Category Archives: Real Estate

Is it Time to Refinance?

Sometimes, life changes make for hardships in our finances. It’s no different in this economy, really. The economy is hurting a lot of people, and it can be hard to make ends meet. Hence, why there are a lot of foreclosures. Now, are there ways to prevent foreclosures? Absolutely! One of the ways is by trying to reduce your monthly payment on your home by refinancing your mortgage.

Refinancing is revisiting your mortgage and trying to make your payments per month cheaper. This is done by checking out the interest rate, the amount that is still due on your home, and the number of years left on your loan. Then, whoever is in charge of loaning you the money (loan company or other financial institution) takes those numbers, and figures out whether or not they can get you a lower interest rate based on current trends in the housing market. If so, ta da! You get a new monthly payment.

Here are five questions you should ask yourself when you’re trying to figure out whether or not you should consider refinancing your home.

  1. Can I afford what I’m currently paying? If you can, it may not be time to refinance. I know that sounds counterproductive, but when you look at the next three questions, you may discover that it’s just easier and more financially stabling to just stay where you’re at.
  2. What effect would closing costs put on my refinancing? This is where people get in a lot of trouble sometimes. They don’t realize that many financial institutions have fees and charges associated with refinancing, and then you also have to pay closing costs on the refinancing.
  3. How much is my house worth compared to what’s left on the loan? Many financial institutions will throw fees on you if your home’s current value is significantly different than the amount you had on the loan initially.
  4. Will I stay or will I go? My friends ended up moving, and if you think there’s any possibility of you doing the same within the next 5 years, refinancing may end up making your mortgage more of a liability than it already is.
  5. Is my credit stable? This is probably the most important question to ask when considering refinancing your home. Most financial institutions won’t even consider refinancing you unless you have a credit score of 640 or better.

Maybe it is your time to refinance; a lot of people are finding that that is the case in the current economy. After asking these questions, I’m going to suggest you do the one thing that I always tell you to do; do your research! Check everything out that you can. You can even look to other financial institutions to see if you can get a better deal on refinancing.

What other thoughts do you have about refinancing? Have you considered refinancing your home before? What has stopped you if you haven’t? Have you been glad that you did refinance if you have? Share some thoughts in the comments, have a great week, and we’ll see you here next week.

5 Things to Do When Renting a Place

I’m a renter. I’ve been renting for about 5 years now, and I’ve usually enjoyed it. This most recent rental has been my favorite, considering my landlord doesn’t come into my house every other week (that was 3 apartments ago that that happened) and it’s cozy and huge. I live alone, but I like having space to entertain people and enjoy their company. The place I have now has also been the best price for my money since I started renting. It’s great, and I found such an awesome place because I took my time and figured out exactly what I wanted and how I wanted it. It took me several tries to get this renting thing down pat, but I think I’ve finally got the hang of it.

There are a lot of things that some renters, especially college kids, overlook when they are considering a rental. And it is the time of year for college kids to be looking for those fall rentals if they desire them. So, here are 5 quick tips for renting an apartment or house.

1. Don’t check out an apartment alone! Whether you have a roommate or not, some apartment hunters look at stuff with rose-colored glasses. Make sure you take a buddy you trust with you, or, if you’re in a roommate situation, take your roommate. It will help you see what you’re looking at a little more clearly and make the process a little more entertaining as well.

2. Check out the rental prices in the area.  See what average prices are, there are plenty of websites to help you do this. See what’s usually included, and then see if the rentals you are looking at are a fair price based on that. Consider neighborhood, utilities included, and distance from your place of employment or college when looking at that price.

3. Read the lease carefully. I can’t emphasize this enough. Make sure you know what any lease says. What are you responsible for? What is your landlord responsible for? Keep a copy so you can check later and hold your landlord accountable if he or she don’t hold up their end of the bargain.

4. Take pictures upon moving in and out. I can’t emphasize this enough. My second apartment (same renter, different place than my first) left my roommate and I with 50 bucks each from our $700 security deposit. Why? Because we didn’t take pictures, and the counter “needed to be replaced” (it had like 5 knife marks on it). My roommate and I weren’t pleased, but there was nothing we could do because we had no proof. So please, don’t get taken advantage of like we did.

5. Get renter’s insurance. I am in the process of getting this. In case something happens, your stuff can be replaced or you can get the money to do so if you have renter’s insurance. It doesn’t protect the building (that’s your landlord’s responsibility), but it protects your stuff.

What other tips do you have for people looking for rentals? What else have you learned from renting? Leave some thoughts in the comments, have a great week, and we’ll see you back here next week.

What’s the Deal with Home Equity?

With these low interest rates, you may be considering a loan. One of your many loan options is something called a home equity loan. Is it an option for you? Should it ever be considered? Is now the best time? We’re going to look at some of those things so that you can make an educated decision.

A home’s equity is the difference between what is owed and what the house’s fair market price. For example, if your home is worth $150,000 and you owe $75,000 on your mortgage, then your home’s equity is $75,000. You can take out all or part of that in the form of a loan or line of credit.

A home equity loan is like any other loan; it provides a certain lump sum of cash all at one time, has monthly payments and accrues a set amount of interest.

The other way to utilize your home’s equity is something called a home equity line of credit, or a HELOC. This allows you to get cash advances and use it as a credit account. Minimum payments are easier to make, the interest is variable, and the payment plans are flexible, but, unlike other lines of credit, it eventually expires.

Home equity loans are sometimes called “home improvement loans.” Giving your home more value should be the primary reason you consider home equity loans.  If you want to put an addition on your home, fix it up somewhat, or do some more expensive wear-and-tear maintenance, a home equity loan is a viable option. If you are doing home improvements, make sure that you compare your home equity rates with home loan rates. If the home loan rates are better, then consider doing that instead.

It is also a good idea to use your home’s equity for other things that are considered good investments, like an education. The other thing is that, if you’re going to risk your house to buy something, it should be an investment. Don’t use it to go on vacation, to buy a car, or anything else that depreciates. Your house is where you live, be wise with what you do with part of its value; you can lose your home if you don’t make payments as you should.

Always talk to a professional before making any type of decision. You need to go through the financial institution that manages your mortgage. Find one of the investment professionals to help you figure out whether you want to have a loan or a HELOC. It usually involves an application process, just like any other loan or line of credit. Make sure that you’ve weighed out all of your options so that you can make the best decision for your family and budget.

Have you considered a home equity loan? What other tips would you have for making the decision? Is it really a great time to do this, or should you just leave your home’s value you alone? Have a great week, and we’ll see you here next week.

5 Easy Ways to Increase your Home’s Value

In today’s economy, homeowners have really been getting the short end of the stick. Whether you’ve lost your home due to foreclosure, tried to move and sell your home, or tried to refinance and discovered that your home is worth less than what you owe on it, you’ve probably gotten bitten a couple of times.

Are you looking at the possibility of selling your home soon, or are you considering refinancing sometime soon? If you fit into either one of those categories, then today, we’ve got 5 easy tips that could help you increase your home’s value.

1. Consider building a deck or adding to your current one. My family added a deck to the house that they live in just after moving in (I’ve since moved out). Since then, it’s been used for multiple reasons, anything from just hanging out to hosting parties. So not only are you adding on something that’s especially useful, but you’re potentially adding several thousand dollars worth of value to your home, depending on the size of the deck and what material you use (wood decks give a little less value than composite ones).

2. Remodel your basement. Have you been thinking about making your dingy basement into a finished one? Do it. Many people who are in the market to buy a home are looking for unique traits like finished basements. More people are entertaining in their homes nowadays, so this home improvement (and adding a deck, like mentioned above), can also help you save some money in the long run. It’s always more fun to hang out at home when you have a room specially made for that purpose!

3. Make your yard pretty! Is your yard just some grass and maybe a tree or two? Consider putting in hedges or other decorative foliage. Don’t make it tacky; subtly make changes that make your home and acreage just a little more appealing to the eye when you first come upon it.

4. Energy efficiency is key. This is the buzzword for everyone. Consider replacing your windows, shingles, and insulation if you’re able to. If you can swing it, get energy efficient appliances that will stay with the home after you leave. The less energy it takes to run the home, the more appealing it is to many of today’s potential home buyers.

5. Take a look at your kitchen. Whether you actually eat in there or not, the kitchen is the most-used room in the home. Everyone has to eat, don’t they? Don’t think that this means that you must totally tear up your kitchen and start all over. Is the look modern? Do you have energy efficient appliances (like I mentioned above)?  Do your cabinet doors need to be fixed and/or replaced? Is there plenty of shelf and/or counter space? Do you have a pantry? All of these things should be taken into consideration when evaluating your kitchen.

If you’re not in a rush to sell your home, don’t disregard this advice!   Doing home improvements over a long period of time can be helpful when you finally do decide to sell your home. Have a great week, and we’ll see you here next week!

Home Sweet Rental?

The American Dream used to be described having a spouse, 2.5 kids, a dog and/or cat, and most importantly, owning your own home, complete with white picket fence. As the economy struggles, the American Dream seems to be shifting quite a bit from that ideal. More and more people wait until they’re in their late 20’s or so to get married (if they get married at all), families are smaller, and buying a house has being replaced with living in rentals.

Not more than a few months ago, most economists were telling people with good credit and stable jobs to go buy a home instead of rent.  Interest rates were low, foreclosures were frequent, and because the housing market was kind of cruddy, you could get a mortgage for less per month than you could rent for. And if you look at the market right now, it’s still that way.

But not for long. If you heard the news last month, Standard and Poor reduced the United States’ credit rating because of the increase in the national debt that occurred. Now, by itself, that wouldn’t be a big deal. Throw in a cruddy economy and banks that already had to be bailed out and you get what we’re going to see soon. Interest rates will rise, higher credit ratings will be required in order to even get a mortgage, and at that point, why would you want to? The initial increase in interest rates may not seem like much, but over the 20 to 30 years that most people have a mortgage for? It’s not pretty, friends.

Renting leaves a nasty taste in some people’s mouths, but honestly, it’s becoming the cheaper alternative, and as it becomes more difficult to buy a home, many people opt to rent their homes out until they can be sold, thus creating more of a rental market. That also makes the rental market stay reasonable, keeping monthly payments lower than what you’d be paying when the market was lousy.

If you’re considering renting instead of buying a home, here are a few things to give you a little less stress about the situation.

  1. Don’t settle for second best. Look around for awhile if you can spare the time. You may come across your best option without knowing it.
  2. Always ask about what’s included. Always. I wouldn’t have gotten my current rental at its monthly cost… until I found out that heat was included. That totally sealed the deal.
  3. Read the lease carefully. It’s a contract, something you are legally bound to abide by. Make sure you know what it says inside and out.
  4. Maintain a good relationship with your landlord. This will make your life easier. I never see my landlord, because we have such a good relationship that I established early on and he trusts me greatly. He’s incredibly flexible because of it as well.

Go forth, and live the new American Dream. Find your dream rental, save money, and enjoy your weekend!

4 Foolproof Tips for Renters

Many Americans are opting to rent instead of buy right now. From the inevitable increase in interest rates to the increase in difficulty in actually getting a loan, renting is becoming more appealing by the day. Homes for rent are becoming nicer, allowing families to be able to rent without struggling for space. The renting market has gotten better, except in college towns, because college kids are becoming more likely to commute in the poor economy.

Anyway, since renting is more financially feasible, there are some things that you should do in order to keep it that way. Today, we’re looking at four tips that can help you keep your costs even lower if you decide to rent instead of buy.

  1. Don’t just settle for somewhere to live. Shop around for somewhere to live. Something that sounds like a good deal may be horrible when you go to look at it or find out where in your town it’s located. One home may include something that another one doesn’t. For example, I know someone who was trying to find a home for $500 a month or less, and she ended up settling for a home that was $525 a month. Did she compromise? Not really, the place she currently resides includes heat in the rent. Always look for those little things that may make the extra cost worth it… or the lesser cost not worth it.
  2. Double check your lease. Always read any contract carefully before signing it. Make sure that you are aware of all of the guidelines within it. The lease should tell you what your rent includes, what it doesn’t include, who covers repairs, lawn care if applicable, what is and isn’t allowed. The occupancy is important too, especially if you end up with a friend in trouble who needs to stay with you for a time. Before doing anything to your rental, check your terms in the lease. If it doesn’t list whatever you’re thinking about doing, call your landlord. That’s what they’re there for.
  3. Get Renter’s Insurance. Please, don’t make the mistake of not doing this. Just like homeowners, you need to get insurance for your property and your belongings. Sure, you’re renting the place, but everything in it is yours. Before you start to argue that it’s too expensive, most run about $25 to $50 a year for thousands of dollars worth of coverage. I think that’s well worth it, especially if you would end up having to replace something expensive like a computer.
  4. Keep Records. Every year, dozens of renters get falsely accused of not paying their rent. Many of them end up getting their credit scores destroyed, going to court, or just paying more money than they should have in the first place. Try to keep your bank statements, some banks will also give you scans of the checks you sent with your statement or, now some checkbooks leave a “copy” of the checks you write out with them.

So yes, don’t let renting stress you out. Follow these tips when looking for and living in a rental, and it will be as cost efficient as it is currently estimated to be. Enjoy your weekend!

Should I Consider a Home Equity Loan?

Buying a home is going to become more difficult in the coming months, due to the U.S.’s lower credit rating and the possibility of interest rates rising in the near future if the Federal Reserve doesn’t thwart it in some way. But, what if you already have a home, and you’re finding that the poor economy is leaving you strapped for cash, especially for things you truly need?

One of the options that you have is called a Home Equity Loan or Home Equity Line of Credit. Equity is, in short, the difference between what is owed on your home and the fair market price of your home, which is determined by your bank or other financial institution. For some of you, this probably sounds great, but here’s something you should think about: The housing market isn’t at its best.

A friend of mine is attempting to sell her home for around $140,000. They got it for $160,000. At this point, her family is losing $20,000 on this house when they finally sell it… if they can sell it for that much. I’ve watched houses in my area go unsold and dip below $100,000 because they just won’t sell.

Can you see the issue? Say that you’re my friend, and you bought your home for $160,000, and in the three years you’ve had your home, you’ve paid off about $25,000 of it, putting your total loan at $135,000. If you were to take out a home equity loan at this point, it would be worth $5,000.

Now, $5,000 may be all you need to pay for whatever you’re paying for. Usually it’s recommended that you pay for home improvements or other investments that don’t depreciate in value, like educational expenses. So, $5,000 may go a long way if you’re just adding a deck onto your house, but it won’t go anywhere if you’re paying for a year of college. Also, because of the nature of the loan (you’re putting your house on the line), you shouldn’t buy things that depreciate, like a car or new computer, with your home’s equity.

On top of that, you should also compare interest rates with other loans that you may be eligible for. As I said before, interest rates will be on the rise soon, so if you’re considering a loan at all, you need to do it quickly. Currently, the rates of most home equity loans are quite low because banks are trying to encourage continued borrowing.

Another option is a home equity line of credit (HELOC). HELOC’s are used for cash advances and like a line of credit that you use against your house’s value. HELOC’s are often more flexible than home equity loans, but the interest rates are variable, thus making it a bit more of a risk to take it out, in case the interest rate goes higher than other loans.

Before making any decision, talk to a financial professional and do research. See if it’s within your best interests to borrow anything at all, or if you can wait on it until you have the money in hand. Home equity can be incredibly useful, but it can also be detrimental to your credit if used incorrectly.

 

Real Problem in Real Estate

A friend of mine bought a house in early 2010. He moved last week due to a change in career. In between that, though, was an inspection mess that no one saw coming: the electrical fixtures in the house were not up to standard

Now, this happens all of the time. Most times, it’s agreed that the person selling the house is the one to take care of the financial end of inspection failures. And that’s what had supposedly happened when the house was sold to my friend.  The same electrical issues that had caused the house to not pass inspection before my friend bought it were the ones that came up when he went to sell the house less than a year later.

Luckily, my friend (we’ll name him Bill so I don’t have to keep saying ‘my friend’) knew what avenues to take in order to get things straightened out. He paid the $200 to fix all of the electrical problems, but went through the channels necessary in order to let the person who had sold the house that he’d been caught in his fraud.

I actually don’t know the outcome of this story, but here are a couple of things that we can learn from Bill’s story.

  • When closing on your house, make sure that you double check your contingencies. Contingencies are the parts of your contract that have to happen before the house can be closed on. Bill found out that the electrician that had supposedly fixed the issue had only given the seller an estimate, and not actually fixed it. They had no idea what happened after that. So make sure you check everything once again. You don’t necessarily have to get a another full out inspection, but just check over what you can.
  • Avoid dual agency when you can. Dual agency is when one agent (or once real estate agency) represents both the buyer and the seller. Sadly, even though there are laws to protect the buyer and the seller in states that allow dual agency (not all do), stuff like this could still fall between the cracks. Bill and the seller were with different agencies, and had they not been, this may have been more difficult to resolve.
  • Always expect the unexpected. Until October, Bill thought that he and his wife would raise their kids in that house. Then, he realized that it was time for a change in his life, and the house they’d bought about 6 months earlier was going to have to go back on the market. Luckily, they were able to find a buyer quickly, but what if they hadn’t? Paying on two homes is not ideal for anyone.
  • Be respectful. Bill ended up talking to a lot of different people to discover what had happened. He had to be careful, because there was always a possibility of invading privacy and breaking rules regarding confidentiality, but he was able to do what he had to without that. Bill was fine with paying the $200, but he just wanted the guy that had wronged him to know that he had.
  • Don’t cut corners. Thankfully, Bill is a guy with a lot of integrity, and got the electrical issues fixed. But the guy before got busted. So, don’t cut corners ever, even if you think you won’t get caught. The guy that sold the house to Bill did, and you probably will too.

Even though I don’t know the exact outcome of Bill’s story, you can change the end of your own by using this advice. Always be cautious; never be afraid to do too much, because in the end, it could result in a happy ending for everyone that’s involved.

Rental Run Around

I was in a tough spot. I’d had to move out of a place I was living for various reasons, and was bunking with a friend and her family until I could find somewhere else to live. Thankfully, as long as I was looking, they didn’t care how long I took, but I wanted to inconvenience them as little as possible.

I wasn’t employed yet, but I knew what I wanted to do and what I needed to do. So, before I even started to do anything, I made two lists: A list of things that had to happen and a list of things that I’d like to happen, but wouldn’t be deal breakers. You should always do this! Your expectations will help you make a good decision. Here’s what my lists looked like:

The apartment must:

  • Be within 5 miles of my church. I volunteer frequently at my church, so I wanted to cut down on gas costs.
  • Be in a safe part of town.
  • Cost $500 or less a month
  • Have a washer/dryer hookup or be really close to a laundromat
  • Be flexible with rental dates (I’d lived in a college town previously, where most places have set dates you can move in and out with little to no flexibility).

The apartment could, but doesn’t have to:

  • Be on the first floor (I have bad knees)
  • Allow pets
  • Include heat, water, sewer, and trash in the rent

I spent 4 days researching, writing emails, and calling people about potential rentals. Most people don’t know exactly where to look for rentals, so if you’re stuck, here’s some things you can do:

  • If there’s a college or university in your town, check out their website. A lot of times, they have rental guides that the students can use.
  • Drive around town and see if there are signs about apartments for rent.
  • Do research on Google to see if there are any apartment complexes or townhouses for rent.
  • Craigslist. Be careful with this, especially because some people who use this just want to get a couple bucks out of you.
  • Call local real estate agencies; many of them have rentals available or work with people who do.
  • Talk to your friends and family; some of them may know people who have rentals.

After I did all of these things, I looked at dozens of apartments. I have never driven so much in 2 days. Ironically, the place I ended up picking was an accidental find; I’d been driving by a house, saw a sign about an apartment for rent, and called the number. It hit everything on both of my lists except allowing pets, including trash in the rent, and being under $500 a month. Why did I compromise? Because I’m from PA and heat was included. The extra $25 a month I now pay is worth the fact that I don’t have to pay for my heat. When you talk to someone about your potential rental, make sure that you ask questions to find out these things! For example:

  • How much is rent? What is included?
  • When can I move in?
  • How much parking is there? Is it off street?
  • How long is my lease for? (some do monthly, some do every 6 months, some do yearly)
  • Do you allow animals?
  • What are my expectations?
  • How much is the security deposit?
  • Who takes care of turning on water and electric? What companies are there?
  • How much do my utilities average?

I was blessed with finding almost exactly what I wanted so quickly. Needless to say, that may not be the case for everyone. But, if you hold to your expectations and you’re patient, you should be able to find something at least close to what you want. I did!

Buying a Home – Determining affordability

Buying a home is the most expensive decision/investment you’ll ever make in your lifetime, so make sure you do your homework! Earlier this year, I was able to purchase my first home. The experience for me was pretty emotional and stressful with a combination of excitement, anxiety, fear and joy all in one. There will be tons of information that you will have to absorb in order to make wise house buying decisions, from deciding if owning is really for you to fully understanding the in’s and out’s of home mortgages.

In this post, I won’t be concentrating too much on the actual details of a home mortgage, instead I want to focus on the process that I went through for purchasing my home.

From an abstract point of view, here are the things that I considered to be very important when purchasing my home:

1.) Determining affordability

2.) Finding a good home mortgage program

3.) House hunting

An important thing to note, when I had decided to purchase a home, I knew that I would stay for long term(meaning at least 8-10 years) The thing is, if you can’t commit to remaining in one place for at least a few years then you might want to reconsider owning a house. With all the different costs and fees of buying a home you’ll probably end up losing a lot of money, especially in my case where I bought points to lower my interest rate.

Let me break down my 3 points.

Determining affordability. The earlier you’re able to determine your home purchasing power the better. It is very important to establish what range and bounds you should be working in and also to pre-calculate your expenses. You don’t want to end up in a situation where your house payment is so high that you can’t afford to get anything else.

The general rule of thumb  is to buy a house that roughly costs two and a half times your income. For example, if your income is $100,000/year, then you want to get a house that’s around or under $250,000. Now this amount seem reasonable to you? We can go deeper and found out. Lets assume that your interest rate is 4.5% with a 30 year mortgage. Using a mortgage calculator, a mortgage for $250,000 would come to $1266 each month. Can you afford this? There’s more, lets move on…

Next, you also want to determine expenses like taxes and home insurance. Assuming you have a general idea of the location where you’d like to live, you can find out how much that county/city tax is by calling your their local treasurer office. Also, don’t forget about state tax. It’s usually around ~1% of your home value for county/city and much lower for state. In my area, I have to pay for both county and city and state tax which comes to .94%, .65% and .11%, respectively. That’s a total of 1.7% in taxes that I pay on my home, that’s alot of money so its good to be able to know this upfront before  making any decisions. If you lived in my county, and taking the $250,000 value from my last example, then you would pay ~$354 each month for taxes. Now that’s $1266+$354= $1620  each month. How about now, can you afford this? Okay, we’re not quite done yet there’s more, lets move …

Now lets talk about insurance. There’s so many types of insurances out there but I just want to talk about the two major ones. Private Mortgage Insurance(PMI) and Home owners insurance. According to wiki, typical PMI rates are $55/month per $100,000 financed. So lets continue on with the example and you owe a total of $250,000 on your mortgage. That’s $55 x 2.5, which comes to a total of $138. Now a quick note, PMI is only required if you do not own 20% equity on the home, in other words, if you put down 20% for downpayment then this does not apply to you. In my case, I do not have PMI but it’s not because I put down 20%, I’ll explain what I did to avoid this when I go into my 2nd point(Finding a good mortgage program). Home owners insurance varies from company to company and also depends on what’s in your home(fire alarm, home security systems, home value..etc), so in this case I’ll just estimate. Usually for a home that’s valued at $250,000 the home owners insurance will be ~$40. Now lets add what we have here… $1620+ $138 + $40 = $1798.  Now, can you afford this?

So early last year, I calculated how much I could afford(based on the steps I just went through) and I kept plugging in new numbers with different location tax prices to determine how much I can afford. I repeated these steps until I reached a number that  I was comfortable with and then continued on to step two which I’ll talk about in my next post.

[Photo]