Category Archives: Mortgage

9 Steps to Take Now to Buy a Home Next Year

9 steps to buying a home in 2018You and your family are thinking of buying a new home – or your next one – in 2018. There are things you can do now to prepare yourself. Here are seven steps to get you ready for this exciting move!

  1. Check your credit score. Target a credit score of 740 or higher to get the best mortgage rate. See mistakes on your credit report? Because this process can sometimes take months, you’ll want to start doing that now.
  2. Follow the real estate market and interest rates. What is the market doing in your area? Is inventory low? What about interest rates – are they inching up? You’ll want to lock in the lowest interest rate you can to lower your monthly mortgage payments and long-term financial outlay.
  3. Save, save, save. We can’t stress this enough. Make sure you have enough to cover a down payment, closing costs, moving expenses, etc. Read our article on closing costs to get a better idea of what those might run.
  4. Don’t use your credit cards or rack up more debt. Obviously, you don’t want to open any new credit cards before you apply for a mortgage, but it is just as important not to use the existing credit you already have. Banks will look at your debt to income ratio, so you want that debt figure to be as low as possible.
  5. Don’t overspend during the holidays. It can be tempting to spoil your loved ones during the holidays, but this could make it harder to get a mortgage – particularly if you use your credit cards for holiday shopping. Instead, get creative. Offer services (e.g., dog walking, babysitting, home organizing, handyman skills) or experiences (gourmet meals, outings, etc.)  instead of giving gifts.
  6. Meet with two to three potential Realtors. We say “Realtor” instead of “real estate agent” because “Realtors” have different and a code of ethics to abide by. Real estate agents are held to a lesser standard. Talk to friends, family and co-workers to get recommendations, and do your research before scheduling no obligation appointments to interview. In addition, check their online reviews on Facebook, Zillow, LinkedIn and other sites to see what they’re clients are saying about them.
  7. Shop for a lender. Just like you would shop for a Realtor, explore your mortgage lending options. Check with your bank, local credit unions and mortgage brokers to see where you can find the best deal and the best long-term relationship.
  8. Gather your documents. When you meet with a mortgage lender, you’ll need to provide tax returns and W-2s for the last two years, pay stubs for the last few months, proof of your current living expenses, a list of debts and other expenses, etc.
  9. Get pre-approved for a mortgage. Once you’ve selected a mortgage lender and have pulled together all of your documentation, it’s time to get pre-approved! This will help you determine what your interest rate will be and how much home you can afford. Read more about getting pre-approved here.

Not sure what’s next? Have questions? Call Team Marti  at 253-859-8500. We’d be happy to help you prepare to buy your next home in the New Year!

 

8 Ways to Save Money for a Down Payment on Your Dream Home

8 Ways to Save for a Down Payment on Your Dream HomeImagine never having to pay rent again. Instead of paying a landlord every month, your monthly housing budget could go toward owning your dream home. Unless you’ve got rich relatives or a trust fund though, coming up with a down payment of 3 percent to 20 percent can seem a bit overwhelming. It doesn’t have to be. Here are 8 ways you can start saving for a down payment today!

  1. Reduce your current housing expenses. Your monthly rent is your most costly expense each month. Cut that bill by getting a roommate, moving to a smaller or less expensive place, or moving in with a relative for the short-term, and save the difference in a dedicated account for your down payment.
  2. Get a part-time job or a freelance gig. Increase your income by getting a part-time job or doing freelance work on the side. You could get a traditional part-time job in fast food or retail, but think beyond that to earn some extra cash. Are you good with technology, pets, words or art? Become a consultant, dog walker, blog writer or Etsy artist.
  3. Cut daily living expenses. Do you get a $7 latte each morning? Are you paying for a gym membership you rarely use? Do you spend a lot on take-out? Those costs add up. If you cut non-essential expenses, you could yield a few hundred bucks each month.
  4. Shop for your new insurance. Car insurance can be pricey, particularly if you are young. If you work with an insurance agent, ask if there are discounts available, or if they can get you a better price. For example, you can usually get a discount by getting your car insurance and renter’s insurance from the same carrier. You can also shop online for different types of insurance at an online site like Esurance.com. Caution: Be sure you are comparing coverages, not just price.
  5. Set up automatic savings deductions. To help you discipline yourself, set up an automatic deduction into your savings account with each paycheck. This is an easy way to save your money before you get a chance to spend it.
  6. Get rid of unwanted stuff. Whether you’ve got college textbooks you don’t need or slightly outdated electronics you’ve already replaced, there is a market for your unwanted stuff. There are lots of online marketplaces – Facebook, OfferUp, Craigslist, etc. – where you can sell your items online. Just be careful and always transact business in a safe, public place.
  7. Save your tax refund and bonus checks. If you get a refund at tax time, bonus checks at work or a birthday check from your parents, put that money in the bank!
  8. Pay down debt. High interest rates on credit cards or paying interest on multiple student loans can eat into your budget. Pay down your credit cards with the highest interest rates first, and consider consolidating your student loans to reduce the total interest paid.

With good planning, budgeting and discipline, you’ll be ready to start home shopping before you know it.

 

3 Reasons to Buy a Home This Fall

3 Reasons to Buy a Home This FallBuying a home can be a difficult decision, particularly in a hot real estate market, but research shows that buying a home is a great investment — and is more financially advantageous than renting. Here are three reasons to consider buying a home this fall:

  1. Prices will keep going up. According to CoreLogic’s latest Home Price Index, homes have appreciated by 6.7 percent in the last 12 months. They are expected to increase another 5 percent over the next year, so the home you are looking at buying today will be 5 percent more this time next year.
  2. Mortgage rates will also go up. Mortgage and banking experts project that interest rates for 30-year mortgages will go up, which means your monthly mortgage payment will also go up. Buy now and lock in an interest around 4 percent.
  3. You’re paying someone’s mortgage; it might as well be yours. Even if you are renting, you are paying your landlord’s mortgage. Why not take that same amount of money to buy your own home.

If you aren’t sure if this is the right time for YOU to buy, let us know. We’d be happy to meet with you to discuss your circumstances.

Team Marti’s Top 10 Tips for First-Time Homebuyers

Team Marti's Top 10 Tips for First-Time HomebuyersA seller’s market can be a tough place for first-time homebuyers to purchase their first home, but don’t despair. It is certainly doable. Educate yourself on what’s needed to succeed in a seller’s market and work with an experienced Realtor who will give you world-class, 24/7 service. Here are our top 10 tips for first-time homebuyers. Good luck!

  1. Get pre-approved for a mortgage. We recommend doing this before you begin shopping a home, so you know how much home you can afford and what type of credit you have, which will ultimately impact your loan terms, including the interest rates.
  2. Begin your home search online to get an idea of what’s available. Check out Realtor.com, Zillow, Northwest MLS or your favorite Realtor’s website.
  3. Work with a Realtor early on in your process. A talented Realtor can help guide you through what can be a very complex process, and offer advice specific to your situation. Get recommendations from friends and colleagues, and be sure to check out the referrals online before you meet with them. Read their online reviews and testimonials and their LinkedIn profile to see how long they’ve been selling real estate. You might also interview a couple of different agents to see who might be a good fit for you.
  4. Know the difference between your wants and needs in a first home. List all the features you want in a home and categorize them as ‘must haves,’ ‘should haves,’ and ‘absolute wish list.’ Learn more here.
  5. Check out the neighborhood and schools. The features of your home will be very important to you, but the neighborhood where you want to buy should also play a factor. Are there similar homes in the neighborhood? Are they well maintained? What amenities are nearby (e.g., parks, restaurants, shopping)? If you have a school-age child, or will be starting a family, what schools will your child attend? Visit the neighborhood at different times of day, if possible.
  6. Attend open houses. This is a great way to tour homes on the market to see what’s available. Keep in mind though that in a HOT real estate market like this one, a new listing may receive multiple offers the day of the open house. If you fall in love with a house you are touring, you’ll want to act on it right away.
  7. Write a winning offer. In a seller’s market, you need to bring your best offer to the table with as few contingencies as possible. Work with your Realtor to offer a fair but attractive price.
  8. Understand that your offer might get rejected. Competition is tough these days, so you may not get the first home you put an offer in on. Be patient. It will happen.
  9. Be prepared to cover closing costs. In a seller’s market, the seller tends to have control, so prepare to cover your own closing costs which will be on top of your down payment. Here are some additional guidelines.
  10. Don’t expect any home to be perfect. Sure, you have your heart set on a dream home with all of the desired features, but that is unrealistic. Realtor.com suggests you focus on three main factors: price, size and location. If you get all three, great, but getting two is more likely.

Good luck, and let us know if Team Marti can help!

[Sources: Inman, Realtor.com and CNN Money]

Real Estate Lingo for Homebuyers: Part 2

Continued from May 15, 2017

Freddie Mac Real Estate GlossaryBuying a home can be a daunting and complex process, but it doesn’t have to be. With the right Realtor, you can feel confident that you are being well represented and that she has your back. It can also help to understand real estate lingo. Here is part two of a Freddie Mac real estate glossary you can use to educate yourself on the home buying process.

Margin: A percentage added to the index for an ARM to establish the interest rate on each adjustment date.

Market Value: The current value of your home based on what purchaser would pay. An appraisal is sometimes used to determine market value.

Mortgage: A loan using your home as collateral. In some states the term mortgage is also used to describe the document you sign [to grant the lender a lien on your home]. It may also be used to indicate the amount of money you borrow, with interest, to purchase your house. The amount of your mortgage is usually the purchase price of the home minus your down payment.

Mortgage Broker: An independent finance professional who specializes in bringing together borrowers and lenders to complete real estate mortgages.

Mortgage Insurance (MI or PMI): Insurance needed for mortgages with low down payments (usually less than 20% of the price of the home).

Mortgage Rate: The cost or the interest rate you pay to borrow the money to buy your house.

Net Monthly Income: Your take-home pay after taxes. It is the amount of money that you actually receive in your paycheck.

Offer: A formal bid from the homebuyer to the home seller to purchase a home.

Points: 1% of the amount of the mortgage loan. For example, if a loan is made for $50,000, one point equals $500.

Pre-Approval Letter: A letter from a mortgage lender indicating that you qualify for a mortgage of a specific amount. It also shows a home seller that you’re a serious buyer.

Pre-Qualification Letter: A letter from a mortgage lender that states that you’re pre-qualified to buy a home, but does not commit the lender to a particular mortgage amount.

Principal: The amount of money borrowed to buy your house or the amount of the loan that has not yet been repaid to the lender. This does not include the interest you will pay to borrow that money. The principal balance (sometimes called the outstanding or unpaid principal balance) is the amount owed on the loan minus the amount you’ve repaid.

Real Estate Professional: An individual who provides services in buying and selling homes. The real estate professional is paid a percentage of the home sale price by the seller. Unless you’ve specifically contracted with a buyer’s agent, the real estate professional represents the interest of the seller. Real estate professionals may be able to refer you to local lenders or mortgage brokers, but are generally not involved in the lending process. [Note: A real estate agent and a Realtor are not the same thing. Click here to learn the difference.]

Refinance: Getting a new mortgage with all or some portion of the proceeds used to pay off the original mortgage.

Title: The right to, and the ownership of, property. A title or deed is sometimes used as proof of ownership of land.

Title Insurance: Insurance that protects lenders and homeowners against legal problems with the title.

Truth-In-Lending Act (TILA): Federal law that requires disclosure of a truth-in-lending statement for consumer loans. The statement includes a summary of the total cost of credit, such as the APR and other specifics of the loan.

Underwriting: The process a lender uses to determine loan approval. It involves evaluating the property and the borrower’s credit and ability to pay the mortgage.

Click here to read Real Estate Lingo for Homebuyers, Part 1.

[Source: Freddie Mac]

 

The True Cost of Waiting to Buy a Home

Are you thinking about buying a home this year, but aren’t certain because it is a seller’s market? Are you waiting because home inventory is low and you are waiting for the perfect house? Here is one good reason to reconsider that plan — interest rates WILL go up — which means you could pay tens of thousands of dollars more for the same priced home next year. Check this out!

The True Cost of Waiting to Buy a Home
Not sure what to do? Give Team Marti a call at 253-246-8938 today. We’d be happy to evaluate your situation to help you decide what is right for you!

 

Honest Advice for First-Time Homebuyers in a Sellers’ Market

Honest Advice for First-Time Homebuyers in a Sellers' Market

 

With home inventory so low, homes are selling quickly and above the asking price, in many cases. Here is some sound advice to help first-time homebuyers purchase a home in this sellers’ market:

  1. Get pre-approved from a mortgage lender. Whether you go through a traditional bank or a mortgage broker, first-time homebuyers should get pre-approved before shopping for a home. This will show sellers that their lenders have run a credit check, verified income and have tentatively agreed to lend the buyers money to buy a home. Pre-approval also typically means that the homebuyers know how much home they can afford. Learn more about pre-qualification and pre-approval here.
  2. Buy a home with a conventional mortgage. This will make homebuyers more attractive to sellers than someone who is getting financed through a VA or FHA loan, for example, because those home loan programs sometimes have greater restrictions.
  3. Put down a large down payment. While low down payment programs like VA and FHA home loans exist so buyers can buy a home with less money down, you will be more attractive to a mortgage lender and home seller with a larger down payment. This will also save you in mortgage interest over the life of your mortgage loan.
  4. Come to the table prepared to cover closing costs. When sellers have multiple buyers to choose from, they are more likely to select a homebuyer that is not going to ask the seller to share in closing costs.
  5. Require fewer contingencies when making an offer. When a seller has to wait for you to sell your home, or when other contingencies exist, a homebuyer becomes less attractive. Sellers want to sell their homes for as much money as possible, and as quickly as is possible. When contingencies exist, they could potentially hold up the selling process.
  6. Make an offer above asking price. Homes on the market now are selling within days. To buy one of those homes, homebuyers often have to offer more than the asking price to get their offer seriously considered. Of course, how much a buyer can offer is going to be based on their budget and down payment, but in this market, they should be prepared to go above the asking price.

This market is particularly challenging for first-time homebuyers. If you are in the market to buy a home now, consult with an experienced Realtor – like me – who can help you improve your chances of finding a home and getting your offer accepted. We can help you understand your options and improve your chances of having your offer accepted.

 

 

5 Tips for Getting a Mortgage in 2017

Special Home Financing Programs: FHA, VA and USDA LoansUnless you’ve got a trust fund or buckets of cash lying around, if you want to buy a home this year, you’ll need a mortgage. Here are 5 tips to help you find a mortgage that meets your needs:

  1. Find out how much of a down payment you need to save. Down payments vary from 0 percent to 20 percent down, and everywhere in between. Talk to your mortgage lender – or an experienced Realtor – to find out how much you need to save.
  2. Check your credit score. To determine your credit worthiness, you’ll want to review your credit score with a mortgage lender. If you are going for an FHA loan, the average qualifying credit score in 2016 was about 686. The average credit score for a conventional homebuyer was about 753, according to Bankrate.com.
  3. Get pre-approved. While pre-qualification does not guarantee you will get a mortgage, getting pre-approved does. When you get pre-approved by a mortgage lender, it means that lender has checked your credit, verified your income and assets and agreed to lend you money to buy a home, assuming everything else lines up (value of the home, etc.). Learn more about pre-approval here.
  4. The 4 Cs. When seeking pre-approval, a mortgage lender will look at the 4 Cs – Capacity (your current and future ability to make mortgage payments), Capital or Cash Reserves – how much money, savings and investments you have, Collateral – the home you want to purchase, and Credit – your credit history. Learn more about the 4 Cs here.
  5. Decide what type of mortgage is right for you. Before you apply for a mortgage loan, you’ll want to know the different types available to you. For example, if you are a veteran, you might be able to get a VA loan. If you are a first-time homebuyer, an FHA loan might be right for you. Talk to your Realtor and your mortgage lender to see what type of mortgage best fits your situation.

What Homeowners Can and Can’t Deduct on Their Federal Tax Return

What Homeowners Can and Cannot Deduct on Their Federal TaxesOne of the many advantages to being a homeowner is the ability to deduct certain home-related expenses from your federal taxes. Here are some tax deductions and credits you’ll want to be sure to take advantage of when you file your 2016 federal tax return.

  1. Mortgage interest deduction. You can deduct mortgage interest paid annually. For singles, you can deduct interest on a mortgage up to $500,000. Joint filers can deduct interest paid on a mortgage up to $1 million.
  2. Deduction for interest paid on a home improvement loan. If you take out a home improvement loan, you can deduct the interest paid on that loan. There is no limit. However, there is a caveat – this deduction only applies to capital improvements made to your home, not to costly home repairs.
  3. Private mortgage interest (PMI) deduction. If you put less than 20 percent down, your lender likely required that you carry private mortgage insurance. Depending on your income, you may be able to deduct the premiums paid for PMI. Check with your accountant or tax preparer to see what the current year’s limits are and where you fall on the spectrum.
  4. Deduction for mortgage points. When you purchased your home, you may have paid mortgage points – or up-front fees – to get a lower interest rate. A point is typically equal to 1% of the total loan amount, so points can be costly. For example, a point on a $300,000 mortgage would cost $3,000. You are eligible for the deduction for the tax year in which you paid the points. If you bought a home in 2016 and paid points to lower your rate, you can deduct that amount on your 2016 federal tax return. If you refinanced a home or bought a second home, you may have to spread that deduction out over the life of the loan.
  5. Property tax deduction. Homeowners can deduct the amount of their property taxes on their federal income tax return. Your tax preparer can help you figure out the amount of the deduction which is not always straightforward because of how and when property taxes are billed and paid.
  6. Tax credits for residential and renewable energy efficiency improvements. If you made certain energy efficiency improvements (e.g., biomass stoves, air source heat pumps, insulation, etc.) to your primary residence in 2016, you may be eligible for a tax credit. Visit EnergyStar.gov for details.
  7. Home office deduction. Homeowners who have a separate home office that they use exclusively for business may qualify for a home office deduction. Visit IRS.gov for rules, restrictions and documentation required to qualify.

Here is a partial list of items you cannot deduct, courtesy of the IRS, publication 530:

  • Homeowner’s insurance premiums
  • The principal portion of your mortgage payment
  • Depreciation
  • Cost of utilities (e.g., gas, water, electricity)
  • Forfeited deposits, down payments or earnest money

We are not tax experts, however, so please talk with your accountant or tax preparer to confirm the deductions you are eligible for and what documentation you’ll need to provide to back up those deductions.

Sources: The Motley Fool, https://www.fool.com/retirement/2017/01/04/6-tax-deductions-homeowners-wont-want-to-miss.aspx

Energy Star, https://www.energystar.gov/about/2016_federal_tax_credits

IRS, https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction

IRS, https://www.irs.gov/publications/p530/ar02.html

Homebuyers, Have You Saved Enough for Closing Costs?

Many homebuyers and home sellers believe they need at least a 20% down payment in order to buy a home or to move on to their next home. There are many loan programs where you can put down as little as 3% – or even 0% with a VA loan.

If you have saved up your down payment and are ready to start your home search, one other piece of the puzzle is to make sure that you’ve saved enough for your closing costs which include everything from homeowner’s insurance and title insurance to appraisal and legal fees.

Freddie Mac defines closing costs as:

“Closing costs, also called settlement fees, will need to be paid when you obtain a mortgage.  These are fees charged by people representing your purchase, including your lender, real estate agent, and other third parties involved in the transaction. Closing costs are typically between 2 and 5% of your purchase price.”

Many first-time homebuyers say they wished that someone had told them closing costs could be so high. If you think about it, with a low down payment program, your closing costs could equal the amount that you saved for your down payment.

Here is a list of just some of the fees/costs that may be included in your closing costs, depending on where the home you wish to purchase is located:

  • Government recording costs
  • Appraisal fees
  • Credit report fees
  • Lender origination fees
  • Title services (insurance, search fees)
  • Tax service fees
  • Survey fees
  • Attorney fees
  • Underwriting fees

Is there any way to avoid paying closing costs?

Work with your lender and real estate agent to see if there are any ways to decrease or defer your closing costs. There are no-closing mortgages available, but they end up costing you more in the end with a higher interest rate, or by wrapping the closing costs into the total cost of the mortgage (meaning you’ll end up paying interest on your closing costs).

Home buyers can also negotiate with the seller over who pays these fees. Sometimes the seller will agree to assume the buyer’s closing fees in order to get the deal finalized.

Bottom Line

Speak with your lender and agent early and often to determine how much you’ll be responsible for at closing. Finding out you’ll need to come up with thousands of dollars right before closing is not a surprise anyone is ever looking forward to. Want some guidance? My team can help explain the closing costs you might have to pay on the homes you are considering.