Category: Real Estate

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Financial Real Estate Savings

Rule of Thumb: How Much Should Your Rent Be?

Grab Your PopRule of Thumb: How Much Should You Spend on Rent

Now that winter has broken in many parts of the country, and it won’t be a punishment to move, people are heading to virtual rental tours in droves so look for new digs. But before you start cruising Zillow, Redfin, or other similar sites to look at your options, take a few minutes to figure out what you should be paying for rent.

The Short Answer Is 30%

Most experts agree that you should spend approximately 30% of your gross income. That’s before taxes are taken out. This means if you make $1,900 per month before Uncle Sam takes any, you should be planning on about $570 for monthly rent. Keep in mind that this is a general guideline and not a rule.

The major factor in how effective this estimate is is the cost of living in your area. While a simple one-bedroom apartment in the Bay Area or North Jersey could cost $2,000 or more per month, renters in rural areas of the midwest could see the rental of a 2 bedroom single-family home for less than $400 per month.

The 50/30/20 Method Works Well For Many

Another great method is the 50/30/20 split. This looks at your total take-home pay and splits it into three categories. This is 50% for your needs, 30% for your wants, and 20% for saving, investing, additional debt payments.

Your needs are expenses like insurance, broadband access, utilities, consistent debt payments, groceries, and of course, rent. Your wants are shopping splurges, dispensary trips or happy hour, concerts, and cosplay. For the last 20%, remember that you should only be keeping an emergency fund in a savings account, while all of your long-term savings should be invested in some fashion, so avoid inflation decay and begin building retirement income. If you have any debt, payments above the minimum should be in this category as well.

This means if you bring home $1,500 per month after taxes, your 50/30/20 split would look similar to this:

  • $750 for your needs
  • $450 for your wants
  • $300 for your future

The second and third categories are necessities, though in different ways than the first. You need a proper work-life balance, so if you can only afford to constantly work just to be able to eat, sleep, and work, your life can get bleak, fast. Make sure you make it a consistent goal to invest in your leisure, and your future.

With this in mind, you can get a really good idea of your rent payment by taking your $750 for needs, from our example, by starting with your relatively constant monthly bills, and working backward. For example, if broadband is $50, your groceries are $150 (I know, just pretend for our example), insurance is $35, and your minimum payment on your only high-interest debt account is $15, that comes to $250 in needs otherwise, so there’s $500 available for rent.

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Financial Real Estate

How To Be Approved For A Mortgage

mortgage approval for buying a home

As we continue to come back from the significant recession that the housing bubble caused, more and more people are thinking about buying a home. With many being first-time homebuyers, we’ve compiled a list of the essentials you’ll need to know to get mortgage approval.

1.   Look At Your Debt-To-Income Data

The very first step to mortgage application preparation is to determine your monthly income as well as your debt payments. Your potential lender will want to see evidence of employment, generally going back two years, but often a few recent pay stubs can get you started with many lenders.

If you are one of the millions of Americans who are self-employed or have variable income such as performers, be prepared to have that process be much more involved. Getting the best mortgage overall, as well as the best payments and interest rates, is going to be dependant on your debt to income ratio.

2.   Clean Up Your Credit Health

This is often one of the largest challenges for many people. Your credit history report and your credit score will be instrumental in your lender’s eventual decision. You should aim to have a FICO score of 680-700 as a floor. However, if your credit score is only missing 680 by a small margin, you may want to look into an FHA loan, which has a little bit easier approval requirements in some cases.

3.   Calculate Your Mortgage Budget

Before you make an appointment with any potential lenders or mortgage officers, you will want to know for sure, how much house you can afford, and what you can commit to in terms of a monthly payment. This payment will include your taxes, fees, and insurance, and should not be more than 33%-35% of your pre-tax income. This can be a difficult stage, since many mortgages have variable interest rates, meaning your payment could fluctuate at some point in the future.

4.   Plan To Save For Your Home Down Payment

This is a very significant step and can make or break your house hunt. Many lenders will require you to be able to put at least 10% down unless you are participating in an FHA loan or other special lending program. If you can put at least 20% down, you can avoid having to obtain PMI, or private mortgage insurance, to protect your lender against a possible foreclosure of the property before it has enough equity built up.

5.   Figure Out The Best Time To Apply

You can often get a pre-qualification without a hard credit pull. It will however stay on your credit report for some time. A pre-qualification can give you a good indicator of whether you can obtain a mortgage at a glance, and is often a very strong indicator of being a serious buyer.  You can often get a pre-qualification letter that will be good for 60-90 days depending on the lender, it’s non-binding, and will put you in a great position to start looking around.

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Financial Real Estate

10 Questions to Ask Your Mortgage Broker or Lender

mortgage broker

When you’re getting ready to shop for a mortgage broker or lender, you are preparing to make a huge financial commitment. Things can go as expected, but in some cases, there are may be significant fees that aren’t spelled out. Some lenders may even try to sell you on a different type of loan that could lead you into years of financial challenges.

1. What Loan Is Best For Me?

Any good, reputable broker is going to want to know more about you before they start loaning you large sums of money. You wouldn’t expect a medical diagnosis without any testing, your mortgage should be no different.

2. What Is The Interest Rate AND The Annual Percentage Rate?

Many brokers will calculate the APR slightly differently, and there is no APR for adjustable-rate loans. Be sure you have all info needed about your loan.

3. What Size Down Payment Do You Need?

Most sources will recommend about 20%, but that is not always needed. If you have good credit, you may be able to get a loan with less than 5% down. Lenders tend to increase closing costs and monthly payments with lower down payments.

4. Are There Discount Pints Or Origination Fees?

Discount points are tax-deductible, but each cost 1% of the total loan amount. Some lenders also charge origination fees for processing your loan application.

5. What Are The Total Costs?

Ask about the total costs. From the broker fees to any other fees that may be charged by a third-party. This can be appraisals, credit pulls, inspections, escrow, and more. There should be a legally required copy of the Loan Estimate that is given to you, which will include this information.

6. Are Fixed-Rate Loans Available?

Interest rates change daily depending on the Fed. This means that if you can get a loan with the interest rate locked in, it could mean saving thousands over other loan terms. Ask about fees though, some lenders charge for fixed-rates.

7. Are There Prepayment Penalties?

In some states, these penalties are not even permitted, therefore it’s very important to ask. Some penalties force the buyer to pay additional interest if you pay off early. Ask how long the financing offer was on the table.

8. Do You Do In-House Approvals?

Most loans need an underwriter’s approval, which can be dependant on conditions. If your lender does its own underwriting, that means your loan may be processed quicker. VA and FHA loans are known for taking longer.

9. How Long Is Needed To Fund The Loan?

In many cases, the time to fund a loan is around 40-45 days. You will have a closing date, so things will need to be coordinated. Inquire about the usual turnaround time, and if there is anything that can delay closing.

10. Are There Any Guarantees For On-Time Closings?

Closing can be stressful, and many contracts will include a date to close escrow by. This is usually subject to the ability of the lender to close on-time.

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Financial Real Estate

Selling Your Home? How Not To Lose Money

selling your home

Selling your home can be a challenge when you don’t know what it’s worth, or how to get the best price for it. We have a few great tips on how to maximize your profit potential when selling.

It Starts With An Experienced Agent For Selling Your Home

Working with an agent that has significant experience in selling homes in your area. You are going to want someone who is as invested in getting every dime of value out of your home as you are.

Occasionally sellers will try to save money by using an agent with lower commissions, but you are going to get what you pay for, as the saying goes. If an agent who charges even a single percentage point more can bring you 5% more profit, you’re already up by 4%.

The Price Has To Be Right The First Time When Selling Your Home

Pricing the home right initially is a huge benefit. The home will lose value the longer it’s on the market without selling. Opening the listing at the right price will benefit you in a couple of ways. First, it will encourage a short time on the market. Second, overpricing can not only cost you time, it can cost you money, as people will know that it is overpriced, and will use that in negotiations. Leveraging a skilled agent can help you get the best price initially.

Make sure you have personally researched local listings and recent sales. Look for trends. Touring open houses can also give insight into what is on the market. Call your bank and asking for a beneficiary demand can also give you an idea of what the home is worth.

Preparation Is Key

This one might cost a little bit of money, but the value added to the potential sale should far exceed what you put into it. This is the stage where you spruce up the cosmetic appearance and curb appeal of your soon-to-be-former home.

Basic home repairs can count for a lot here, as can a fresh coat of paint in several key rooms. Also make sure you pay attention to your landscaping, maybe hire a crew for an afternoon to get it ready for the weekend showings. This can help first impressions be great.

Keep An Eye On The Fees

When you receive an offer from a potential buyer, the offer will list the fees the buyer expects the seller to pay. Sometimes, the buyer requests inspections or other closing concessions. These can all be negotiated, and if they request a percentage toward costs, you might consider raising the price to help offset that.

Be sure to negotiate, particularly on the fees. The same goes for a home warranty, if the buyer wants reports for inspections or pests, for example, make sure you cap the potential expense that may make you liable for. Also shoot for the end of the month for closing, so that you can save a little money in interest.6

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Financial Real Estate

How to Find the Right Real Estate Agent for You

selling your home

Regardless of whether you are buying or selling a home, it’s very possible you would reach out to a real estate agent for guidance and help through the process. How do you know how to find the right real estate agent for your needs?

With realtors, full-time, part-time, and even family friends and relatives in the business, how do you know who to choose, or even how to evaluate a potential agent? We’re going to take a look at some of the factors that you should consider.

1.   Use A Professional

This cannot be overstated. There are part-time agents and agents that essentially do real estate as a hobby, but not as a career or even a full time job. When you are buying a home, and especially when you are selling a home, you want a real estate agent that is experienced and has a track record of closed deals and satisfied clients. They will be acting as your professional negotiator, so industry success is crucial.

2.   Sellers Need Special Attention

If you are selling your home, you will need the attentive service of a full-time, professional real estate agent. Having someone stop by and throw a “for sale” sign in your yard doesn’t cut it anymore, and it definitely won’t result in a sale.

A seller is going to want a real estate agent that will be proactive in their search for potential buyers. Particularly valuable real estate agents will be thoroughly familiar with leveraging technology in their trade. This is of extreme importance since most people will be viewing your listing on an app or website.

This also means they will need to be able to provide good pictures, enticing descriptions, and provide the details that buyers are hungry for.

3.   The Right Agent For Buyers

The buyers of new homes also need a particular type of attention in their quest for the perfect home. They benefit heavily from a real estate agent that has a history of successful buys and closed deals. Many real estate agents only sell a few homes a year, so finding one that has made significantly more than that is an indicator of quality and expertise.

Average real estate agents will simply search the MLS, and go through the listings with the potential buyers, without devoting much effort or care to the overall results. A great agent will find great homes that are about to hit the market and may be able to get a potential buyer into a very advantageous place to make an offer.

4.   Know The Difference Between Realtors And Real Estate Agents

Remember that not all real estate agents are going to be realtors. A realtor is a trademark of an organization called the National Association of Realtors, which is a professional organization with a formal ethics code. There are similar ethical standards in place by federal and many state agencies, but the NAR is additional.

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Financial Real Estate

Real Estate Tips for a First-Time Home Seller

real estate tips for selling your home

While buying a home often revolves around emotions, and how the house “feels” as a home. Selling should be detached as much as possible from that emotional aspect so that it can maximize the profit potential of the seller. These tips will apply to anyone putting a home on the market for the first time, as well as anyone who may need a quick review of some best practices.

1.   Make Sure You Have An Accurate Price Listed

This is one of the areas where having an experienced and reputable agent can help you immensely. Particularly one that has already had success in your general neighborhood. Make sure that they will perform a comparative market analysis for you. This should help you set your price as high as possible while not deterring offers or needing to reduce your price.

2.   Staging Can Add Incredible Value

Get advice from your agent on prepping for the sale. Many homes can benefit greatly from being professionally staged prior to an open house. Most homes show better and get more positive results from having about half of the furniture removed before showings. Professional home staging can add significant leverage for appeal and selling power.

3.   Stay Flexible With Showings

You may have to have several showings, so if they are too much of an imposition, or if watching someone tour your home seems weird, consider just not being around for the first weekend your home is on the market. This will allow your agent to show your home at times that work best for the prospective buyers.

4.   Host An Open House For Potential Home Buyers

If you have had your home staged, you may get noticeable benefits from hosting an open house. Your agent will know if this will be a viable option for your home. Some homes may not be conducive due to traffic patterns in the area, or even the home layout.

If there is a reasonable expectation of a benefit from the open house, put signage nearby, preferably on the main road likely to draw in viewers from the traffic. Sometimes all someone needs to know your house is the one, is to walk through it.

5.   Get The Commission Details

Don’t hire an agent purely based on a cheap commission. Many times the agents who offer a reasonable standard commission should be seriously considered. Don’t expect a cheap agent to give your listing the full service and attention it deserves. Likewise, be sure that the agent you do go with has a proven track record of selling homes, and of the sellers being satisfied.

6.   Respond Quickly To Home Buyers

If you’re putting in serious effort to sell your home, make sure you put in serious effort to respond to offers. It’s not uncommon for purchase offers to expire relatively quickly. Even if they don’t, prospective buyers will not appreciate waiting for the acceptance of their offer, or possibly even more frustrating, a counteroffer. Responding the same day, or within 24 hours, is ideal.

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Financial Real Estate

Types of Contract Contingencies for Homebuyers

Contract Contingencies for Homebuyers

Buying a home for the first time or the 15th time requires a lot of detailed work. It can even be a bit nerve-wracking for everyone involved. To help protect homebuyers and sellers, contract contingencies have become a common-place way for anyone to work within the deal and get their money back.

What are Contract Contingencies?

Contingencies are built into contracts as a way for prospective homebuyers to cancel the contract without the penalties that were typically incurred. Homebuyers can also get back their earnest money deposits which help lower the risk for buyers when they’re looking to purchase.

Common Contingencies

Detailed contingencies vary from state to state as some take different views of different inspections. Whether it’s roof inspections or septic tanks, before you buy a home you’ll need to research which ones are specific to your state. There are a few common ones that are standard across state lines!

Appraisal

This is when the home is checked out and evaluated to determine what the purchase price will be. So what happens if a home is appraised at a much lower value than originally thought? Buyers may back out of a sale when the lender doesn’t want to approve the mortgage amount.

Home Inspection

Before buying a home, buyers are encouraged to have the home inspected. If the home has issues and the buyers request a repair, the seller must first receive a copy of the home inspection before making repairs. During this stage of the buying process, the buyers want to drop out due to difficulty to repair issues, the home inspection contingency allows them to do so.

Lead-based paint

In many homes built before 1978, lead-based paint was used all over the place. Buyers have ten days to inspect this paint. If it’s found they’re allowed to drop out of the deal through the lead-based contingency.

Wood Destroying Pest Inspection

Who doesn’t love some little neighbors already burrowing into the woodwork? If pests or dry rot is found, the contract will specifically stipulate who needs to deal with the issue. Additional costs may be incurred during this time causing the buyers to can drop out of the deal in general.

Roof Inspection

Your roof does a lot more than just keep the rain off your home! During home inspections, buyers can hire a roofing company to do a complete roof inspection. They may even call off the deal if there’s too much damage. Putting in a new roof or repairing something that’s severely damaged is costly and may not be worth the price.

Sewer Inspection

Sewers can be delicate contraptions and easily susceptible to tree roots or deterioration over time. During a sewer inspection, plumbing companies check out the pipes for damage so buyers can determine if it’s sound before going forward with the sale. Installing a new sewer system is very costly and to put one in right after buying may be too much for homebuyers.

Takeaway

Buying a home is a risky business. Getting all of your inspections done on a new home is one of the best ways to be sure you’re getting exactly what you want. Contingencies offer you an escape route in case the home doesn’t stand up to scrutiny. Take your time and get all of your inspections completed before signing the final papers!

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Financial Real Estate

Selling Your Home? Here’s a Moving Timeline

selling your home moving timeline

Selling your home can be a very stressful time. From worrying that you’ll make enough money on the sale to concern about having to move in the midst of everything else that you have to deal with when selling your home. Generally speaking, the process of selling your home is not done quickly. Most people plan for months before even listing, and then from there you never know how long it could take.

Right Now

Whether you think you’ll be ready to move in 3 months or 6 months, you should have a list date planned, as it makes it easier to plan ahead and get your home ready to show potential buyers. Not only this, but it also simplifies the moving process when you finalize your plans on where you will be living next.

Two Months Prior to Listing Your Home

The market can fluctuate greatly, so it is a smart move to wait to decide on your list price until closer to when you will place your home on the market. Browse the local market; the comparable homes will help you set a price that isn’t so low you lose out on money but not so high that people are not interested.

Six Weeks Prior to Listing Your Home

If you do not already have a real estate agent in mind, this is the time to start getting recommendations from friends and family so you can interview a few candidates. You may get lucky and find someone great right away, but it could take you a few weeks to pick.

You should also get your home ready. A fresh coat of paint inside and outside and a few simple upgrades can make a big difference.

One Month Prior to Listing Your Home

This is a great time to start moving out. Renting a storage unit and eliminating unnecessary clutter, seasonal items, and things you have been storing in your home allows potential buyers to really see the home, helping them visualize their belongings and families in the space.

Two Weeks Prior to Listing Your Home

Contact the company that is handling your mortgage and get the payout information. You will need to know exactly how much you owe so you can price your home right. Also, you want to get any liens on your property taken care of.

If you have decided to use a real estate agent, this would be a great time to discuss staging so your home is ready to be listed.

One Week Prior to Listing

It’s almost time! This is the time where you or your agent will take pictures inside and outside of your home. First impressions matter and these photos will likely be the first thing potential buyers see about your house.

Listing Day and Beyond

Now that your home is on the market, your agent could call you anytime saying someone wants to view the house. It is best to keep your home as clean as possible so you don’t have to scramble at the last minute to get things ready to view.

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Financial Real Estate

How to Sell Your House Faster by Its Curb Appeal

sell your house curb appeal

It’s getting to the time of year when home sales absolutely explode. If you are getting ready to sell your house, you should know most of the main ways that you can squeeze all the extra value out of the inside of your home.

But what about the exterior? How can you boost your curb appeal and have those buyers ready to make an offer before they even hit the living room? We’ve got the top tips, take a look.

1.   Quality Signage In Front Of Your Home Is Important

It may seem like one of the more trivial things, but the real estate signage in front of your home is a direct reflection of how you and your listing agent regard your property. It should be clean and made from quality materials.

2.   Trim Your Trees And Shrubs

The foliage around your home should accent it, not define it or hide it. It doesn’t take an award-winning artist to trim some hedges and shrubs to make them look nice before going on the market. Bigger trees may need a professional trimmer to come do it safely. Attractive pruning is one of the things noticed immediately by those pulling up to your home. If there are any diseased trees or limbs, you may want a skilled arborist to address those.

3.   Pamper Your Lawn

Make sure you keep your lawn neatly mowed and precisely edged. If you don’t have the right equipment, don’t be afraid to call a local landscaper to come one afternoon before the listing goes live or before an open house. Depending on the time of year, a quick lawn feeding can green it up and really impress potential buyers.

4.   Add Some Color To Your Home

A few flats of flowers from the local nursery or home improvement center can be worth their weight in gold when placed strategically around visible gardens. A splash of the color outside can really help, particularly in areas where HOAs prevent many colors in exterior paint shades. Stick with simple flowers and bright colors, but don’t go overboard. Top it off with fresh mulch.

5.   Refresh Your Walkways In Front Of Your Home

This is often overlooked, but it can add incredible value to your potential sale price on your home. Having your driveway, walkways, and sidewalk professionally pressure washed can make them look nearly new. If you have a blacktop driveway, throw a coat of sealant on it so that it looks nice and crisp.

6.   Stage Your Deck

Really want to sell your house? Make your outdoor spaces look inviting. Clean furniture, pressure washed deck and patio area, and maybe a fresh coat of stain makes for a beautiful and welcoming outdoor relaxation area.

7.   Get Neighbors On Board

Selling your home for top dollar doesn’t stop at your wallet. Your neighbors benefit from higher property values when a home on the block sells for a good price. Let them know you’re selling, and ask (as nicely as possible) if they could match your efforts at making things beautiful for the potential buyers.

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Financial Real Estate

Home Inspection Preparation

home inspection

The chore of selling your home is almost done. You’ve prepped it, listed it, and found a buyer. They managed to make an acceptable offer (congratulations!) and now it’s time for the home inspection. Hold off on filling up and taping those moving boxes shut, this step has caused many deals to fall through.

In most real estate deals, the home inspection happens once the buyer has signed the purchase agreement, but before the final closing date. Many buyers prefer to make the closing of the deal contingent on the acceptable results of a home inspection.

This lets them back out of the sale if any serious issues or defects are found by the home inspector. There is generally the opportunity for the seller to remedy the items, but if they are a major expense, like roofing or foundation issues, they may not agree to the expense.

If you’re a little nervous about the inspection, as the home seller, you are certainly not alone. Many sellers find this final hurdle nerve-wracking. On one hand, you don’t want the deal to fall through, on the other hand, you don’t want to be saddled with the cost of repair for anything that might be major. Here are some things that you can do to help prepare for the event.

1.   Clear The Way

The last thing a home inspector is going to want to see is that anything they need to inspect is blocked by stuff. Storage, junk, furniture, whatever, get it out of the way. If something common cannot be inspected, the buyer will see that in the report, and it could be a red flag.

2.   Walk The Perimeter

Check your siding, trim, windows, caulking and seals, doors, and weatherstripping of your home. This is all small stuff that you should have in order easily.

3.   Check The Roof

You may not have ever looked up there, but you know who’s going to? You guessed it, the home inspector. So haul out the ladder and take a look at the roof. Clean the gutters, remove any moss, look for and replace missing tiles or shingles.

4.   Check Your Bulbs

This is simple, but it can be your undoing. A light that doesn’t work tells an home inspector one of two things, either the bulb is out or the wiring or outlet is faulty. Since they won’t be bringing extra bulbs to test, make sure they won’t need them.

5.   Toilets

Clean and functioning properly are key. Worn parts can cause a toilet to keep running, get that stuff replaced before it’s noted on the home inspection report. The parts are only a few bucks and anyone can do it.

6.   Pilot Lights

This one is important if you turn your furnace off during the warmer months. The inspector is going to test the major appliances, so make sure that they are ready.

7.   Water Leaks

This is a big one. Look under cabinets and up at floor joists in the basement if you have one, and look for signs of leaks. Fix the leak, and fix any water damage before the home inspection.