage.

In some cases, an adjustable rate mortgage may be your best option, but keep in mind, they are not the answer for everyone. Adjustable rate mortgages can be risky for some borrowers and it's important to understand both the pros and cons.

When To Consider An Adjustable Rate Mortgage

Perhaps one of the best things about ARMs is they typically have a lower starting interest rate than fixed rate mortgages. For some borrowers, this means it is easier for them to qualify for a loan. 

ARMs Are Beneficial For Borrowers Who:

• Anticipate an income increase - for borrowers who are anticipating their income to increase over the next year or two, an ARM may be the right option.
• Will be reducing their debt - those borrowers who have automobile loans or student loans that will be paid off in the next few years may benefit from an ARM which would allow them to qualify for a larger mortgage today anticipating their ability to convert to a fixed-rate mortgage.
• Are purchasing a starter home - when you anticipate living in a home for five years or less, an adjustable rate mortgage may help you save money for a bigger home.

Adjustable Rate Mortgage May Contain Hazards

There are a number of different types of adjustable rate mortgages and they are each tied to specific interest rate indexes. While an ARM may offer borrowers some flexibility in terms of income and debt ratios, the downsides cannot be ignored. Some of the cons of using an ARM to finance your mortgage include:

• Increasing rates - borrowers should carefully review their loan documents to see how frequently their interest rates may increase. Some loans adjust annually while other may not increase for three to five years after the mortgage is signed. For borrowers, this means they can anticipate an increase in their monthly payments.
• Prepayment clauses - oftentimes, lenders include a prepayment penalty with ARM loans which can be devastating for borrowers. Before agreeing to an ARM, make sure you read the documents very carefully to determine how long you need to hold the loan
• Home Values - one of the biggest challenges borrowers face with an ARM is what happens if the property value decreases: Refinancing a home into a fixed-rate mortgage may be impossible if this occurs.

Borrowers who are searching for the right mortgage should discuss all options with their loan officer. There are specific instances when an ARM may be the best option and there are other times, such as if you plan to stay in your home for more than five years, where a fixed-rate mortgage may be your best option.

Should I Shorten My Mortgage Term, Important Factors To Consider

When you first bought your home a few years ago, perhaps you started off with a 30 year mortgage. Now, you are considering refinancing and changing it to a 20 year or even a 15 year mortgage.

Shortening your mortgage term and refinancing can be a smart financial move, but before you make this decision there are a number of factors that you should consider.

Switching to a shorter mortgage will mean that your monthly payments will be higher, but you will be 100% paid off much sooner and you will save thousands of dollars in interest rates. Here are a few of the factors to consider before making this decision:

Has Your Situation Improved?

Perhaps you have moved to a higher paying position, allowing you to earn a higher income and pay off more of your mortgage every month? Or maybe you have received an inheritance, which will help you to make the payments? Perhaps your expenses have gone down and you will have more money left over from your wage?

Whatever the reason, if your financial situation has improved you might want to consider switching to a shorter mortgage. With your spare money, you will be able to make the larger payments and get your house paid off sooner.

Is The Improvement Long Term?

However, it is important to consider whether this improvement will last for the long term. Will your higher wage stay that way for the next several years? Are there any hidden expenses that you are failing to factor in?

You might be set up to repay larger monthly amounts on your mortgage at the moment, but you don’t want to set yourself up for failure in the future if your finances change.

What Are The Refinancing Costs?

Keep in mind that refinancing often comes with costs and fees, so make sure that you subtract these when you are making your calculations. It can sometimes take at least two or three years to recoup the fees, so make sure that you don’t plan on selling your home in the short term.

Can You Get A Better Rate?

One of the advantages of refinancing to a shorter mortgage is that you can sometimes get the opportunity to find a better rate. Perhaps if you have an adjustable rate you will be able to convert it to a fixed rate. Take a look at what is available and ask your financial advisor for help.

These are just a few important factors to consider when it comes to shortening your mortgage term. For more info about your home, contact your trusted mortgage professional.

Dodd-Frank's Latest Gift: The Qualified Mortgage Rule

The Dodd-Frank Wall Street Reform and Consumer Protection Act's latest provision - the Qualified Mortgage rule - is going to effect on January 10, 2014.

While, like many of Dodd-Frank's other features, its ability to protect customers remains to be seen, one of its impacts is already clear. Taking out a home loan just got harder.

The QM rule contains a set of provisions that, if followed, may protect lenders from lawsuits. They will also make it harder for customers to qualify to borrow money to buy a house.

Verifying Incomes

Lenders now have to follow stringent procedures to verify that borrowers can repay their loans. While many home loan lenders are already verifying and documenting borrower incomes, assets and debts, they will have to create additional paperwork to prove that they did their jobs.

DTI Caps

For a loan to be considered a qualifying mortgage, the borrower's debt-to-income ratio can be no more than 43 percent. This means that if a borrower has $4,500 in gross monthly income, his total debt payments including his new mortgage cannot exceed $1,935 per month.

Previously, some lenders had been willing to go up to 45 percent.

Fee And Term Caps

Lenders will be less able to make creative loans, as well. Loans that meet the QM rule can be no longer than 30 years in length. They also cannot have closing costs and fees that exceed a cap of 3 percent of the loan's balance.

Who Gets Impacted?

The good news is that the normal borrower taking out the normal loan might not notice the new QM rule. Borrowers that get squeezed are those that need to take out a loan that doesn't fit the box laid out by the provisions. These include:

• People in high-cost cities that need 40-year or interest-only mortgages to lower their payments.
• Self-employed people and contractors that need to be able to borrow money on "stated" income without detailed verification.
• Borrowers that can afford a loan but have other debts, like student loans.
• Those that need non-traditional loans with high fees.

While the law still allow a lender to make a loan that isn't a qualifying mortgage, given that the loan won't have the same legal protections, its costs remain to be seen. This could end up pricing people with special needs out of the home loan market.

3 Considerations When Making A Down Payment

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 pay "discount points" to lower your interest rate.

There are pros and cons to doing both and each borrower's situation will be different so it's important to understand which option is best for your individual need.

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 mortgage interest rate. Before you agree to pay discount 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, discount points are normally 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, potentially better loan terms and possibly 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 (discount 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 home mortgage loan.

Talking with your mortgage professional and where appropriate your tax professional will help you make the decision that is right for your specific situation.

Pitfalls And Warning Signs Of Making A Down Payment

When you already have a home, you may be interested in determining if a refinance is a good option. You will not have to worry about restrictions on down payments or some of the problems that can occur with a down payment.

However, if you are considering purchasing a home in or the surrounding communities, understanding down payment restrictions is important.

Gifting Of A Down Payment

There are some programs that will allow you to use a gift for your home down payment. However, before you assume this, make sure you talk to your loan officer. Generally speaking, the lender will require the person making the gift to provide a letter stating the money was a gift and does not require repayment.

Windfalls Of A Down Payment

When people hit the lottery or come into money through an inheritance, one of the first things they may consider is buying a new home. However, it is important to keep in mind that lenders will typically want to know exactly how you came up with your down payment.

Borrowers still need to show a "trail" of how they came into money. If your down payment amount has not been "seasoned" the lender may not accept your loan.

What Is A Seasoned Down Payment?

Generally speaking, your loan officer will want a "paper trail" to document your down payment. Most lenders require down payment funds to be at a minimum six months old.

For example, let's assume a borrower did win the lottery: If they deposit the funds into their checking account and leave it there for six months or more, the funds would be considered seasoned.

Lender restrictions on down payment funds are fairly common. If you are uncertain if your funds meet the lender's criteria, talk to your loan officer. In most cases, a lender will require at least one-half your down payment fall into the category of seasoned funds.

Some borrowers may use their retirement account or other savings to make their home down payment.

Don't wait until the last minute to discuss your down payment with your loan officer because you may wind up disappointed. Keep in mind, every lender has different requirements and these rules may not apply to your lender.

4 Tips To Save For That Down Payment

In order to save up a huge amount of cash for the down payment on your first mortgage, you need a solid savings plan!

When you take out a mortgage on your new home as a first time homebuyer, the more you can pay as a down payment the better. The down payment on a mortgage reduces the principle of the loan and means that you will be paying tens of thousands less in interest payments over the life of the loan.

Most financial experts recommend that you should save up at least 20% of the value of the home as a down payment. Depending on the value of the home that you want to buy, this can be a serious chunk of money.

The conventional saving tricks of skipping your morning latte and eating dinner at home just aren't going to cut it when saving up this much money! You will need some strategies for saving big.

Here are some tips to help you get closer to that down payment:

Make A Separate Savings Account

No matter how much you have already saved for your down payment, create a new savings account to put the money in. When the money is in your personal account it is so much more tempting to spend it on day to day expenses. Also, a savings account will give you a better rate of interest so that you can help you money grow.

Pay Off Your Credit Cards First

If you have credit card debt, you will be paying interest charges to the credit card company every month. These charges can really add up, especially if you are only paying the minimum on your loans. If you can pay down this debt you will have extra money every month to put into your savings instead.

Get A Part-Time Job

If you want to accelerate yourself towards having your down payment saved up, you could consider taking on a part-time job in addition to your full-time job on a few evenings and weekends.

It doesn't have to be something that you do forever, but even sticking with it for six months to a year will give you thousands in extra income that you can put straight towards your down payment.

Make A Backwards Budget

Do you find that after you have paid all of your bills and your living expenses, there is nothing left over to save? Rather than calculating all of the money that you use on your monthly expenses and then saving whatever is left afterwards, why not make your budget the other way around?

Start off with how much you want to be able to save per month then subtract that amount from your net income. The number you have left is what you have to live off.

You will find that you naturally change your habits to make this amount of money work for you and if it if not enough you can increase your income by getting a side gig. These are just a few ways that you can save up for a down payment on your first home in order to save money over the years on your mortgage.

5 Great Questions To Ask At An Open House

An open house gives you a great opportunity to look more closely at real estate you might be interested in buying. It also affords you the chance to chat with the owner or real estate agent so you can bring up any issues or hesitations you have with the home.

Knowing what to ask can be difficult, so below are examples of questions to ask at the next open house you attend.

Why Has The Seller Decided To Sell Now?

If you ask why the seller is moving, you could learn valuable information to help determine your offer or possibly whether or not you want to buy the home.

Knowing whether the owners are about to go into foreclosure, have experienced trouble in the neighborhood, or if they've retired and completely paid off the home can help you understand how urgently they need to sell their property.

Has The Seller Had Any Other Offers?

Don't forget that you are not only negotiating with the seller for a price, you are also competing with other potential buyers. It really helps to know what you are up against.

It is important to understand that you might not get a 100% straight answer to this question as most sellers know that competition or perceived competition can cause a potential buyer to move forward more quickly and at a higher price.

If you're comfortable in this discussion, you might want to try and see if you can find out the details of any other offers.

Does The Property Have Special Ownership Costs?

Ask the agent or owner about the other costs associated with owning the property, such as Home Owners Association fees within a condo complex or a gated community. It's important to know about these extra expenses in advance so you can make an informed offer.

You may also want to ask about any pending litigation concerning the property. Litigation is not always a deal killer, but it's better to know the details before you sign closing documents.

What Furniture And Appliances Are Being Sold With The House?

Most of the time, a seller will include their major appliances such as the refrigerator, stove and dishwasher with the home, but this isn't always the case. If you don't already have these items, it's important to know whether they are included in the purchase price.

Is There Anything Else That You Want To Leave With The Home?

This is an important question to ask. Especially if there are specific things in the home that you have a strong interest in. Perhaps there is custom art work or a pool table that fits perfectly in the game room.

The seller may be eager to part with those items and include them in the sale of the home or sell them at a large discount. The open house is a great opportunity to learn more about a home before making the decision to buy it, so be sure you ask the right questions.

3 Tips To Sidestep These Common FHA Loan Hang-ups

FHA loans are becoming increasingly popular these days as potential homeowners are not able to qualify for mortgages from traditional lenders. The FHA insures these high-risk loans, in turn allowing borrowers with low down payments and less than perfect credit to purchase homes and bolster the housing market.

However, getting through the loan process with the FHA is more difficult than with a traditional lender, and you may need to cope with some of these common loan hang-ups.

Property Condition

You can't buy just any property with a FHA loan. The appraiser must deem it to be livable, without any conditions that could jeopardize health or safety. If the home has chipping paint, a leaky roof, or a wobbly banister, the financing could fall through.

Sometimes you can get the seller to make the needed repairs to pass inspection, but in other cases, you may have to go an alternate route. The FHA 203K streamline loan allows you to borrow up to $35,000 over the purchase price of the home for repairs and updates. It's important to check with your local mortgage lender to determine any specific local FHA 203k loan details.

Low Appraisal

In addition to inspecting the property, appraisers also estimate its market value. These estimates are based on the property's features and a comparison to similar properties that have sold recently. If the appraisal is low, the FHA loan funding could fall through because the FHA will not let you borrow more than the home's appraised value.

Rather than trying to scrape together a bigger down payment, just take the information to the seller to renegotiate the purchase price. The seller will likely recognize that other buyers would be in the same boat, leading the seller to agree to a lower purchase price.

High Debt-to-Income Ratio

Your FHA loan may encounter a snag in the underwriting process if your total debt payments, including your new mortgage, would be a high percentage of your income. If you are in this situation, ask your lender to try running you through the automated underwriting program called TOTAL.

The process is quick, and often you can make up for a high debt-to-income ratio with other compensating factors, like a larger down payment or a cash reserve of several months of mortgage payments. For more information on common FHA loan hang-ups feel free to contact your trusted mortgage professional today.

Are 50 Year Mortgages A Good Financing Option?

When most people are taking out a mortgage on a property, they select either a 15 or 30 year mortgage loan. However, there is a new mortgage option that has been available to home owners since 2006 and that is the 50 year mortgage loan.

Although a half-century might seem like a very long loan term, there can be some advantages to taking out a five-decade mortgage. Here are some of the pros and cons to taking out a mortgage that you repay over 50 years.

Advantages

The main benefit that you will experience with a 50 year mortgage is the ability to take out a larger loan and buy a more expensive house that you might not have otherwise been able to afford. This means that you can enjoy a better standard of living with lower monthly payments.

A 50 year mortgage might also make home ownership easier to qualify for as a first time homebuyer. On a monthly basis, it means that you will have more room in your budget for paying for other expenses.

Disadvantages

Of course, the major disadvantage to a 50 year mortgage is that you will end up paying much more interest over the loan period. Also, you will build equity in the home very slowly and you will not gain back much equity if you sell the home a few years on.

Also, often 50 year mortgages will come with higher interest rates than their 30 year counterparts. You can usually expect to pay an extra 0.25% or more than you would if you took out a 30 year mortgage, which can really add up over time.

It might be advantageous to take a 50 year mortgage with low payments in the beginning, with the aim to refinance and reduce your term in the future when you are earning more money and can make higher mortgage payments.

A 50 year mortgage can sometimes be advantageous, but ask yourself if you really want to wait until you are in your 70s or 80s before owning your home! If a 50 year mortgage is the only way you can afford your mortgage payments, you might be considering a home that is beyond your price range.

To find out more about the right mortgage term for you on your property, call your trusted mortgage professional today. 

Beware Of Zombie Titles

With the economic downturn, anyone dealing in real estate quickly became familiar with previously little-known terms such as foreclosure and short sale. Now that the housing market is picking back up and people are moving on, a new term is coming to light — zombie titles.

The Zombie Title

This is when a home has been vacated because the owners defaulted on their loan and their bank started the foreclosure process. However, for some reason or another the bank never completed the foreclosure and sold the home.

So, when the city starts fining someone for the overgrown grass and dilapidated structure, the homeowner who thought they were finished with the property gets the bill.

A Home That Keeps Haunting

Homeowners think they don't own the property any longer and therefore try to move on by rebuilding their credit score and finding a new place to live. It can be a rude awakening to find out that not only do they still own a home they could have been living in, but also its long vacancy has caused it to fall into disrepair.

It's Spooking The Neighborhood

These vacant homes can decrease the value of a neighborhood. If the bank or the un-suspecting homeowner are neither one taking care of the property, then it can become overgrown and an eyesore on the block. It becomes a problem with no solution because the owner won't want to invest any money in fixing up the property when the bank could come back with the foreclosure at any time.

Nail Shut The Foreclosure Coffin

Homeowners who have foreclosed on a home should double check that their bank actually followed through to closing on a sale. They could contact their lender or check public property records just to make sure. Otherwise, they could be haunted by their housing nightmare all over again.

Don't let the zombie title of a past property haunt your future! Check with your bank to make sure you're free and clear of your foreclosure. If you'd like more information on zombie titles or have other questions, please contant your trusted mortgage professional.