French philosopher Gaston Bachelard once wrote, “If I were asked to name the chief benefit of the house, I should say: the house shelters day-dreaming, the house protects the dreamer, the house allows one to dream in peace.” While a sturdy roof certainly keeps out the elements and four walls ensure the privacy of occupants, owning a home imparts significant financial benefits as well.
A home allows you to build wealth over time. When you own a home, your wealth—in this case, equity in your home—increases every month. Each time you make a mortgage payment a portion of the installment reduces the amount you owe, growing your equity (the difference between what you can sell it for and what you owe on it). Your equity will also increase as the value of your property increases.
A home comes with numerous tax deductions. Provided you itemize deductions on your federal income taxes, you stand to benefit from huge deductions when you buy a home. For example, you can deduct origination fees from your income the year you buy your home. You can also deduct the interest you paid on your mortgage and the cost of your property taxes—the first year and every other year you own your home.
Open a home equity line and deduct even more. If at some point you decide to tap into the equity you’ve built in your home to pay off high-interest debts, go to school or make property improvements, you can deduct the interest you pay on that home equity loan or line of credit when you figure your federal income tax as well.
In many cases, you can avoid capital gains tax when you sell. Provided you live in the property as a primary residence for more than two years, you can keep up to $250,000 in profits (or $500,000 if you’re married) from the sale without paying capital gains taxes. If your home has appreciated substantially since the time of purchase, these tax savings can be significant.
Owning a home is cheaper than renting—especially in the long term. According to a recent report on ABC News, rents are increasing across the country as apartment vacancy rates continue to fall. In many locations, rent is rising faster than wages or inflation—averaging 3.2 percent more in 2013 than in 2012. Experts expect rents to continue to only increase.
Buy a home and you’ll avoid rising rental costs as well as reap significant tax benefits, all while increasing your wealth. For more insight into the housing market in your city, contact a local real estate professional.
According to the National Association of Realtors (NAR), the average homebuyer spends 10 weeks searching for the right property. During that period, 90 percent look at available homes online—yet only 45 percent attend an open house. Those who don’t are missing out on a convenient opportunity to ask the listing agent or homeowners a few probing questions that could help tremendously in the purchase decision.
Before you attend your next open house—or private showing with a real estate agent, for that matter—consider the following enquiries virtually guaranteed to reveal much more than the age of the property and homeowners association fees.
Has the property had any offers? If you’ve found a home you’re really interested in, the answer to this question will indicate how much competition you can expect should you make an offer.
Have the sellers rejected any offers? If the current homeowners have rejected an offer, you’ll want to know why. That type of information will help you craft a bid they’re more likely to approve and, if you find yourself competing for the property, may even give you an advantage.
How long has the property been on the market? In general, the longer it’s taking to sell a home, the more likely the owners will be to accept an offer below asking price—especially if homebuyers have shown little interest so far. Ask about the timing of any previous price reductions as well.
Has the property previously been in escrow? If an offer was accepted but the sale fell through, it could indicate potential issues. Request copies of any inspection reports before you proceed with an offer of your own. Lenders will not finance mortgages for homes with serious or potentially costly defects.
Is the property subject to any liens? Unpaid homeowner’s association dues, property taxes and federal taxes can all result in liens on a home. The sellers would need to settle these before closing, which could result in a significant delay.
Why did the homeowners decide to sell? While more than 30 states have laws describing what a seller must disclose to a potential homebuyer—including things like structural problems, toxic mold and lead paint—not all require them to reveal issues with their neighbors or the neighborhood in general. Still, the agent may let something useful slip so it doesn’t hurt to ask.
Has this property appraised at the asking price? The real estate crash caused home values to decline across the nation, leaving numerous owners underwater on their mortgages. While values are on their way up once again, appraisal at the listing price is never guaranteed—and if it comes in low, it could derail your financing.
Many homeowners looking to sell put their properties on the market during the warmer months of spring and summer. If you’ve been thinking about moving up or investing in rental property, now is an excellent time to contact a real estate professional and begin the search for your next home purchase.
According to the National Association of Realtors (NAR), the average homebuyer spends 10 weeks searching for the right property. During that period, 90 percent look at available homes online—yet only 45 percent attend an open house. Those who don’t are missing out on a convenient opportunity to ask the listing agent or homeowners a few probing questions that could help tremendously in the purchase decision.
Before you attend your next open house—or private showing with a real estate agent, for that matter—consider the following enquiries virtually guaranteed to reveal much more than the age of the property and homeowners association fees.
Has the property had any offers? If you’ve found a home you’re really interested in, the answer to this question will indicate how much competition you can expect should you make an offer.
Have the sellers rejected any offers? If the current homeowners have rejected an offer, you’ll want to know why. That type of information will help you craft a bid they’re more likely to approve and, if you find yourself competing for the property, may even give you an advantage.
How long has the property been on the market? In general, the longer it’s taking to sell a home, the more likely the owners will be to accept an offer below asking price—especially if homebuyers have shown little interest so far. Ask about the timing of any previous price reductions as well.
Has the property previously been in escrow? If an offer was accepted but the sale fell through, it could indicate potential issues. Request copies of any inspection reports before you proceed with an offer of your own. Lenders will not finance mortgages for homes with serious or potentially costly defects.
Is the property subject to any liens? Unpaid homeowner’s association dues, property taxes and federal taxes can all result in liens on a home. The sellers would need to settle these before closing, which could result in a significant delay.
Why did the homeowners decide to sell? While more than 30 states have laws describing what a seller must disclose to a potential homebuyer—including things like structural problems, toxic mold and lead paint—not all require them to reveal issues with their neighbors or the neighborhood in general. Still, the agent may let something useful slip so it doesn’t hurt to ask.
Has this property appraised at the asking price? The real estate crash caused home values to decline across the nation, leaving numerous owners underwater on their mortgages. While values are on their way up once again, appraisal at the listing price is never guaranteed—and if it comes in low, it could derail your financing.
Many homeowners looking to sell put their properties on the market during the warmer months of spring and summer. If you’ve been thinking about moving up or investing in rental property, now is an excellent time to contact a real estate professional and begin the search for your next home purchase.
Everyone knows that buying a new home is an exciting—though sometimes stressful—experience. However, unless you’ve been through it before, you may not realize that the process of selling your old one can be equally thrilling—in both positive and negative ways. Fortunately, the more informed you are about what to expect, the smoother the journey will be. Consider these essential tips for first-time home sellers.
Start with a realistic asking price.
Sure, you could ask for more than you’re willing to sell your home for and then reduce the price if you don’t get any offers. However, if you do so, you’re unnecessarily going to extend the time your property spends on the market. Realistic pricing—based on what comparable homes in your area are going for—is necessary if you want to attract the greatest number of potential buyers in the shortest period of time.
Find an agent who will market the property appropriately.
Yes, some potential buyers still drive through neighborhoods of interest when looking for a home, so a “For Sale” sign in your yard is essential. But you need an agent who will go further than that. According to the National Association of Realtors (NAR), 90 percent of homebuyers search for a new property online. This means you need a seller’s agent who will feature your home on the Web with lots of gorgeous photos that show the residence at its best.
Move half of your stuff out.
You’ll obviously want to make sure your home is clean and tidy when potential buyers come to check it out—but don’t stop there. Ask your real estate agent what else you can do to make it more attractive to visitors both in person and in pictures. He or she is likely to suggest eliminating all clutter and possibly even paring down the furnishings in your home to make it look more spacious. You can box nonessentials and store them in your garage or, even better, stash them in a storage unit so they’ll be off the property entirely.
Make smart upgrades.
Most buyers look at multiple properties before making an offer, so your home could face a great deal of competition. Ask your real estate agent about upgrades that will help it come out on top in the current market. In general, new carpet and interior paint are a safe bet—especially in soft neutrals that appeal to a wide range of tastes and can integrate with a variety of decorating styles. Your agent may also recommend kitchen and bathroom updates and other home improvement projects that add value and attract buyers.
Think about throwing in extras.
If you’ve priced your home to sell from the beginning, you might not have much room to negotiate with potential buyers without taking a loss. However, including extras is one way to get your asking price while still sweetening the deal. Consider throwing in an appliance or two (like the washer and dryer), paying for a portion of the closing costs, or other perks you can offer to get a potential buyer off the fence.
If you’d like to learn more about selling your home, give us a call. We’d love to answer all your real estate questions and put you in touch with an agent who has expertise in your market.
The traditional 30-year fixed-rate mortgage is among the most affordable loan products available today. The longer term allows for a lower monthly payment than that found with a 15-year or 20-year mortgage. The fixed rate makes it more stable than an adjustable rate product; the monthly payment on the loan will never go up. In addition, few 30-year fixed-rate mortgages come with pre-payment penalties. This makes them flexible; you can pay off your mortgage earlier of you want.
That said, a 30-year fixed-rate mortgage is not always the best choice for every homeowner. There are a number of alternatives that could be a better fit for your financial goals.
Cash – While the many of home buyers may have been unlikely to consider an all cash offer in the past — that trend is changing. In 2014, 43% of all home purchases were cash offers, according to Realtytrac data. That’s nearly half — and if you can afford to go the all-cash route, there are a few benefits. First, you’ll avoid the hassle of applying for a home loan. Second, now that the real estate market is again on an upswing, you may earn a better rate of return on your investment than you will if you leave the cash in CDs or other low-interest savings vehicles. Finally, a home seller may be more likely to give you a discount on the purchase price in exchange for the ease of a closing facilitated by cash.
Fifteen-year fixed-rate mortgage – If you have the means to make the larger monthly payments required by a 15-year fixed-rate loan and want to be mortgage-free sooner, this is an attractive alternative to the traditional 30-year product. It and the 20 year fixed rate mortgage are increasingly becoming a preferred loan option for refinancing. Because you’re paying a larger portion of the principal each month, you’ll build equity in the property at a much faster rate. This product often has a lower interest rate than a traditional 30-year loan as well—which can save you thousands of dollars over the life of the mortgage.
Five/one adjustable-rate mortgage – Adjustable rate mortgages (or ARMs) got a bad rap during the mortgage crisis. However, a 5/1 ARM is still a viable loan option for homebuyers and refinancers who are comfortable with some degree of risk and don’t plan to live in their properties for long. The product offers a low fixed interest rate for the first five years followed by annual adjustments for the remaining loan term. The lender will calculate the rate adjustment based on a variable rate plus a fixed margin. Most of today’s 5/1 ARM loans include limits on how much the rate can adjust in a single period and the maximum rate possible over the life of the loan.
Mortgage interest rates are still quite low, making it a great time to buy or refinance for many Americans. If you’ve been dreaming of lowering your mortgage payment, reducing your loan term, or buying a new home, contact your mortgage professional to discuss your borrowing options including these 30-year fixed-rate mortgage alternatives.
Almost everyone has had the experience of driving by a home for sale and impulsively taking a flyer. While fantasizing about the darling Craftsman bungalow in an older neighborhood can be fun, impulsively calling a realtor might not be the best choice. Taking the time to prepare for home ownership can save you money, hassle and heartache down the road. Get a copy of your credit report. If your score is on the low side, take steps to increase it before applying for a loan. The higher your FICA score, the lower your interest rate is likely to be. Shoot for a score between 760 and 850, advises Bankrate.com. Build up your credit by applying for a credit card and making on-time monthly payments.
Do not apply for multiple lines of credit, however, as your credit score is adversely affected each time a company checks your credit report. In addition, if you have too large a line of credit, banks will be reluctant to make a home loan, as your potential debt to income ratio will be too high. Pay down any existing debt, as this will increase your credit score.
Make an honest assessment of your income and expenses. Before you can decide how much home you can afford, it is important to look at all of your expenses, including existing debt. Avoid the temptation to anticipate increased future income, or lower expenses. Look at your expenses each month over the past year and work with the numbers from the month with the highest expenses. This way, you will avoid committing yourself to purchasing a home that will financially tax you and your family.
Make a list of qualities you want in a home. If you have children, investigate local schools and identify the neighborhoods served by the schools you prefer. Look at crime rates, commute times and other quality of life factors. Think about whether you prefer new construction or a fixer-upper, and what amenities you would like your home to offer. Prioritizing your wants and needs will help you to avoid making a potentially unwise emotional decision after you have been approved for a home loan.
Get pre-approved for a home loan. Doing so will enable you to better negotiate with sellers and obtain a sales contract on the house you want. You will also be able to get the home appraised, which is essential to obtaining the actual loan. Ask around before deciding on a lender. Your friends and neighbors will be able to tell you of local lenders with whom they have had a positive experience.
Once you know what you want and are prepared, you are ready to go home shopping. Stick to your guns and resist the urge to settle for something less than what you want. Remember, if it is not available now, chances are it will be on the market soon.
