Why Your Job Matters When Buying a Home

Did you recently change jobs or receive a promotion? Despite what you might have heard, it is still possible to qualify for a mortgage to buy or refinance a home using your new income. The lending atmosphere is rife with misconceptions about job gaps, job changes and occupational changes within the course of an employment time frame. You can get a mortgage if you switched jobs or even changed industries, you just have to approach it the right way to seal the deal.

When determining your ability to pay (and therefore determining how much house you can afford), a lender will calculate your average income based on your pay from the past 24 months. It’s pretty straightforward if you’ve had the same job and same income and pay structure, but if any of those things changed in the past two years — or will change soon, you may face challenges when trying to get a mortgage.

In the past, lenders were ready to strike down loan applications in which there was a job or an industry change. Even real estate professionals will tell you not to change jobs before applying for a home loan. While that very well may be the case for most situations, it is not necessarily so black-and-white.

If you have had a job change, no matter what, a lender is going to need the following things from you — and your employer — in order to close on a mortgage: an offer letter, a role change letter if you have a title change and commensurate compensation package change, and the most recent pay stub and verification of employment.

How Lenders View Hourly Employees

Hourly employees are under the tightest microscope when it comes to getting a mortgage. Why? An hourly employee may have a set full-time schedule, which is ideal for lending purposes. However, if you work slightly less than a full-time schedule, with hours that fluctuate from week to week, this can muddy the waters.

The income gets averaged as long as you’ve been an hourly employee — even if you’re making more money now on a per-hour basis. That’s right, if you were making $40 an hour, and now you earn $50 per hour, the averaged income during the past 24 months – including the lower wage — would apply. So what can you do to get the higher hourly rate factored in to your ability-to-pay calculation?

Here’s what you’ll need from your employer: An offer letter, a current pay sub and a detailed description of the compensation structure with a new employer. These items could get you an exception due to relocation or an alternative circumstance. In either capacity, a most recent verification of employment can bridge the gap between how many hours worked in the year to date, supporting the new federal ability-to-repay requirements.

How Lenders View Salaried Employees

Lenders love salaried employees the most because a set salary streamlines the income calculation in the qualifying process. If you’re changing from one salaried role to another salaried role, despite a job gap, this should be no problem for qualifying for a mortgage so long as you can explain any gaps in the most recent 24 months.

Each job you’ve held in the past 24 months — even if you’ve held multiple jobs — all have to be detailed and itemized with dates so there is no gap in employment. If there is a gap in employment, the lender will need a written explanation detailing the transition. If you have changed jobs from one salaried role to another salaried role, with a different title and a different position — even within a different industry — that still should be fine for your lender as long as you are paid the same way — a flat salaried income.

What If You’re Salaried With Overtime, Commissions or Bonuses?

Have a new job? Or a new salaried role with big commissions, overtime or bonuses? If you do not have a history of this additional add-on income, it cannot be counted for use when qualifying for a new loan.

Here’s an example of a transition that a lender will find acceptable when calculating average income: A police officer has earned overtime plus salary for the past 24 months, and decides to change jobs to become firefighter with overtime potential. In this case, the overtime will be included in the 24-month average. The overtime, bonuses or commissions must be consistent during that time period for that type of income to be included in the average. A borrower can’t have a history of overtime, then change jobs and now have add-on commission income and expect the lender to include the add-on income in the 24-month average when there is no prior history of it.

Changing From Salary to Hourly Pay

If you are moving from a salary role to an hourly role, the lender is going to have to use your hourly income supported with a pay stub and verification of employment. As long as the change is within the same field and your title and role are similar, you should be in the clear.

Future Promotion or Raise On Deck

Congratulations, you’ve been offered a promotion! But first: Has it actually occurred yet? If not, you will be hard-pressed to get the lender to use the projected income, even if it is guaranteed.

If you cannot provide a pay stub with year-to-date income (usually a 30-day pay stub depending on your specific lender requirement), along with a letter detailing the change, you won’t get approved for the loan. Let’s say, for example, you are searching for the house and you know in the next four months your income is going to increase to $6,000 per month because you’ll have a new role within your company. In order for that $6,000 per month income to be used in the calculation, you’d have to get the details of the raise, including the role change letter and at least one pay stub.

So if you are thinking about getting a mortgage, even if it is further down the road, consider opening a dialogue with a lender now so you can be guided through any income bumps the past or future may hold. It is especially critical for homebuyers to get pre-approved with a lender upfront prior to house-hunting. This process includes allowing a lender to review your credit, debt, income and assets to assess your ability to qualify.

This is also a good time to start looking over your credit reports and checking your credit scores so you can address any problems in advance of applying for a mortgage.

Source: blog.credit.com ~ By Scott Sheldon ~ Image: pixabay.com

Homebuyers Are Willing to Make Big Sacrifices for Top Schools

  • About 75 percent of homebuyers said that access to excellent schools was important in their search.
  • Nearly 80 percent of buyers gave up some home features to land in their preferred school district, with about one in five sacrificing a garage.
  • Palo Alto is home to the top-ranked school district and high school in California this year and also claims America’s best college.

Purchasing a home in a good school district has always been a high priority for buyers who have or want children, and recent survey results show just how much a neighborhood’s educational pedigree matters.

Nearly three-quarters of successful homebuyers said that the quality of the school district was either important or very important in their purchasing decision, according to a realtor.com poll and an accompanying analysis by company Chief Economist Danielle Hale. About the same amount — 78 percent — sacrificed some features to score a home in their desired school district.

Although a separate survey conducted by realtor.com earlier this year found that a garage was the No. 1 home amenity, 19 percent of buyers gave up that essential to gain access to an excellent school district. Eighteen percent sacrificed a large backyard, 17 percent gave up an updated kitchen and additional bedrooms, and 16 percent were willing to forgo an outdoor living space.

So what criteria defines a good school in the eyes of homebuyers? For 59 percent, test scores are the most important thing to look for. Next on the list are accelerated curriculums (53 percent) and music programs (49 percent).

The analysis also examined the most popular schools in every state based on 2018 search data from realtor.com. In California, the most searched elementary school is Cordelia Hills Elementary Hills in the Solano County city of Fairfield. For high schools, buyers are performing the most searches for Clovis North High School, located on the outskirts of Fresno.

Excellent educational opportunities are one of the reasons that Silicon Valley remains such a sought-after — and expensive — destination for California homebuyers. Earlier this year, Niche.com ranked school districts in Palo Alto, Los Gatos, Saratoga, and Mountain View as the best in California. Palo Alto’s Henry M. Gunn High School ranks No. 1 in the Golden State, while Stanford University is at the head of the class on Niche.com’s 2018 list of America’s best colleges.

But buyers who are intent on providing their children with a top-tier Palo Alto education will need to dig deep to pull it off. According to MLS data, the median price for a single-family home in the Santa Clara County city in the second quarter was $3.29 million, a year-over-year gain of 15.5 percent.

Source: blog.pacificunion.com ~ Image: pixabay.com

25 AWESOME STAYCATION IDEAS

Ah vacation.  How many of us don’t sometimes wish we could escape the hustle, bustle, & day-to-day responsibilities of our normal lives for a week of fun and relaxation somewhere far, far away?

The truth is that for many of us a traditional vacation is not always in the cards.  Between restaurants, hotels, and transportation, travel costs can add up fast especially when those costs are multiplied for a family.  And even when the cost isn’t a factor, sometimes health concerns or work obligations prevent us from leaving town anytime the urge strikes.

But that doesn’t mean when Spring Break or summer vacation time rolls around and the kids are home from school that you can’t still have a great time! This year, why not plan a vacation in your own backyard?  A true Staycation is more than just a week at home, it is an intentional time of fun and relaxation for your whole family.  It does take a little effort to do it right, but can ultimately be just as satisfying as going somewhere far away.

SET SOME GROUND RULES

The point of a Staycation is to make it feel as much like a real family getaway as possible, without leaving the comfort of your own home.  Thus, to make sure the whole family is on the same page, it is good to start with some ground rules that everyone can agree on.  Start with deciding exactly when your vacation at home starts and ends, and then set a few guidelines for what your family may and may not do during this time.  These could include all or some of the following:

  • No smart phone
  • No email
  • No computer or video games
  • No television
  • No working from home
  • No worrying
  • No fighting
  • Family time only—no independent activities or outside plans
  • No cooking
  • No cleaning
  • No laundry

PLAN FOR FUN!

Just like a real vacation, the more you plan for fun, the more successful your Staycation is likely to be.  Start by setting a reasonable, realistic budget for your week of fun at home.  Set some money aside for activities, eating out, and perhaps even paying for a splurge or two such as paying for a house cleaner or treating yourself to a massage or pedicure at a local spa.

DIG DEEPER

Next, take the time to figure out just what you will do on your Staycation.  If your kids are old enough to have an opinion, hold a family meeting to discuss your ideas and to get a feel for what everyone wants to do. (The list below is a great start!)  If you like spontinaeity, consider putting everyone’s ideas into a jar, then picking one activity each day.  Or, if your family prefers more structure, use your ideas to develop an itinerary for the week.

Be sure to also spend some time prepping your home and kitchen to make things as easy—and neat—as possible for your relaxing week at home.  Gather menus to all the local restaurants that offer takeout and delivery or, if eating out every day is not an option, plan a freezer cooking session ahead of time to prepare a week’s worth of easy stress-free meals.  You might also want to consider using disposable dishes and serve ware to cut down on dishes.  Make sure to caught up on laundry before your week begins, and, if possible, do a family power-cleaning session the day before your Staycation starts.

GET CREATIVE

Chances are there are dozens of fun things to do in your own hometown that you either never have time for, or don’t even think about because they are so close by.  Here are 25 fun and creative ideas to get you started:

  • Try Geocaching-According to the official Geocaching website, “Geocaching is a real-world, outdoor treasure hunting game using GPS-enabled devices. Participants navigate to a specific set of GPS coordinates and then attempt to find the geocache (container) hidden at that location.”  Get more information here, or find local Geocaching groups here.
Go on an a family adventure by getting out the map and exploring your neck of the woods.
  • Try Paintballing or Laser Tag-Invite a few other families to join yours and battle it out for the title of Most Awesome Family.  There are paintball or laser tag facilities almost everywhere—use Google to find one nearby.
  • Visit a Nearby National Park-National parks truly are one of our country’s greatest treasures, and most NPs have a variety of awesome family friendly activities to choose from.  After finding a park in your area, first visit the Ranger Station to pick up a Junior Ranger kit, then complete the required number of activities to receive a badge.  You can also purchase a Passport to National Parks at any NP gift shop, then collect passport stamps at every park you visit.  Most park fees are nominal, but you can also check out this page to find free entrance days.
  • Enjoy Your Local Theater-Check the local newspaper or theater website to see what plays, musicals, concerts, or family-friendly comedy shows will be playing during your planned Staycation time, then book tickets and plan for an evening at the theater.
  • Visit a Nearby Amusement Park-While Disney World may not be in the cards this year, that doesn’t mean you can’t still have a blast at a nearby theme park.  Check out this list to find an amusement park in your own state or town.
  • Visit a Local Children’s Museum-If you’ve got younger kids it can sometimes be hard to find activities that the whole family can enjoy, but a great Children’s Museum can definitely fit the bill!  Most have a variety of fun and interactive activities that can keep you busy the whole day.  Check out the Association of Children’s Museums website to find one in your area, and consider purchasing a Family pass—you can usually get your money back in just two visits.
  • Visit the Zoo or Aquarium-Who doesn’t love seeing animals?  Check out the Association of Zoos & Aquariums to find an AZA accredited zoo or aquarium in your area, then be sure to also check what special programs your zoo has available.  Some offer Junior zookeeper programs or opportunities to feed the animals, while some others even allow you to spend the night in the zoo!  Be sure to pack a lunch to save on pricey zoo fare!
  • Check out the Local Library-Most libraries have family-friendly events and activities happening every weekend, and sometimes even daily during spring break and summer vacations.  Check your local library website for details.
  • Major or Minor League Sporting Event-While major league events are a lot of fun, they can get pricey quickly, especially for a family.  Luckily almost every city has a minor league team these days, which can give you (almost) the same experience for a fraction of the price!  Be sure to check out which days include special events, such as free caps or fireworks for added fun!
  • Go Bowling-If your kids are small, try bumper bowling; for older kids go at night during “glow bowling” times!  Many bowling alleys around the country even participate in a free bowling program that allows kids to bowl free and parents to join them for just a few dollars more.
Sometimes every family needs to pitch a tent and kick back together, cooling your bare feet in the breeze!
  • Camp in Your Own Backyard-Why not enjoy the great outdoors in your own backyard?  Set up a tent and sleeping bags, build a fire (or use the grill) to cook s’mores, and take turns telling ghost stories.  Then download the Night Sky app (make sure your device is GPS-enabled first!) to identify stars, planets, and even satellites in the sky.
  • Tour a Local Factory or Brewery-Is there a large manufacturing facility near your town or city?  Most offer tours and even samples of their goods.  Check the company website for details!
  • Visit a Nearby Tourist Spot-Is there an area nearby that always draws the crowds? Even if you normally avoid the tourist traps, every once in a while it is fun to become a tourist in your own town.  Make all the cheesy stops and take pictures along the way!
  • Theme Restaurant or Dinner Theater-Make dining an event!  Depending on where you live there may be theme restaurants, dinner theater, or even a murder-mystery dinner train or cruise
  • Go Paddleboarding or Canoeing-If there is a river, lake, or ocean nearby, chances are pretty good there is also a paddleboard or canoe rental facility nearby as well.   Both are a fun way to enjoy the water and test your skills!
  • Create Your Own Art-Spend an afternoon getting creative at a nearby paint-your-own pottery facility.  Not only is it fun, you’ll have your own gorgeous dishes to take home when you’re done.
  • Get Wet-Spend the day at a local pool or waterpark, or just head to the beach!  If that sounds like too much effort, simply set up a slip & slide in the backyard and have a family water day at home.
  • Tackle a family project-Have the kids been begging for a tree house or wanting to redecorate their rooms?  Consider spending your week together working on something to improve your home.  You’ll not only bond while painting and building together, but at the end of the week have something concrete to show for your time!
  • Host Your Own Film Festival-Pick a theme, allow each family member to pick a movie, then get comfortable for a day of movies.  Be sure to provide plenty of snacks, and take breaks to discuss and rate each film.
  • Give Yourselves a Makeover-Do hair and makeup at home, or take a day to go to the local spa or beauty parlor.  Complete the new look with a new outfit!
  • Find a Local Festival-Check your local newspaper or chamber of commerce website to find out what is happening in your town or towns nearby the week of your Staycation.  Depending where you live there are often events happening almost every weekend!
  • Go Golfing-If dad is into real golf, consider spending an afternoon doing a family golf lesson; otherwise, stick to mini golf at a local novelty course!
  • Play Outside-Go fly a kite, take a walk, go for a bike ride, or take a hike–most state and national parks have at least a few walking, hiking, or biking trails to choose from.  Do a little research to find one that fits your family’s athletic ability, then head out to enjoy the great outdoors.  Don’t forget to pack snacks and water for your trek!

RELAX AND ENJOY!

For most people—and moms especially—the hardest part of trying to “relax” at home is letting go of the all the everyday obligations and distractions that bombard us in our own homes.  But the key to having the best Staycation ever ultimately has nothing to do with the activities you choose, but with your own attitude and commitment to making your week a time of fun and relaxation.   Let the chores be for a week and instead give yourself permission to kick back and enjoy the moment.  Laugh and talk with your kids and spouse and create memories that you will cherish for a lifetime.  This is your time…..make the most of it!

Source: livingwellspendingless.com ~ Image: Pixabay

The Ultimate Summer Home Maintenance Checklist

Everything you need to do to keep your home and yard in tip-top shape this summer.

With the change of each season comes a new set of maintenance tasks for your home. Now that summer’s here, you’ll want to prepare your home and yard for the onslaught of summer heat. From air-conditioner upkeep to hanging a clothesline, these simple chores will help keep your home happy and healthy.

Check detectors. Check your home’s smoke and carbon monoxide detectors to make sure they’re working properly.

Inspect air-conditioners. If you haven’t already, prep air conditioners and fans for their busiest season:

  • With the help of your spouse, install window air-conditioning units. Remove and clean the filters before firing up the AC. If you have central air-conditioning, consider a professional servicing.
  • Clean all ceiling fans and other fans with a damp rag. If you have high ceilings, a ceiling-fan duster can help you de-grime hard-to-reach blades.

Enjoy a dry spell. Install an outdoor clothesline to dry your laundry in the summer sun; you’ll save money and energy by skipping the dryer. Plus, who doesn’t love the smell of air-dried sheets?

Clean your outdoor cooker. Give your grill a deep cleaning with these simple steps:

  • For gas grills, turn the heat up to high and let the grill cook with the lid closed for about half an hour. Allow the grill to cool and then brush it off with a grill brush. Wipe down the exterior with a damp sponge and a gentle cleanser. Clean the grill’s drip pans.
  • For charcoal grills, completely empty the grill and wipe out any ashy residue. Then clean it inside and out with hot water, a scrubby sponge and some liquid dishwashing soap. Let the grill dry completely before using it again.

Polish your porch. Thoroughly sweep painted porch floors; then mop them with an all-purpose cleaner. If there’s a lot of built-up dirt on the floorboards, you may need to scrub them with a brush.

Analyze your deck. Look over your deck for signs of rotting and hammer in any nails that are poking up. Then, determine if your deck needs sealing. Sprinkle water on the deck’s boards. If the water beads up, you’re in good shape; but if it soaks right in, it’s time to reseal that sucker.

Wash your windows. If you didn’t tackle exterior window washing in the spring, now’s the time to get your glass clean.

Make much ado about mulch. Add a layer of mulch to keep weeds down and help the ground retain its moisture in the heat. It’ll give your plants a chance to grow.

Be a leak detective. Check your hoses and exterior faucets for leaks — even a tiny drip can add up to a big waste of water. Pinhole leaks in hoses can be covered up by winding regular electrical tape around the (dry) hose in overlapping layers.

Primp your plants. Deadhead both perennials and annuals to keep them productive. If you have visible dead foliage from spring bulbs, pull it out to maintain a tidy look, but if the daffodil or tulip leaves are still green, leave them alone; they’re busy nourishing the bulb to bloom again next year.

Plan your watering schedule. Train your garden to endure dry days by watering deeply a couple times a week, instead of watering lightly daily. This style of watering will promote the growth of deep, strong roots.

Stop dirt at the door. Keep summer’s mud and muck outside with not one, but two doormats at your main entry door. Place a coarse mat at the exterior and a softer, cloth one on the interior to catch the most dirt. Better still, instruct family members to remove their shoes upon entering. If you live near a beach, a tub of water for sandy feet placed by the door works wonders for keeping sand outside where it belongs.

Source: thenest.com ~ By Laura Fenton ~ Image: Pixabay

6 Benefits of Owning a Vacation Home

…So why even think about vacation, or buying another home for that matter?

Hear us out.

First of all, who said a vacation home should just be for the summer? More on that later.

Second, with a highly active housing market, an economy on a tear, and rates still hovering around historic lows, now may be the perfect time to consider purchasing and investing in a vacation home. This decision, though, comes with a big personal and financial commitment—given the research and preparation required, and the likelihood of paying off two mortgages at the same time.

Nonetheless, buying a vacation home can be especially appealing and favorable when you throw in these personal and financial benefits, too.

1. Tap into rental income.

Owning a second home presents the opportunity of renting it out when you’re away. And if your second home is a vacation home? Well, so long as it’s the right property in a desirable town, turning it into a rental property will also give you a second source of income. And in some cases, you can deduct expenses of renting your vacation home. (As always, consult a tax professional regarding the deductibility of interest and charges.) Keep in mind, some local ordinances and homeowners associations (HOA) may have conditions, such as how much or how little a property can be used for renting.

2. Build (even more) home equity.

The housing market and home values fluctuate. Therefore, the decision to make a vacation home purchase shouldn’t be made with certainty that the property’s value will give you a huge payday in the future. However, if the town where you buy your home is vibrant, that may increase the likelihood of your property appreciating over time.

With that said, it’s critical to do a lot of research on housing factors like price trends, new-home construction, access to highways, restaurants, and other amenities to make sure you’re making a smart investment.

3. Capitalize on tax breaks.

For most homeowners, the home is their biggest tax break—and this can be true for a vacation home, too. If you use this property as a true second home and not as a rental property, then your mortgage interest and property taxes may be tax deductible. (Again, remember about consulting that tax professional!) On the flip side, there’s a special IRS rule that if you use a home as a residence and rent it for fewer than 15 days, you don’t report any of the rental income but also don’t deduct any expenses as rental.

4. Have a second “home base”.

Let’s forget the financial advantages for a second and focus on the warm and fuzzy stuff. The opportunity to build even more memories and have roots in another community shouldn’t be overlooked. This home can be a special place to host loved ones, create new traditions, or give you a peaceful haven when you want to get away. Your children will benefit from new experiences and friends, too—and as they age, your vacation home can serve as an heirloom and be passed down to future generations.

5. Prep for retirement.

Making a vacation home purchase with the intention of selling your current house and retiring in it can be a huge money saver for you. How? You’ll be reducing your mortgage debt before it even becomes your primary residence. And once you retire, the profit from your sold home can go toward the current mortgage balance of your vacation home.

This will also make your transition easier, given that you’re already familiar with the location, community, and most of all, the home. Plus, haven’t you heard? When it comes to retiring in America, the times they are a-changin’.

6. Simplify your getaways.

Whether your house is near the beach, on a lake, or in the country, there’s a good chance this property will become your family’s go-to vacation for any season. And why not? You’ll pocket what you would have spent for accommodations elsewhere. Plus, have we mentioned it’s all yours? You decide how long you want your visits to be, who will join, and what belongings you want to keep there.

Now, would this be the sole reason to make a vacation home purchase? Absolutely not, but it’s certainly a perk of owning one.

When it comes down to it, owning a second home is not for everyone. From your rationale and financial well-being to the local market and trends, there’s plenty to consider before making a decision.

But if having the keys to your own vacation home is something you’re committed to, then you might want to check out Your Cheat Sheet to Buying a Home When It’s Been a While.

Source: blog.ditech.com ~ By:  ~ Image: pixabay.com

How to Buy a Vacation Home in 5 Steps

Turn your getaway daydreams into reality — this guide will walk you through it, step by step.

Dream of owning a vacation home but find the idea of buying one too intimidating? It’s actually easier than you may think.

Here’s a guide to help you analyze your options.

1. Match housing choices to your lifestyle

Many people assume they must own a primary residence before owning a vacation home, but that’s not necessarily true. What’s really important is matching your housing choices to your lifestyle.

You may live in a city and want lots of space that you can’t afford there. You could rent a modest condo in the city and buy a large vacation home outside the metro area.

Or you may live in a large country house and want to enjoy city life as much as you can. In that case, you could own your country home and also buy a vacation condo in the city.

Either way, the financing and tax implications are almost the same.

2. Decide how you’ll use it

From a financing and tax standpoint, you need to consider how you intend to own and use your property. You have three options:

  • Primary residence. You can buy for as little as 3 percent down (if your loan doesn’t exceed $417,000), and you get significant homeowner tax benefits.
  • Second home. You can use your second home anytime you want, but lenders won’t let you rent the home. Buy for as little as 20 percent down, and qualify for the loan using your full primary residence cost plus your full second home cost. Mortgage rates and tax benefits are the same as primary residences.
  • Investment property. You can rent the home and use it when it’s not rented. Rates are .25 percent to .375 percent higher than second home rates, and your down payment usually starts at 30 percent. You qualify for the loan using your full primary residence cost plus your full investment home cost, but you can use rental income to help qualify. Tax treatment is less beneficial, but the extra income can help with affordability.

3. Understand the total cost of owning it

You can determine what you can afford in seconds. Then you’ll find a lender to formally analyze the cash available for down payment, closing costs and reserves. You’ll also calculate the total monthly cost on your existing home (whether you rent or own), plus the total monthly cost on the vacation home.

You also need to plan for personal budget items that lenders don’t use in their qualifying calculations:

  • Gas, electric, cable TV and internet
  • Furniture and housewares
  • Travel costs to your vacation home
  • Total cost of property maintenance items, like cleaning, landscaping and pool/spa upkeep

4. Review monthly and transactional cost line items

Suppose you live in San Francisco and want to purchase a home in the wine country of Sonoma County, CA, for $600,000. Here’s how much it would cost as a primary residence, second home and investment property.

Estimated monthly costs
Primary or second home Investment property
Mortgage payment $2,223 (30-year fixed mortgage at 3.75%) $2,035 (30-year fixed mortgage at 4.125%)
Insurance $100 $100
Property tax $600 $600
TOTAL ESTIMATED MONTHLY COSTS $2,923 $2,735
Estimated cash to close
Primary or second home Investment property
Down payment $120,000 (20%) $180,000 (30%)
Lender fees $2,500 $2,500
Title/escrow/inspection fees $3,500 $3,500
TOTAL ESTIMATED CASH TO CLOSE $126,000 $186,000

5. Make an offer using a local real estate agent and lender

Many vacation properties are in specialized local markets, so it’s best to find local real estate agents and lenders.

Your real estate agent will clarify local transaction fees, taxes and commissions, as well as advise on local zoning and property rental rules. For example, the town of Sonoma doesn’t allow short-term rentals for vacation homes, but other towns in Sonoma County do.

In destination areas, real estate agent commissions can be higher and can also be seller- or buyer-paid, depending on the area. Only a local expert can advise properly. And, of course, they will structure your offer for you and negotiate on all facets of the deal that are a priority to you.

Likewise, local lenders will be comfortable with appraisals and lending in rural areas. Appraisals are more difficult in less populated areas because comparable sales can be old and hard to find.

If you follow these steps, your closing will be a snap, and you’ll be relaxing in your vacation home before you know it.

Source: zillow.com ~ By: JULIAN HEBRON ~ Image: pixabay.com

Mortgage protection insurance: Should you buy it?

When you take out a mortgage, you can expect to be pitched mortgage protection insurance. It comes in several forms, but it typically covers your loan payments if you lose your job or become disabled, or it pays off your mortgage when you die.

Would you benefit from mortgage protection insurance? Or is it just another way for your mortgage company to siphon extra money out of your wallet each month while protecting itself upon your death?

The answer depends on your health, financial situation and what you want to happen when you die. Here are the pros and cons of mortgage protection insurance, along with tips for getting the best policy at the right price.

What is mortgage protection insurance?

Mortgage protection insurance, or MPI (sometimes called mortgage payment protection insurance), is simply a form of life insurance. The cost depends on factors such as the amount of your mortgage, your age and your health. For MPI policies that cover a mortgage in the event of disability, costs also vary depending on your occupation.

If you purchase mortgage protection insurance that pays off your mortgage when you die, the insurance company will send a check directly to your mortgage company, leaving your heirs with a home unencumbered by a mortgage.

Payments also go directly to your mortgage company if your policy pays upon disability or job loss — but only for a certain period, typically a year or two, and there may be a waiting period before payments kick in. Also note that disability or job-loss policies pay only the principal and interest on your mortgage. But you may be able to get a rider to cover other mortgage-related expenses, like homeowners association fees.

Many people confuse MPI with private mortgage insurance, or PMI.

“You’re required by law to get PMI if you put less than 20 percent down to purchase your home,” explains Christopher Ketcham, a visiting assistant professor at the University of Houston Downtown, who teaches courses about insurance. “It has nothing to do with disability, job loss or death. It pays the bank if you’re foreclosed on.”

Pluses of MPI

A major benefit of mortgage protection insurance is that it’s typically issued on a “guaranteed acceptance” basis.

“If you fill out the application, few questions will be asked to keep you from getting coverage,” says Kevin Lynch, an assistant professor of insurance at The American College in Bryn Mawr, Pennsylvania. “That’s valuable for people who are uninsurable or insurable at a high rate because of health issues.”

It’s also valuable for people who work in high-risk occupations, such as roofers, who usually can’t get disability insurance.

Consider whether you want to spend the money on a mortgage protection insurance policy after you’ve factored all of the other big costs of owning a home.

Minuses of MPI

Mortgage protection insurance is a waste of money if you own your home outright. In addition, MPI is a declining-benefit policy, which means that even though you pay a set premium for the life of your mortgage, the payoff amount decreases as you pay down your home loan.

Having a policy that wipes out your mortgage if you die may not be best for your family. “When my father passed away very young, my mother’s home was paid off by a lump-sum payment to the mortgage company,” Lynch says. “Her mortgage payment was something like $112 a month. It would have been more beneficial for her to receive the lump sum and earn the 18 percent interest banks were paying in the 1980s while continuing to make the mortgage payment.”

Some financial planners say purchasing MPI is like buying tires, when what you really need is a car.

“Focusing on insuring for the mortgage is relatively myopic,” says Vernon Holleman III, principal at BCG Holleman, a financial planning company in Chevy Chase, Maryland. “Whether to pay off the mortgage upon a breadwinner’s death is a question you can’t answer unless you’re taking a comprehensive look at the family’s finances.”

Choosing and saving on MPI

If you have health or job risks that make life or disability insurance unavailable or too expensive, mortgage protection insurance is probably a smart option. But don’t sign up through your mortgage company without shopping around.

“Ask about the price and features of each policy and whether it can be converted into whole life insurance,” says Ketcham. “Also investigate the insurer’s financial condition through A.M. Best Co., which rates insurers.”

If you’re considering MPI payable upon your death, you might buy a level life insurance instead. Your policy wouldn’t decline in value and would cover not only your mortgage but also your family’s living and educational expenses in the absence of your income.

“You’re far better off using a level product because most insurance carriers allow a later reduction in the policy’s face value,” Holleman says. “If at, say, year seven in your policy, you decide your need isn’t $1 million but only $800,000, you can reduce the face amount and save through the reduced premium. You’re better off controlling the benefit than having it automatically reduced.”

Source: bankrate.com ~ By: G.M. FILISKO

Do You Need A Home Warranty?

When you purchase a home, even a home that isn’t new, there is a very good chance that you will be offered a home warranty. The seller may offer to purchase one on your behalf to provide peace of mind that any component of the home that fails can be fixed affordably. If not, you will likely receive numerous mail solicitations to purchase a home warranty once the sale closes. A home warranty may sound like a great form of financial protection against expensive, unforeseen home repairs. But is it really the safety net homeowners expect?

What Is a Home Warranty?

A home warranty is not the same thing as homeowners insurance, nor is it a replacement for homeowners insurance. Homeowners insurance covers major perils such as fires, hail, property crimes and certain types of water damage that could affect the entire structure and/or the homeowner’s personal possessions. A home warranty does not cover these perils. Rather, it covers specific components of the home.

A home warranty is a contract between a homeowner and a home warranty company that provides for discounted repair and replacement service on a home’s major components, such as the furnace, air conditioning, plumbing and electrical system. A home warranty may also cover major appliances such as washers and dryers, refrigerators and swimming pools. Most plans have a basic component that provides all homeowners who purchase a policy with certain coverages. Homeowners can also purchase one or more optional components that provide additional coverage at additional cost.

Home warranty companies have agreements with approved service providers. When something that is covered by a home warranty breaks down, the homeowner calls the home warranty company, and the home warranty company sends one of its service providers to examine the problem. If the provider determines that the needed repair or replacement is covered by the warranty, he completes the work. The homeowner only pays a small service fee, plus the money she has already spent to purchase the warranty. (For for information, check 6 Tips To Sell Your Home Faster.

What Does It Cost?

A home warranty costs a few hundred dollars a year, paid up front (or in installments, if the warranty company offers a payment plan). The plan’s cost varies depending on the property type e.g., single-family detached, condo, townhome, duplex, and whether the homeowner purchases a basic or extended plan. The cost usually does not vary with the property’s age, unless the home is brand new, which increases the cost of coverage. The home’s square footage also does not affect the price in most cases, unless the property is more than 5,000 square feet. Separate structures, such as guest houses, usually are not covered by the basic policy but can be covered for an additional fee. However, garages should be covered by the basic policy.

In addition to an annual premium, home warranties charge a service call fee (also called a trade call fee) of around $75-$125 every time the warranty holder requests that a service provider come out to the house to examine a problem. If the problem requires more than one type of contractor to visit (e.g., a plumber and an electrician), the homeowner may have to pay the service fee for each contractor.

Having a home warranty doesn’t mean the homeowner will never have to spend a penny on home repairs. Some problems won’t be covered by the warranty, whether because the homeowner didn’t purchase coverage for that item or because the warranty company doesn’t offer coverage for that item. Also, home warranties usually don’t cover components that haven’t been properly maintained. Furthermore, if the warranty company denies a claim, the homeowner will still have to pay the service fee and will also be responsible for repair costs.

The Benefits of a Home Warranty

Like all warranties, a home warranty is supposed to protect against expensive, unforeseen repair bills and provide peace of mind. For a homeowner who doesn’t have an emergency fund or who wants to protect their emergency fund, a home warranty can act as a buffer. Home warranties also make sense for people who aren’t handy or who don’t want to worry about tracking down a contractor when they have a problem. Warranties can also make sense for people with expensive taste in appliances.

The subject of home warranties often comes up during the sale and purchase of a home. A home warranty can provide reassurance to a homebuyer who has limited information about how well the home’s components have been maintained (or how well the home has been built, in the case of new construction). A warranty can also be helpful for someone who has just depleted their savings to buy a home and wants to avoid any additional major expenses. For home sellers, offering the buyer a paid-up, one-year home warranty with the home purchase may provide a measure of protection against buyer complaints about any home defects that arise after the sale closes. However, providing a home warranty does not exempt the seller from her legal requirement to disclose any known problems with the home. (To learn more about protecting yourself, read Consumer Protection Laws You Need To Know.)

Home Warranties Have Drawbacks

If home warranties were perfect, everyone would have one. But they don’t. Why is that?

One major problem with a home warranty is that it will not cover items that have not been properly maintained. What is considered proper maintenance can be a significant gray area and is the source of many disagreements between home warranty companies and warranty holders. In a worst-case scenario, unscrupulous warranty companies may use the improper maintenance clause as an excuse to deny valid claims. In another scenario, the homeowner and the contractor who makes the house call may simply disagree over what constitutes proper maintenance.

Another common problem is that when a homeowner purchases a used home, it might come with a 10-year-old furnace that the previous owner did not maintain. At that point, no matter how well the new homeowner tries to care for the furnace going forward, he can’t correct the previous lack of maintenance. In addition, warranties have numerous exclusions, as well as dollar limits per repair and per year.

Home warranties aren’t expensive compared to the cost of repairing or replacing most of a home’s important components, and this fact is one of a warranty’s major selling points. However, there may be many years when nothing at all breaks down or wears out in the home. In these years, the homeowner gets nothing (except, perhaps, peace of mind) in exchange for his premium. That money could be put into an emergency fund for making the same repairs and replacements that the home warranty would cover. Also, if the homeowner tries to use the warranty and the claim is denied, he will probably feel like the money spent on the premium and the service call fee was wasted.

Home warranties do eliminate the need to find a contractor when something breaks. However, they also eliminate the freedom to choose your own independent contractor if you want the warranty to pay for the repair or replacement. If you don’t like the contractor or the work they do, you may be stuck with them. Furthermore, repairs may be more complicated with a third party (the home warranty company) involved in the process than a direct negotiation between a homeowner and a contractor would be. Also, the homeowner may have little or no say in the model or brand of a replacement component – though the warranty contract should provide for a similar- or equivalent-quality replacement.

The Bottom Line

A home warranty is not a perfect solution to the risks homeowners face. Before purchasing one, homeowners should read the fine print in the home warranty contract and carefully consider whether the warranty is likely to pay off. Home sellers who want to offer a warranty to buyers and homeowners/buyers who would feel more comfortable having a home warranty should also do careful research to find a reputable home warranty company that will actually pay for legitimate repairs when they are needed. (To help you with your home purchase, check out Top Tips For First-Time Home Buyers.)

Source: investopedia.com ~ By:  Amy Fontinelle

What A Real Estate Agent Really Does, And How To Find The Right One For You

Ask the average Joe what a real estate agent does, and you’ll hear things like hosting open houses and showings, staging and advertising properties and having a “guy” for everything. These are all correct answers and helpful responsibilities, but it’s like saying you go to a hospital because the reclining beds are comfortable. You go to the hospital to get well; you just end up with a comfy (or not-so-comfy) bed while you’re there.

Picture this: You’re sitting on the couch at home watching the game when the doorbell rings. You answer the door, a man confirms your name, hands you an envelope and walks away. You open the envelope and find a court complaint: Someone is suing you for $100,000. What do you do?

Do you research it online and take a go at it yourself? That’s certainly your right; after all, attorneys are expensive. You did just put the roof on the garage and install that new dishwasher all by yourself, and all it took was a few online videos to show you the ropes. But wait, didn’t it take three months to finish the roof? Oh, and the dishwasher sprung a leak and ended up damaging other parts of the house.

I’ve certainly tried my own DIY projects, and some have turned out great — others, not so much. Many times, I’ve had to hire a skilled professional to finish the project or redo what I did wrong. In the cases where I did it wrong, I usually didn’t realize it until it was too late — which cost me more money than if I had hired somebody to do it right in the first place.

The risk in the lawsuit example is $100,000. Sure, it’s possible that you could prevail if you do it yourself and save not only the $100,000 but the cost of attorney’s fees too. But what happens if your luck runs out or do it wrong? It’s going to cost a lot more than it did to fix the damage your dishwasher project caused.

The great news is that in most cases, there are professionals who specialize in doing things you don’t. You might even say they make their jobs look easy. What you might do once or twice in your lifetime, they might do once or twice a day. All of the challenges you run into in your DIY projects — for them? Child’s play.

An experienced real estate agent participates in more transactions in one month than most people do in their entire lifetimes. They know the sale process inside and out, which allows them to anticipate hurdles, identify opportunities and set realistic expectations before they are presented with them. This applies to all phases of a transaction: marketing, drafting offers, offer negotiations, inspection negotiations, the closing (escrow) process, closing and post-closing concerns.

Real estate agents know what homebuyers expect in the current market, which helps them prepare their home seller clients in terms of marketing, staging, financing, typical concessions, etc. With some smart strategizing upfront, a seller could often be positioned to net more money on their sale. Conversely, knowing what home sellers typically want in the current market, and the feelings that typically drive their decisions, an agent can strategize with a homebuyer to get them better terms on their purchase.

Good agents understand and have good working relationships with other real estate professionals in their markets. This allows them to give insight to, and strategize with, their clients about things that the opposing agent may find valuable and how they might perceive a specific request or proposal.

Professional real estate agents, like other professionals, are stewards to all aspects of the industry. They participate and offer guidance to governments planning future growth, as well as lobby for homeowners and property rights. This knowledge and advocacy directly benefits their clients, from knowing governmental decision makers to better understanding the laws affecting property rights.

While I could list a hundred “things” that a professional real estate agent does, the knowledge, experience and strategy are where the biggest values are derived.

As you seek out your real estate professional, consider the following:

  • Do ask a trusted friend or family member for a referral.
  • Do online research: Review the agent’s website for information about their experience and qualifications, review online testimonials, Google their name and explore the results page.
  • Do ask them questions about some of the topics in this article, brokerage support, and any tech tools that might be helpful to you.
  • Don’t search by price alone. The cheapest option isn’t always the best.
  • Don’t hire an agent out of a sense of obligation. Choose your agent based on their qualifications.

When you hire any professional, you’re trying to accomplish something in the most efficient and productive way and minimize risk, all with the least impact on your time and pocketbook. In short, you want to win. A professional real estate agent will help you do just that, if you choose wisely.

Source: forbes.com ~ By: Justin Fox ~ Image: 21online Asset Library

The Inside Workings of Credit Scores

Consumers are encouraged to check their credit reports once per year. The primary reason for doing so is to make sure there aren’t any mistakes. Unfortunately, credit reports are prone to contain mistakes. It’s not really the fault of the three main credit repositories, Equifax, Experian and TransUnion because all three are just a database. Whatever is reported to them is what you see. Further, someone with a similar name can show up on someone else’s report. If you’re not the only Bob Smith in town, this is certainly possible.

Someone else’s poor credit might very well be showing up on your report which can directly damage your credit scores. When you find an error work with your loan officer to get it fixed. Your loan officer has working relationships with credit agencies and can help get mistakes fixed and provide a method to get your scores back to where they should be.

But have you ever wondered how these scores are calculated in the first place? They follow an algorithm first developed by The FICO Company years ago. For a while, credit scores weren’t the primary force behind a credit decision but over time the impact of a credit score became more and more important. Most every loan program available today has a minimum credit score and if a score falls below the minimum, there’s some additional work that needs to be done to get those scores back on track.

There are five characteristics of your credit history that make up your three-digit score:  your payment history, account balances, how long you’ve had credit, the types of credit used and how often you’ve applied for new credit over the past couple of years.

Credit scores range from 300 to 850. Let’s say a borrower has a credit score of 600 but needs a 620 to qualify for a particular loan program. Credit scores will improve much more quickly by paying attention to the two categories that have the greatest immediate impact on a score- payment history and account balances.

Payment history accounts for 35 percent of the total score and account balances 30 percent. When someone makes a payment more than 30 days past the due date, scores will fall. An occasional “late pay” won’t really do much damage to a score but continued payments made more than 30, 60 or 90 days past the due date definitely will. By stopping the late payments scores will begin to recover.

Account balances compares outstanding loan balances with credit lines. If a credit card has a $10,000 credit line and there is a $3,300 balance, scores will actually improve. The ideal balance-to-limit is about one-third of the credit line. As the balance grows and approaches the limit, scores will begin to fall and fall even more should the account balance exceed the limit. This category contributes 30 percent to the total score.

The remaining three have relatively little impact. How long someone has used credit accounts for 15 percent of the score but there’s really nothing anyone can do to improve this area other than to wait. Types of credit and credit inquiries both make up 10 percent of the score. By concentrating on payment history and account balances, scores will improve significantly over the next few months.

Source: realtytimes.com ~ By: David Reed ~ Image: pixabay.com