by jeffp | Dec 3, 2016 | Inside Real Estate
A fixer-upper can be a great investment when you know what you are getting into. Homeowners that purchase and renovate fixer-uppers can often see their homes appraise for 50% or more than what they paid when they purchased it. That’s a pretty substantial return on investment.
But before you pick a fixer-upper as your next home, be careful!
- Be sure you like the general “bones” of the house. If you are buying a craftsman, don’t plan to turn it into something its not. The key is understanding the features you love in a home and then finding a fixer-upper in the right neighborhood that has the fundamental characteristics you enjoy.
- Sweat equity counts. The more work you can personally put into a home the more value it will have at the end of the process. And less you think you aren’t talented… nearly anyone can handle demolition and paint interiors. The key is in finding a contractor that will help you help them in whatever ways you are equipped to work.
- Be prepared for surprises, cost overruns, and the process taking longer than you imagined. “Fixer” homes often have surprises. From cracked foundations to needing completely new electrical wiring throughout, fixers can cause serious heartburn especially if you’re watching each dollar because the scope of the project is pushing you to your financial limits. It’s better to be sure you are well within your means so that you have spare room in your budget for the surprises that will invariably happen.
- Watch out for code-upgrades. Most jurisdictions have requirements that when homes are going through a major renovation, such renovations trigger mandatory upgrades to the home that typically include electrical and plumbing systems. If you are buying an older fixer that has never seen an update… this could add a lot of costs to the project.
- No matter how much you love the home or the neighborhood… be sure you don’t go from fixer to most expensive home on the block. In other words, benchmark similar homes with upgraded interiors and their overall value. Be sure the cost of the home and the cost of repairing it won’t take you to the limit of these other home values.
One other thing that most folks overlook… be sure to talk with your insurance professional as you begin the process of purchasing and fixing your new home.
They can give you guidance on insurance products designed to protect the property during construction and they can make sure you have the right amount of insurance for what the home is truly worth after renovations… not just what you paid for it.
A fixer-upper can be a great investment if you have the time, money, and emotional energy. And like many others who have gone before you, if done right you’ll have a home that’s worth more PLUS the satisfaction that goes with creating a space that’s truly yours while improving the value of the neighborhood around you as well.
by jeffp | Oct 5, 2016 | Inside Real Estate
Unless you’re among the one-third of homebuyers who can purchase a property with cash, you’re going to need a mortgage approval before you can secure your next home. While a good credit rating can make the process much less stressful, most homebuyers still experience a nagging worry that their application will be rejected even after they’ve dotted and crossed those metaphorical I’s and T’s. Fortunately, forewarned is forearmed. Talking to your trusted mortgage or real estate professional about the reasons—even these surprising ones—borrowers are turned down for loans can help you prevent unforeseen issues from derailing your home purchase.
- You’re a job hopper.
Mortgage lenders love borrowers who demonstrate stability. Unfortunately, frequent career changes tend to make you look like anything but an acceptable risk. If you’ve been thinking about looking for a new job, consider postponing your search until after you’ve closed on your loan. Lenders generally prefer borrowers who have been in the same position for at least two years.
- You’re retired.
If you were able to retire before the age of 65, congratulations! Most everyone will acknowledge that required hard work and diligent saving and investment efforts. However, depending on your retirement income, it may not endear you to mortgage lenders. They want to see enough earnings—whether from a traditional job, self-employment or investments—to ensure you’ll be able to meet your mortgage obligations.
- You recently made a big purchase with credit.
Maybe you just leased a new car. Perhaps you opened a Care Credit card to finance your child’s orthodontics or Lasik surgery for your spouse. While these are all sensible actions under most circumstances, mortgage lenders don’t want you to increase your monthly debt obligations in any way during the months leading up to your home purchase. To best improve your chances of securing a loan, avoid all non-essential purchases until after you’ve closed on your new home.
- You’re buying a condo.
While plenty of mortgage lenders make loans for condo purchases, those who want to sell those loans to government-backed Fannie Mae and Freddie Mac will only do so if the condo complex meets certain standards. This includes a certain level of owner occupied units. If too many are investor-owned and occupied by renters, your mortgage application may be rejected. The same goes for FHA loans. If the condo you want to buy is not on the FHA-approved list, you’ll be turned down for a mortgage.
- You’re not borrowing enough.
Believe it or not, sometimes a sizeable down payment can actually result in an application rejection. Lenders make money on interest and many set mortgage minimums. If you’re buying a $150,000 home with a $75,000 down payment and your lender’s minimum loan amount is $100,000, you may have to go elsewhere to secure a mortgage or agree to borrow more.
by jeffp | Aug 25, 2016 | Inside Real Estate
For the first time since 2012, total mortgage originations are expected to exceed $2 trillion this year thanks to strong home sales and housing price gains across the nation. As of July, refinance rates were up 50 percent year-over-year, and with interest rates predicted to stabilize around 3.5 percent, they should remain at about that level for the remainder of 2016. What does all this mean for millions of U.S. homeowners and potential homebuyers? Simply put, now is an excellent time to buy your first property, move up or refinance your current loan.
Of course, not all mortgage applications are approved. Whether you’re purchasing or refinancing, ‘complicating circumstances’ can lead lenders to reject you. In fact, according to Zillow, 11.2 percent of applications for conventional home loans were denied last year. Fortunately, there are plenty of steps you can take to improve your situation should you be turned down for a mortgage.
- Start by figuring out why your application was rejected.
Low credit scores—or a complete lack of credit history—are common reasons lenders reject potential borrowers. So are high loan-to-value and debt-to-income ratios. If your application is rejected, you’ll generally receive a letter from the lender explaining the reason. You can also contact the lender for additional insight into your specific situation if necessary.
- Take action to remedy the situation.
If you were rejected due to a low credit score, you’ll have to work on improving it. Review your credit report for errors and request corrections. Pay down your revolving debts—and make those payments on time. Steps like these will lead to a higher credit score over time. Paying down debts—or taking on a second or higher-paying job—will also help you if you were rejected due to a debt-to-income ratio that was too high.
If you were attempting a refinance and turned down for high loan-to-value, you can look for ways to improve your home’s value (such as making repairs and improvements) and try again, or focus on paying off a larger portion of the loan balance to increase your equity in the property and reduce loan-to-value.
Whatever the reason for rejection, your lender should be able to advise you on the steps you can take to alleviate their hesitation.
- Consider alternative loan types.
You can also ask your lender about alternative loan products. For example, government-backed FHA loans, which are insured by the Federal Housing Administration, have lower credit score and down payment requirements. If you’re a veteran, you may be able to qualify for a mortgage through the VA loan program. Direct Home Loans are available for Native Americans, or you may be able to qualify for a Rural Housing Loan if you live in an eligible rural area. You can learn more about the various government-backed loan programs available here.
- Enlist the assistance of a cosigner.
If you’re having difficulty qualifying for a conventional mortgage and are not eligible for a government-backed mortgage, you might want to talk to a family member or friend about cosigning your loan. As a cosigner, they’ll apply for the mortgage with you. This means the lender will consider their financial information (credit score, income, etc.) in addition to yours. If he/she happens to be an attractive borrower (with excellent credit, for example), it may help you secure a mortgage.
A mortgage rejection is disappointing to say the least, but it doesn’t have to be the end of the world. Talk to your mortgage lender, take the appropriate steps to improve your situation, and explore additional options. You may still be able to make your dream of home ownership or a refinance a reality.
by jeffp | Aug 11, 2016 | Inside Real Estate
While property values are rising across much of the nation, far too many homeowners still find it difficult to avoid overpricing their home. Though this is often caused by emotions getting in the way of cold, hard real estate data, inexperience (first-time home seller) and misinformation (such as Zillow ‘Zestimates’) can also play a role.
Unfortunately, an overpriced home is unlikely to sell. In some parts of the country—where competition for available properties is fierce and bidding wars are rampant—it might not noticeably slow down the process. But in other areas where market conditions have stabilized, a too-high price could result in additional weeks, months or even years waiting for a buyer. And continually lowering the price could eventually lead potential buyers into believing something is actually wrong with your home.
If you’d like to ensure your home is priced correctly from day one, your best bet is to consult with a qualified real estate agent who knows your neighborhood well. He or she will consider renovations you’ve made to your property—such as building an addition, updating your kitchen, adding a bathroom or installing wood flooring—as well as what similar homes in your area are selling for.
These comparable sales, or comps, should be comprised of properties that are as near-identical to yours as possible in terms of floor plan, square footage and amenities. They should also have closed as recently as possible—such as within the last couple of months. If there aren’t any recently sold homes in your neighborhood, your real estate agent can pull older comps and adjust them for the current market. He or she may also find neighborhoods similar to yours in demographics and amenities and then look for comparable properties there.
Armed with this data your real estate agent can then help you determine the best listing price for your property. If you begin receiving offers quickly, you’ll know you priced your home correctly. If you get requests for lots of showings but don’t have any offers, you may want to reconsider the price or have your agent ask the potential buyers about issues/features that may be turning them off once they’re inside the home.
Bonus Pricing Tip
- These days, most potential home buyers start their search online. Usually they (or their Realtor) will search a database for properties under a certain value, which is usually a round number. Keep this in mind when pricing your home. For example, if you’re willing to accept $500,000 but you price it at $510,000, potential buyers searching for homes for $500,000 or less won’t even find it.
If you’re ready to sell your home or just curious about its current value, we’re here to help. Give us a call today for a comparative market analysis.
by jeffp | Jul 29, 2016 | Inside Real Estate
Whether you’re redoing your kitchen, adding a bathroom or finishing your basement, it’s easy to get caught up in the excitement of a home renovation. However, before you buy your supplies and hammer in that first nail, here are a few things you might want to consider.
You may need a permit before you can begin.
Depending on where you live, you may need a permit before you can take down or erect walls, cut new doors or windows, or even update the plumbing or electrical system in your home. Professional inspections may be required as well, making home improvements even more of a challenge for the do-it-yourself renovator. Hiring a general contractor who is familiar with the requirements in your city and county can help—though it will increase the cost of your project. If you still want to go it alone, be prepared to make multiple calls to the local permitting office.
The improvement may not increase your home value.
Consider the value of the other homes in your neighborhood before beginning any renovation. If you’re planning an expensive improvement that is going to out-price the market, it’s unlikely you’ll ever recoup your investment when it comes time to sell. The same can be said for home renovations that are less popular or even unpopular with many buyers—such as reducing the total number of bedrooms by combining two smaller into a larger or adding a swimming pool or high-maintenance water feature.
Safer bets are improvements that have traditionally increased home values. These include updating your kitchen (new appliances, flooring and countertops); modernizing your heating, plumbing and electrical systems; finishing the basement or attic; replacing flooring and adding a fresh coat of paint.
Hiring professionals might ultimately cost less.
You’ve included building supplies, new fixtures, carpet and paint in your budget. But what about your time? Not only will a major do-it-yourself renovation suck up all your free time, it will also turn your home into a work zone. When you hire professionals, you can spend that time doing things you enjoy while the job—usually—is completed faster than you could do so yourself. Before you begin your project, it doesn’t hurt to get quotes from a few professionals. All things considered, you might be surprised how much more “affordable’’ professional home improvement can be.
If you want to use a contractor, you’ll need to plan further ahead.
Whether you just want to use a general contractor to help you get the right permits and inspections or plan to outsource the entire project, you’re going to have to line up help months in advance. Not only do you need to get on the contractor’s schedule, but you also need time to make sure he or she—plus the subcontractors he or she works with—are licensed, bonded and insured. While you’re at it, ask if you can contact a few of their previous customers. Then call the homeowners and ask about their experience.
by jeffp | Jul 15, 2016 | Inside Real Estate
In 2012, the Federal Trade Commission (FTC) completed a study examining errors on American consumers’ credit reports. Some of the results were rather disturbing, namely that one in five consumers had errors on at least one of the credit reports issued by the three major credit reporting agencies. However, the study also found that about 20 percent of consumers who identified and disputed these errors were able to increase their credit score as a result. And as we all know, a higher credit score often means a lower interest rate—whether you’re applying for additional revolving credit, an auto loan or a mortgage.
If you’re preparing to buy a new home or refinance your current property, experts suggest you review your credit report for errors and take the necessary steps to dispute any inaccurate information you may find. Errors open to dispute include:
- Personal information, including incorrect spelling of your name, incorrect former and current addresses, and incorrect employment information. While these issues might be simple clerical errors, they can also indicate you’ve been a victim of identity theft.
- Credit accounts, including incorrect balances and incorrect payment history. Pay close attention to any late payments listed. These can have a major impact on your credit score, so you’ll want to dispute any payments noted as late that were actually submitted on time.
- Collection accounts, specifically credit cards, loans or medical fee charges listed as having been sent to collections when they were actually paid on time. If you notice collections for debts you don’t recognize, that could also be an indication of identity theft.
- Violations of the Fair Credit Reporting Act, which includes derogatory marks—such as late payments, collections and foreclosures—that are more than seven years old. Chapter 7 bankruptcies can remain for 10 years.
You’ll need to check and correct your credit report at all three major credit reporting agencies: Equifax, TransUnion and Experian. If you visit annualcreditreport.com, you can get a free report from each agency once every 12 months. Periodically reviewing these reports and addressing any errors will help you protect your credit and keep your score as high as possible—ultimately saving you money on interest.
To dispute an error, you’ll need to contact the credit reporting agency that issued the erroneous report. If you purchased a report complete with credit score from a service such as MyFico.com, you may be able to log a dispute online. Otherwise, you’ll need to submit notice of your dispute to the appropriate credit reporting agency in writing. The FTC offers a sample dispute letter here. Complete it and mail it, along with copies of supporting documentation, by certified mail. They also suggest you use the USPS ‘return receipt requested’ service so you can document when the credit reporting agency received your request.
Credit reporting agencies have 30 days to investigate the information under dispute. This includes notifying the organization that supplied the erroneous information of the dispute and reviewing the results of that organization’s subsequent investigation. Once the investigation is complete, the credit reporting agency must send you the results in writing along with a free copy of your report if the dispute resulted in any changes.
Do you want to learn more about the home buying and financing process? We’re here to help, whether you have a simple question or require more in-depth advice and assistance.
