Interest rates are low and now is a great time to purchase or refinance, but once you are in that great new loan, what are some ways to get it paid off quick and save even more? Of course I am sure you have heard about the benefits of paying bi-weekly instead of monthly. This can be done by setting up a payment plan with your mortgage lender where they pull out half of your monthly mortgage payment every other week. Given that there are 26 bi-weekly pay periods in a year this has you making one extra payment on your mortgage every year without having to put the effort into actually saving up the money to do so. On a $200,000 loan that one payment can shorten the term of your loan by roughly 5 years and save you over $34,000 in interest over the life of the loan.
If one whole extra payment a year seems too much for a tight budget to handle you can do something as simple as rounding up your mortgage payment just a touch more. Rounding up an extra $10 a month will reduce the life of your loan by 4 months and on a $200,000 mortgage save you roughly $2,469 in interest. To really see an impact you can increase your mortgage payment by $50 a month for $12,666 in interest saved and shorten your term by 2 years, again based on a $200,000 mortgage.
If you are just purchasing your first home, these are good habits to get into to get the most out of your new asset. If you currently own, make sure you’ve checked out your financing options to see if you qualify for a lower rate or shorter term and then put these into play to get it paid off even faster.
Short sales can be a great option for first time home buyers who possess a little patience. Truth is there is nothing short about doing a short sale. The whole process from offer to close can take up to 6 months, although as short sales have become more prevalent banks have gotten quicker at turning them around. 40% of short sales purchased August of last year were done so by first time homebuyers.
A short sale is where the home is still owned by the seller, not by the bank, however the house is usually underwater for what the borrower owes. So both the bank and the seller agree to sell for less than the amount owed. The trick (and the time consuming part) is that the final sales price has to be approved by both the seller and the seller’s lender. These homes are usually a great value for first time homebuyers because most times they are getting them at a reduced rate from what they would normally sell for, thus being able to get more house for the money. The mistake most home buyers make is putting in offers that are too low. Remember these homes are already being sold for a discounted rate and the bank is only going to be willing to lose so much money. It is important to work with a realtor who is experienced in short sales and who knows the local market well and will be able to tell you if you are making a realistic offer. And just make sure that you have a back up plan if you are on a deadline to have to leave your current living situation because again, these transactions can take a little longer. But if you have the time, the great deal you’ll get in the end will be well worth the wait.
The housing market is on the rebound. Economists are saying that the housing market is clearly superior this year to the past four years and the National Association of Realtors expects the national median of existing home prices to rise 5.7% in 2013. The lack of inventory on the market has many prospective buyers finding themselves in frustrating bidding wars. Some tips to help you know if you truly are getting a good deal – for starters do your homework on the neighborhood. Find out how many homes are on the market in the neighborhood, what kind of condition they are in, and how long they’ve been on the market. Also look to see what homes in the area have sold for in the past 90 days and then compare the cost and condition of the one you want to buy. Remember how the neighbor treats their house can impact the value of yours, so make sure the view across the street and next door isn’t looking onto a rundown property. And if you find yourself in a bidding war, 2 key factors that can help you come out the winner include putting down a larger earnest money deposit to show you are really serious and committed to the home and find a lender that can get the loan closed fast. Your realtor will often times be able to suggest a lender that they work with and while you are free to use whoever you want, remember your agent does this on a regular basis and will know what their own lender is capable of.
With all the adjustments being made to mortgage programs to try and get inventory moving and buyers back into the game, FICO – the credit score people – are now jumping into the game. FICO announced it is going to be releasing a new score which includes non-traditional data. Your normal credit score includes things such as car payments, credit cards, and student loans. This new score will deal with things not previously reported such as rental history and information on short-term loans like payday loans. This is extremely beneficial to borrowers who would have had difficulty securing a loan otherwise due to lack of credit history. It will allow people to gain credit scores without doing things that could potentially get them into trouble or tick up their debt to income ratio such as opening multiple credit cards or taking out auto loans. Again, the important thing to remember is to rent it like you own it and use payday loans responsibly because they are now going to affect your ability to purchase more than ever. The new score model is currently in a testing phase with no word on when it will become available on a national level.
Need a little extra cash month to month? The answer may be as close as your own home. With rates at historic lows and new programs for home owners coming out on a regular basis you may be able to refinance your home and save hundreds. FHA home owners who purchased prior to June 2009 may be eligible for a streamline refinance without an appraisal. The process is quick and simple and involves very little paperwork. The good news for those with rental properties is that there are programs now to refinance them as well. Your home is the biggest asset you will ever own, see if you can put it to work for you.
About a week ago I found myself in every landlord’s most frustrating position. Tenants had rolled out and now on a hot 100 degree afternoon I was standing in the middle of my rental property wondering where to begin. They had left behind furniture, there was trash all over the floor of every room, they had half painted 3 of the bedrooms in funky shades of purple and green, and they had let a window air conditioner drip down the wall in the kitchen where now the drywall was all crumbling due to water damage. The counters and floors in the kitchen and bathroom were covered in filth. While I was pondering over how people could be such pigs there was a knock at the door. The man on the other side walked into my house and said “I want to rent your house, let’s make a deal.” I looked at him and looked around the room and said “You’re crazy! I think the heat has gotten to you.” He looked me in the eye and said, “What you see is a mess, what I see is the potential of a beautiful home.” Two weeks later, he was right. With the trash cleaned out, walls patched and freshly painted, counters and floors scrubbed, and hardwood floors refinished what remains is a beautiful home.
When looking for your new home, always look for the potential. If you find one where you love the neighborhood, love the floor plan and the way it lives, but it needs some work, consider an FHA 203K Renovation loan. There are two different types of 203K loans, the streamline which is for the home that just needs some simple updates like new carpets and paint and covers up to $35,000 in repair costs, or the full for when you need to make structural changes like knocking out walls. Everyone talks about the great deals in today’s market with low prices and low rates. One of the best ways to get a deal on a good house is to recognize its potential and know that with a little work and a 203K loan you could turn it into a beautiful home.
Think what you do in your current rental today won’t impact you in the future? Think again. Having a positive rental history is an important part of getting a mortgage. Mortgage lenders will check the place you are currently renting to make sure that you pay on time and not 30 days late, and sometimes even if you have recently moved out of a rental they will still go back and verify that you paid on time. Any collections on past rents due from skipping out on leases that shows up on your credit report will need to be taken care of as well. The news reported this week that it is now cheaper to own then it is to rent and that rents have increased as much as 15% in parts of the country. New home sales were up 7.6% in May, the highest they have been in two years. That being said why continue to throw your money away paying someone else’s mortgage. If your plan is to become a home owner know this, that it is important to treat the place you are currently renting like it was your own. Because what you do in someone else’s house today can impact whether or not you get to own your own home in the future.
If a tree from your yard falls on your neighbors house, who is responsible for the damage? That is actually covered on the neighbor’s home owners insurance as many people found out after damaging storms rolled through the Baltimore and DC area on Friday night. The horrible sight of trees that had fallen through roofs and damaged homes was prevalent in many neighborhoods. Having proper coverage is key for situations like this, and unfortunately many home owners aren’t aware of how their coverage works or what they have until a catastrophe happens. And while paying less per year to have a higher deductible may sound like a good plan, when something unexpected like this happens, how easy is it to actually come up with that money, or have it taken out of what you are getting back to pay for the repairs. In most cases the smartest move is to go with the lowest deductible possible and pay a little more month to month. You should also shop your policy every year to make sure you are getting the best deal and the lowest rates.
Another option many people don’t know about when something happens to their home is the option of using a public adjuster. A public adjuster works as a liaison between the home owner and the insurance company to get the home owner the most money possible for repairs. Public adjusters can be beneficial because they know what is covered and what isn’t and what the insurance company looks for and will negotiate with them, rather than just accept the first offer. Nine times out of ten the public adjuster will get a higher settlement for the home owner.
Home owners insurance protects your biggest and most valuable asset. When shopping for insurance, price is important, but the right coverage and good service is even more valuable.
Current home owners are not the only ones who have cause for concern over appraisals these days. Prospective home buyers have just as much need to be worried about whether their potential dream home will make the grade – and the value is only part of the concern.
The appraisal can make or break the deal for multiple reasons. The first concern is always the value. It would be assumed that the listing realtor did their homework and doesn’t have the seller asking more than what the house is worth. However, this is not always the case. Realtors run comps same as appraisers to help determine how much to ask for a home. However, sometimes the realtor won’t look at the same comparing factors between homes in the market when determining the value as what the appraiser looks for. The listing agent, of course, wants to get his seller the absolute highest possible value. Sometimes agents will use homes that aren’t truly comparable, either because of square footage, or certain upgrades, or they will give more value to upgrades than what the appraiser would give. Either way, sometimes it happens that the appraised value comes back lower than the contract asking price. This is not
always a deal breaker, if this happens there are two options – either the seller can lower the asking price, or the buyer can agree to pay the difference. In the majority of cases, the seller lowers the asking price, because really most people wouldn’t want to buy a home and start off paying more than what it’s worth. But unfortunately sometimes neither party will budge on what they want and end up having to part ways.
Another concern affecting appraisals is repairs. This is especially true on FHA appraisals which are more strict when it comes to repairs needed. These repairs are the sellers responsibility and sometimes if there are too many or the cost is too great and the seller can’t do them then it kills the deal.
One of the best ways a buyer can protect themselves from appraisal woes is to use a local lender. While the internet is full of enticing deals promising low rates and other great incentives, using a lender from a different state who isn’t familiar with the market can lead to a huge disadvantage. Many times if the lender knows the market and the appraised value on a property comes back low the lender can challenge the value if they think the appraisal is inaccurate. While loan officers cannot pick who does the appraisal or even speak to the appraiser to give their input, there are checks and balances put in place to make sure the appraiser that goes out is knowledgeable of the area and the market, and that can make a big difference in determining value. It is also important to use a
realtor who is local and familiar with the market you are purchasing in. A good realtor will know what to look for in terms of potential repairs and other factors that could affect the value of the home. And most importantly get a home inspection before the appraisal is done and study it closely. Many times there are issues on the home inspection that could become repair issues on the appraisal and if there is something major on there that could be a deal breaker it is best to catch it and have your agent discuss it with the seller’s agent beforehand. Most lending institutions make the buyer pay for the appraisal in advance and if it comes back as a deal breaker, that is several hundred dollars out of the buyers pocket that won’t be reimbursed.
Like any other aspect of buying a home when it comes to the appraisal make sure you do your homework, ask questions, get educated and work with a team of experts that can hopefully pinpoint any potential problems in advance.
The media is full of negative things to say about the current housing market. Words like “foreclosure” and “short sale” are constantly being thrown
at the public. However, a closer look actually shows that now is a great time to become a home owner. Rates are low and there is a lot of affordable inventory on the market to choose from.
The word “starter home” doesn’t even need to be in a 1st time homebuyers vocabulary these days because it is easy to find lower priced larger homes that leave enough room for a family to grow. Think about it, low rates mean a buyer never has to refi and low prices on larger homes means they never have to move. There are still programs out there to help first time homebuyers with down payment assistance, and believe it or not you do not have to have a 720 credit score to buy a house, there are programs for that too. Banks are lending money; they are just doing it smarter.
The key is that homebuyers have to get out of “rental” mentality. Buying a home is a long-term commitment, and if you are truly committed to your house, you can make it work no matter what the economy. Before you purchase consider what you would be willing to do to keep your home. Would you work a part-time job if need be? Take on a roommate? Give up Saturday nights out? And do your homework, find out about different mortgage programs and rates and what they mean to your bottom line. Learn about what the lender uses to qualify you and what ratios they are looking at.
The other reason why now is a great time to buy is because the market is cyclical and won’t stay this low forever. The great deal you are getting today will pay
you back in the future as long as you hold onto it long enough. Remember, buying a home is a long-term commitment and like any relationship you will get out of
it what you put into it.
