Tag Archives: buying

Secret Ingredient to Selling

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Being open to flexibility can often be the secret ingredient to selling your house.

The idea of downsizing can feel daunting, like trying to fit your entire life into a tiny car. Yet, for those who’ve invested time and money into a large family home, the thought of moving into something smaller can seem overwhelming.

However, downsizing doesn’t erase the memories made in your old home – those family gatherings, the first steps of your children, or the grand holiday celebrations. As life evolves and your nest empties, the idea of downsizing can become more appealing. Many Americans embark on this journey, especially after retirement, seeking a simpler lifestyle, reduced housing costs, and freedom from maintenance tasks like painting and mowing.

According to Emmet Pierce’s article on downsizing for MoneyTalksNews, opting to rent can make selling your home and relocating a more straightforward decision. “Renters have the flexibility to live wherever they choose and experience life in different communities. And once your lease is up – sometimes even before – you’re free to move on.”

But whether you choose to sell and rent or buy something smaller, dealing with clutter becomes inevitable. An organization expert quoted by Pierce explains, “Retirees in large homes often find themselves using only a few rooms, while other areas collect clutter because maintaining such a vast space becomes overwhelming.” Downsizing offers liberation from unused items, providing more breathing space.

Moreover, downsizing can enhance your quality of life and reduce stress, according to aging experts. Letting go of unnecessary furniture, outdated gadgets, and unused exercise equipment can be liberating, giving you more room to relax.

Are you tired of navigating stairs daily, burdened by the constant ups and downs? Downsizing can address mobility issues, offering homes with better accessibility, enabling you to age in place comfortably.

If you miss the convenience of urban living after moving to the suburbs for a larger home, downsizing could be the answer. Transitioning to an apartment or condo in the city center brings you closer to amenities, entertainment, and even potential job opportunities, reducing the need for long commutes.

Source: MoneyTalkNews, TBWS

Is it time to buy an investment property?

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Is it advisable, at the age of 25, to consider purchasing a house for rental purposes as an investment, leveraging rental income to pay off the mortgage?

Real estate has historically proven to be a lucrative investment avenue due to its potential for cash flow, particularly through rental income, and appreciation over time. While the aftermath of the 2008 financial crisis saw a decline in home values, most areas have since rebounded, returning to pre-crash levels.

Before delving into rental property investment, it’s crucial to define your expectations thoroughly. This involves evaluating potential cash flow, which may occasionally be negative. Here’s a structured approach to analyzing this:

Start by researching market rental rates in your area, utilizing online resources or the rent survey typically required by lenders for appraisal purposes. Consider adjusting your gross income estimate to account for vacancy and collection losses, as well as potential expenses associated with eviction, albeit rare.

Factor in repairs and maintenance costs, acknowledging that despite the current condition of the property, these expenses are inevitable. Additionally, allocate funds for replacements, such as estimating the remaining lifespan of major components like the roof.

Expect to provide a larger down payment for a rental property compared to an owner-occupied loan. Lenders may also require reserves, typically around 6 months’ worth, although this varies. Maintaining cash reserves is prudent regardless.

Bear in mind that interest rates for investment properties are typically higher than for primary residences. Utilize spreadsheets or online calculators to calculate principal and interest payments, and estimate property taxes and hazard insurance premiums.

Subtract all negative figures—vacancy, repairs and maintenance, replacement reserves, and monthly mortgage payments (including taxes and insurance)—from the property’s gross income to determine cash flow. A positive result is ideal, while a negative one indicates a monthly deficit that needs covering. Assess whether your stable income or liquid assets are sufficient to offset this deficit.

Consider other pertinent factors:

Is your regular income stable and ample to cover potential shortfalls?
Have you set aside emergency funds for both property-related issues and personal contingencies?
Are you prepared to hold onto the property for an extended period, perhaps five years or more?
Will your job situation permit you to remain in the area? If not, budget for a property manager, typically charging around 10% of monthly rent.
Is your current living situation satisfactory? You might weigh whether purchasing your primary residence should precede investing in rental properties, given the lower cash requirements and financing costs.

I trust this guidance proves beneficial. Best of luck!

First-Time Homebuyer Advice

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Best advice I would give to first-time homebuyers
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I was once asked: We’re in the process of hopefully purchasing our first home, and I’m a little lost on everything that is going on. What’s the best advice you would give to first-time homebuyers?

Undoubtedly, your primary step in the home buying journey should involve securing your financing. While I acknowledge that this advice may appear biased, considering my involvement in the mortgage business, it’s a reality that the majority of today’s home buyers rely on mortgages, making this part of the process more intricate than before.

Despite the potential complexity, obtaining a mortgage today is not as insurmountable as some may portray. Recognizing your credit situation is pivotal. Lenders don’t demand perfection, but it’s crucial to be aware of your standing. Check your credit report on platforms like Free Credit Report.Com or Creditkarma for free and promptly address any errors, past-due accounts, or public records.

Collection agencies often settle for amounts less than what is reported. However, exercise caution when settling collections older than two years, as it might impact your credit score. Establishing a relationship with a reliable loan officer early on is crucial. Seek someone responsive, trustworthy, and capable of offering clear guidance.

Initiate the preapproval process with your chosen loan officer by submitting essential documents such as pay stubs, W2s, and bank statements. The Automated Underwriting System (AUS) will swiftly provide initial findings. Aim for “Approve/Eligible” or “Accept” results and inquire about a “TBD Approval” for added strength in your offer to sellers.

I hope you find this information helpful. Best of luck on your home-buying journey!

PMI or Larger Down Payment?

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Determining whether it’s cheaper to pay for private mortgage insurance (PMI) or to put up a larger down payment on a house depends on your specific financial situation and goals. Here are some steps to help you make an informed decision:

Calculate the cost of PMI: If your down payment is less than 20% of the home’s purchase price, your lender may require you to pay PMI. PMI costs can vary based on the loan amount, credit score, and other factors. Your lender can provide specific details on the PMI costs associated with your loan.

Assess the cost savings with a larger down payment: Compare the total cost of PMI over the time you expect to pay it (until the loan-to-value ratio reaches 78%) with the potential savings of making a larger down payment. A larger down payment means a smaller loan amount, which can result in lower monthly mortgage payments and less interest paid over the life of the loan.

Consider alternative uses for your cash: If you have the money for a larger down payment, weigh the opportunity cost of using that money for a down payment versus other financial goals. For example, paying off high-interest credit card debt or investing the money might yield higher returns compared to the savings from a larger down payment.

Factor in future home value appreciation: If you expect the value of the home to appreciate significantly in the coming years, it may impact when PMI gets automatically canceled (at 78% loan-to-value ratio). If the home appreciates rapidly, you may reach that threshold sooner, reducing the overall cost of PMI.

Evaluate your overall financial situation: Consider your long-term financial goals, current income, job stability, and other financial commitments when deciding between a larger down payment and paying PMI.

Consult with a financial advisor or mortgage professional: Seeking advice from a financial advisor or mortgage expert can help you better understand the trade-offs and make a decision that aligns with your financial objectives.

Ultimately, the decision depends on your unique circumstances and financial priorities. Whether you choose a larger down payment or opt for PMI, buying a home should fit comfortably within your budget and contribute to your overall financial well-being.