Some real estate agents have had the novel idea of partnering with social media influencers in order to get younger, first-time buyers checking out their listings.
A story in Bloomberg last week revealed that agents are turning to social media influencers to sell the idea of a better lifestyle, with Instagram posts or YouTube videos featuring some of their listings to help prospective buyers picture themselves living there.
Christine Blackburn, a sales director with Compass, told Bloomberg that she believes younger home buyers âtrust these influencers â thatâs what it comes down to.â
Blackburn has used the tactic herself, teaming up with three well known Instagram influencers to decorate condo units she is selling in Brooklyn, N.Y. One influencer, whoâs known for her houseplant tips, helped to outfit the condo with various potted plants and shared the photos on her profile. Some influencers have hundreds of thousands of followers that will see such images.
The National Association of Realtors says its data suggests that younger buyers are more likely to take advice from close friends and relatives when it comes to buying a home. And theyâre also more likely to respond to word-of-mouth marketing, and the NAR includes social media influencers in that category.
âWeâre seeing that social media has played quite a big role in home shopping,â StreetEasy Economist Nancy Wu told Bloomberg. StreetEasy has taken it onboard, and recently launched its own TikTok account that features home tours.
Bloomberg said the real estate pros it interviews that have used social media influencers declined to say how much they paid to get their listings featured. But they unanimously said that the posts resulted in a big increase in the number of people who viewed their listings.
Itâs likely that real estate agents will leverage content creators more often in the coming years, Thomas Fialo, vice president of Douglas Elliman Development Marketing, told Bloomberg.
âPeople can identify with them,â Fialo said, referring to social media influencers. âItâs about thinking outside the box and bringing a home to life.â
The post Social media influencers are being paid to promote real estate appeared first on RealtyBizNews: Real Estate News.
Earlier this year, I published the post Is Being House Poor Limiting You? While no one ever thinks they will fall into being house poor, it does happen to some. Due to this, when asking yourself the question “how much home can I afford,” it’s best to think about ALL of the expenses that go into homeownership.
There are many “hidden” costs that go into homeownership that many do not think about when buying a home. While some homes may seem affordable, there are many factors and expenses to think about.
According to recent data from Zillow:
U.S. homeowners on average spend more than $9,000 per year in hidden homeownership costs and maintenance expenses
U.S. homeowners pay an average of $6,042 per year in unavoidable hidden costs: homeowners insurance, property taxes and utilities
U.S. homeowners pay an average of $3,435 per year in annual optional costs including house cleaning, yard care, gutter cleaning, carpet cleaning, and pressure washing.
That’s a lot of extra money each year that many homeowners do not realize that they may need to pay for.
By not knowing about these costs, a person may become stressed due to the amount of debt they may rack up from being house poor. It may also delay retirement, lead to a house being empty (there might be no money left to decorate), and more.
There are things you can do though so that you can make sure you don’t fall into a house poor situation, though. When pondering the question “How much home can I afford,” think about the many tips below.
Add up all of the costs.
Buying a home can easily lead to being house poor if you don’t do enough research. This can limit you because you may be even more house poor than you originally thought.
When some families buy a home, they don’t think about the total cost of homeownership. While you may be able to afford the monthly mortgage payment, you may not be able to afford everything else if you don’t do your research.
Before you say “yes” to a home, I recommend you add up all of the extra costs that you may have to pay for if you decide to buy a specific home.
Other homeownership costs include:
Gas. Many homes run on gas in order to have hot water, to use the stove, and so on.
Electricity. Generally, the bigger your home then the higher your electricity bill will be.
Sewer. This isn’t super expensive, but it is generally around $30 a month from what I’ve seen.
Trash. This isn’t super expensive either but it does cost money.
Water (and possibly irrigation). Water bills can vary widely. I know many who live in areas where the average water bill is a few hundred each month.
Property taxes. Property taxes can vary widely from town to town. You may find yourself looking at two similar houses with similar price tags, but the property taxes may vary by thousands of dollars annually. That is a LOT of money. While it may seem small when compared to the actual home purchase price, remember that you have to pay property taxes annually and a difference of just $3,600 a year is $300 a month for life.
Home insurance. Home insurance can be cheap in some areas but crazy expensive in others. Don’t forget to look into the cost of earthquake, flood, and hurricane insurance as well as that can add up quickly depending on where you live.
Maintenance and repairs. Even if your home is brand new, you may have to pay for repairs, which is something that many don’t realize. No matter how old your home is, repair and maintenance costs will eventually come into play.
Homeowners association fees. This can also vary widely. You should always see if the house you are interested in is in an HOA because the fees can be high and there may be rules you don’t like as well.
Home furnishings. Furnishing your home can be done cheaply, but I know some who buy huge homes but can’t afford to put anything in them, such as a table, a bed, and so on. Why own a $500,000 house if you don’t have any furniture?
Related: Home Buying Tips You Need To Know Before You Buy
Buy for less than what you are approved for.
Many potential homeowners are approved for home loans that are somewhere around 30% to 35% of their salary before taxes.
That’s a lot of money. This amount is before taxes as well, which means that your actual monthly home payment would be a significant portion of your take-home income each month. Many who buy at the full approval amount cannot afford their homes due to the fact that it is such a significant percentage of what they earn.
If you don’t want to be house poor, then you should make sure to buy a home that is less than what you are approved for. You should also add up all of the costs of owning a home and make sure it is an amount that you are comfortable with.
Related posts:
Renting Out A Room In Your Home For Extra Money
How To Live On One Income
Ways To Make An Extra $1,000 A Month
Have an emergency fund.
An emergency fund isn’t just to protect you from your job. They also exist to help you in case something goes wrong with your home.
Your roof could spring a leak, a tree may fall on your home, a pipe may burst, there may be an electrical problem and more. Homes have many things that go into them and you never know if something may need to be fixed.
By having an emergency fund, you will have a fund that will help you if something were to go wrong. It will be you be more prepared so that you don’t have to take on any debt in order to help pay for an expense.
What would you say to someone who asks “How much home can I afford?” Do you know anyone who is house poor?
The post How To Avoid Being House Poor appeared first on Making Sense Of Cents.
Looking for the perfect home on the real estate market? Unfortunately, it can be tricky if you have unpaid taxes. Failing to pay your federal income taxes can lead to the Internal Revenue Service placing a lien on your property or your assets. These legal tools protect the government’s ability to get its money. They also set off alarm bells for lenders.
Can you buy a house if you owe taxes? The good news is that federal tax debtâor even a tax lienâdoesn’t automatically ruin your chances of being approved for a mortgage. But you do usually have to take steps to resolve the issue before a lender will look favorably upon your mortgage application.
Can You Buy a House If You Owe Taxes?
Itâs still possible, but you could have to actively work on the tax debt before a bank will approve a home loan. It might be best to pay off the lien before you fill out a loan application. But if that’s not something you’re able to do, you still might be able to forge ahead, provided you’ve actually tried to make a dent in that debt.
The specific details of your situation come into play, though. And lenders typically have slightly different requirements and documentation needs, so you’ll need to work closely with your bank or mortgage lender. If you know you have tax debt you can’t pay immediately, be honest about it so the lender can let you know what you may need to accomplish to be approved.
Can You Get an FHA Loan If You Owe Back Taxes?
Yes, you may be able to get an FHA loan even if you owe tax debt. But you’ll need to go through a manual underwriting process to make this happen. During this process, the lender looks for proof that you have a valid agreement to repay the IRS. It also requires that you have made on-time payments on this agreement for at least the last three months.
Obviously, FHA loans aren’t only contingent upon your tax debt status. You’ll also have to meet any other requirements, including those related to income and credit history.
Can Military Borrows with a Tax Lien Get a Home Loan?
Lenders can view liens differently depending on the loan type and other factors. But in general, military borrowers with a tax lien may be able to obtain VA mortgage preapproval if:
They have an acceptable repayment plan with the IRS and have made on-time payments for at least the last 12 consecutive months.
They can satisfy all debt-to-income ratio requirements with that monthly tax repayment included.
They note their outstanding tax lien on the standard loan application.
Can You Buy a Home If You Owe Other Types of Tax Debt?
If you owe state taxes or property taxes, you could also put your dreams for homeownership at risk. The rules vary slightly for each situation, but any type of debt you owe can cause your lender to consider you a higher-risk applicant. Even if you’re approved for the mortgage, your interest rate may be higher.
The best bet with any type of tax debt is to pay it off as quickly as possible. And if you can’t resolve it before you apply for a mortgage, at least reach out to the agency you own to make arrangements.
Research and Preparation Are Important
Whether you want to buy a home while you owe federal taxes or you’re certain your credit report is squeaky clean, take time to prepare before applying for a mortgage. You may be surprised by an error or negative item on your credit report, for example. It’s better to fix credit issues before you try to buy a home than be side-swiped by them during the process.
After taking steps to pay off or make three to 12 timely payments on your taxes, check your credit reports. Then, use your score and other information to find out what types of mortgage rates you might qualify for. This helps you understand whether or not it’s the right time to apply for a loan and buy a new home. If you’re in the market for a mortgage loan, look at the options available from the lenders on Credit.com.
The Bottom Line on Buying a Home When You Have Tax Debt
So, if you’re a prospective homebuyer with a tax lien, a good first step is making sure your track record shows at least a year’s worth of on-time payments. Pay it off in full if possible, but if that’s a tall order, know that you might have diminished purchasing power and a rockier road until the slate is clean.
In the meantime, you should also be keeping tabs on your overall financial progress by checking your credit reports regularly. You can get these reports free once a year from each of the three major credit reporting agencies, and you can get your free credit score from Credit.com.
Monitor your credit scores for increases or drops. Taking an active role in your credit can help you get on track to buy a home, especially when you’re facing certain financial hurdles such as a tax lien.
The post Can You Buy a House if You Owe Taxes? appeared first on Credit.com.
The process of finding and buying a home can be complicated and stressful, but you don’t have to go it alone. A real estate agent can help you to find the right house; a mortgage broker can help you get the best deal.Â
Everyone understands what the former does and why they need them, but many first-time buyers often overlook the services of a mortgage broker.
The question is, what is a mortgage broker, what services can they provide you with and should you work with one?
What is a Mortgage Broker?
A mortgage broker acts as an intermediary between you and the mortgage lender. The broker has your best interests at heart, working with the lender to help you secure the home loan you need at an interest rate you can afford.
Mortgage brokers are fully licensed and regulated. They know enough about mortgage companies to understand what makes them tick and help you secure the best rate from the many different lenders out there.
The broker will pull your credit report, gather documents pertaining to your income, creditworthiness, and affordability, and work as the middleman throughout. Once you find the best mortgage lender for you, the broker will help you file the loan application and work closely with the mortgage underwriters to ensure everything runs smoothly.
As a first-time homebuyer it can be very helpful to have someone like this on your team. It can feel like you’re entering the home loan process blindfolded, with little more than references and advice from friends and family to guide you.Â
It’s not a hugely complicated process, but when it’s your first time, a lot of money is at stake, and you’re trying to juggle your everyday life with all these new demands, it can feel overwhelming.
How do They Get Paid?
A mortgage broker can be paid by the borrower, but more often than not they are paid by the lender. The mortgage lender pays the broker anywhere from 0.50% to 2.75% of the total mortgage amount on average. This means that on a $100,000 loan, the broker could be earning $500 to $2,750.
It can seem like a lot of money for one mortgage acquired for one buyer. However, once you consider all the work that goes into this process and the length of time it takes, as well as the fact that mortgage brokers are highly specialized individuals, it begins to look like a bargain. More importantly, you’re not the one paying the fees, so you don’t need to worry about them.
If you have any experience with affiliate companies or lead generation, it’s kind of the same thing, but on a much grander scale. Simply put, the mortgage lender needs customers and they get those customers through the broker, rewarding them with a small share of the profits in exchange.
Are Mortgage Brokers Fair?
You could be forgiven for thinking that mortgage brokers are only interested in earning money and will steer you down whatever path earns them the highest share. However, their only goal is to find the right mortgage rates for you and as long as you get a mortgage in the end, they won’t care.Â
They’re getting paid either way and it doesn’t benefit them to focus on a single lender. They’ll look at all mortgage products and loan options; they’ll compare all lenders, and they’ll remain with you throughout the mortgage process. That’s all that matters, and you don’t need to worry about favoritism.
Mortgage Brokers vs Loan Officer
The main difference between a mortgage broker and a mortgage loan officer is that the former works as a middleman between you and the lender, while a loan officer works directly for the lender and is paid a salary by them.
A loan officer is also employed by just one mortgage lender, while a mortgage broker works with multiple lenders.Â
Do I Need a Mortgage Broker?
The mortgage process can take a lot of time and it’s time that you might not have. If you’re busy and you’re going into this process blind, we recommend working with a mortgage broker or at least looking at ones in your area to see what sort of benefits they can provide you with.
In any case, whether you’re working directly with big banks and credit unions or going through a mortgage broker, it’s important to study the interest rates and closing costs closely. Are you getting cheaper rates but paying huge closing costs? Are you paying over the odds for your origination fee just to get a few fractions shaved off elsewhere?
A mortgage is something that may stay with you for several decades, and if you make a bad decision now, you could pay thousands or tens of thousands extra in that time.Â
Always check the loan terms before you sign on the dotted line and commit to the home purchase. It’s also important to understand the house prices in your area and to have a good grasp of the current housing market. If there is any doubt that the market is about to go into freefall, you may be better off waiting for a year or two.Â
Real estate is usually a sound investment that increases in value over time, but if you buy at the height just before a crash, that house may lose a lot of its value in a short space of time and take years to recover.
Finding a Mortgage Broker
We usually don’t advocate asking friends and family for advice when it comes to things like this. After all, the internet exists, and you can “ask” millions of people for their opinions at the press of a button, so why would you focus on one person?
However, when it comes to local mortgage brokers, this is one of the best tactics. You trust your friends and family to give you an honest opinion and when you don’t have a lot of reviews to read through and a lot of information to check, that opinion could be invaluable.
This works best if you have multiple people to ask. The problem is, many of them probably had a good experience and as they likely only worked with one mortgage broker, they’ll probably only gave that one recommendation to make. So, compare recommendations from different friends, see if any of them match, and pay more attention to the friends who have worked with several different mortgage brokers.
Working with Mortgage Brokers: Tips and Advice is a post from Pocket Your Dollars.
If youâre buying a home, one of the (many) things you must check off your list is hiring a professional to do a home appraisal to assess the property’s value. But what if you check it off your list and then, for whatever reason, the home sale falls throughâwho pays the appraisal fee then?
Letâs take a look.
What is a home appraisal anyway?
A home appraisal is a professional assessment of how much a property is worth. Unless youâre paying for your home in cash, itâs a non-negotiable in the process. Most lenders require an appraisal before theyâll grant you a mortgage. Your home is their collateral, and if you canât pay your mortgage, they want to make sure they can get back as much of their money as possible. An appraisal also helps protect you from buying an overpriced property.
The appraiser will take an unbiased look at a home, the condition itâs in, any repairs it needs, and other factors, and will also likely compare it to other similar properties in the area before providing an estimate of what they think it’s worth. An appraisal goes deeper than the comps your real estate agent likely gathered and presented to you when you were first considering the propertyâbut not as deep as a home inspection, which youâll also want to have completed in most cases before the sale is final.
If the appraised value is higher than the cost of the home you want to purchase, good for you! Youâre making an investment thatâs paying off from the get-go. If, however, the appraised value is lower than the price of the house, then you have a variety of optionsâincluding negotiating with the seller, challenging the appraisal, and/or getting a second one. Or, of course, you could walk away from the deal completely.
The cost of a professional appraisal varies depending on where you live; but in general, you can expect to pay somewhere around $300 to $400 for one.
Who pays the home appraisal fee when a deal falls through?
In most cases, even though the appraisal is for the benefit of the lender and the appraiser is selected by the lender, the fee is paid by the buyer. It may be wrapped up into closing costs, or you may have to pay it upfront. There are some cases, however, in which a seller will offer to pay the appraisal fee to make the deal more attractive.
So, back to the original question: When a sale falls through, whoâs on the line for the fee? In most cases, itâs still going to be the buyer.
âThe buyer is usually required to pay the appraisal fee upfront, and it is owed even if the lender does not move forward with a loan,â says Lee Dworshak, a real estate agent with Keller Williams LA Harbor Realty in Rancho Palos Verdes, CA. âWhile the seller may have agreed to pay all closing costs, if the closing does not occur and the property is not conveyed, the seller is not required to pay your appraisal fee.â
If a buyer doesnât pay the appraisal fee upfront and instead rolls it into the rest of her closing costs, that doesnât mean she’s off the hook if she doesnât close.
âIt has nothing to do with the seller; it is ordered by your lender, and payment is due regardless of the outcome,â says Maria Jeantet, a real estate agent with Coldwell Banker C&C Properties in Redding, CA. âIt is typically paid by the buyer unless specifically negotiated ahead of time to be paid by the seller.â
Having a home sale fall through is usually a bummer for both the seller and the buyer, and having to pay for an appraisal on a home youâre not going to buy adds a bit of insult to injury. Just know that while the appraisal fee can sting, it can save buyers from a much bigger financial wallop that comes with buying an overpriced home.
In the grand scheme of things, itâs a small price to pay when it comes to finding the right house at the right price.
The post If a Sale Doesn’t Go Through, Who Pays the Appraisal Fee? appeared first on Real Estate News & Insights | realtor.com®.
FHA loan requirements are simple; they’re different than conventional loan requirements. For a conventional loan, for example, you will need a good credit score. However a FHA loan credit score is only 580.
If you’re a first time home buyer and need a first time home buyer loan to purchase your dream home, then keep reading to find out how an FHA loan is right for you.
Click here to compare the rates if you’re thinking of applying for an FHA loan. It’s totally FREE.
In this article, we will cover several topics around the FHA loan requirements. As a first time home buyer, you will need to be aware of these requirements so that your home-buying process can go as smoothly as possible.
Here’s what we will cover: FHA loan limits, FHA loan rates, FHA loan credit score, FHA lenders, and so many others. In addition, we will address the difference between conventional loan requirements versus FHA loan requirements.
Click here to apply for a FHA loan.
FHA Loan Requirements – Guideline & Limits:
Buying a house through an FHA loan, while exciting, can be daunting, especially as a first time home buyer. Taking a few moments to familiarize yourself with the FHA loan requirements can save you from costly mistakes during the home buying process. Below is an overview of FHA loan process
FHA loan definition
What is an FHA loan? Simply stated, an FHA loan is a loan that is insured by the Federal Housing Administration. These type of loan are popular among first time home buyers because they allow them to put as low as 3.5% down payment and require a very low credit score.
So if you’re a first time home buyer with a bad credit, then an FHA loan makes more sense.
Feeling Overwhelmed With Your Finances?, You have options and there are steps you can take yourself. But if you feel you need a bit more guidance, simply speak with a financial advisor. SmartAssetâs free tool matches you with fiduciary advisors in your area in 5 minutes. If you are ready to meet your goals, get started with Smart Asset today.
FHA loan limits
FHA loan limits refers to the maximum amount of loan the FHA will give you. For 2019, for example, in low cost areas, FHA loan requirements have been set in place allowing the maximum amount for a single family home to be $314, 827. Whereas for a four-plex, the maximum amount is $605,525.
FHA loan limits – low cost areas
Single
Duplex
Triplex
Fourplex
$314,827
$403,125
$487,250
$605,525
For high cost areas, the FHA loan limits for a single family home is $726, 525 and for a duplex, the FHA limit is $930, 300. Those limits, of course vary depending on your states and they are update annually. So visit your state to determine what the FHA mortgage lending limits are.
FHA loan limits – high cost areas
Single
Duplex
Triplex
Fourplex
$726,525
$930,300
$1,124,475
$1,397,400
Click here to compare current FHA loan mortgage rates
FHA loan vs conventional
When it comes to get a home loan for presumably the biggest purchase you’ll ever make in your life, you certainly have to know the key differences between an FHA loan and a conventional loan. While it’s easier to get approved for an FHA loan, it’s important so that you can make the best decisions.
FHA loan requirements
FHA credit score loan requirement
The FHA loan requirements are fairly simple and straightforward. Here’s what they require: 1) You must have a credit score of at least 580.
2) A 3.5% down payment is required. (*note, if your FICO score is between 500 and 579, then you will have to put 10% down payment). 3) You will have to pay Private Mortgage Insurance (PMI);
4) Your debt to income ratio must be < 43%. Your debt to income ratio is the percentage of your income that you spend on debt, including mortgage, car loan, student debt, etc..
5) The home you intend to purchase must be your primary residence. You must also occupy the property within 60 days of closing.
Click here to shop for FHA mortgage rates in your area
It can’t be an investment property. However, you can buy a duplex or triplex, live in one unit and rent the other units. As long as you reside in the property, you will satisfy that requirement. Also, the house must meet FHA loan limits (see above).
6) Finally, and of course, you must have a steady income and proof of employment. I will discuss later whether a FHA loan is better than a conventional loan. For more information about FHA loan requirements in general, visit the FHA website.
Conventional loan requirements
The requirements for a conventional loan, however, are much stricter. By the way a conventional loan or traditional loan is not insured by the Federal Housing Administration. But instead it is guaranteed by a private lender such as a bank, credit union, mortgage companies, etc…
Of course whether you will qualify for a conventional loan vary from lenders to lenders, but the following are required:
1) A credit score of at least 680 (of course the higher the score is, the more likely you will get qualified, and the lower your interest rate on the loan will be.
2) A down payment of at least 20% of the house purchase price. If you have less than 20%, you still can get the loan. But the problem is, you will have to take out private mortgage insurance, pay its premiums until you achieve at least 20% equity in the house.
3) Your debt to income ratio needs to be around 36% and no more than 43%.
Should you apply for an FHA loan or conventional loan?
As you can see above, the FHA loan requirements are less strict than the conventional loan requirements. However, which one you choose to apply to depends on your personal circumstances.
But if you are a first time home buyer, there are a lot of good reasons why an FHA loan would seem more appealing to you. For one, the down payment is only 3.5% (compare that with a 20% down payment a conventional loan requires). A down payment is the upfront money you need to to make when buying a home.
As a first time home buyer, saving for a 20% down payment on a house can be a big burden. Homes are expensive. For example, saving for $450,000 home can take you years to accomplish, especially if you have other debt like student debt, credit card debt, car loan, etc… So a 3.5% down payment makes it easier for you to buy your own home.
Second, the FHA loan credit score is only 580. Although, you should always take steps to raise your credit score, sometimes certain changes in your life may leave you with a low credit score. Perhaps, you had to file for bankruptcy which resulted in a low credit score.
Or maybe you never had a credit card, which means that you don’t have an established credit history. Or maybe you’re a victim of identity theft which lowered your credit score. So there are several reasons why you could have a low credit score.
However, that shouldn’t mean you can’t buy a house. That’s why the FHA loan requirements make it easier for folks who otherwise would not have been qualified for a conventional loan.
Related Articles:
5 Signs You’re Not Ready To Buy A House
The Biggest Mistakes Millennials Make When Buying a House
How Much House Can I afford
Buy a home with the Right Financial Advisor
You can talk to a financial advisor who can review your finances and help you reach your goals. Find one who meets your needs with SmartAssetâs free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
The post FHA Loan Requirements – Guideline & Limits appeared first on GrowthRapidly.
If youâve been keeping your eye on real estate home listings, you mightâve seen more foreclosed properties for sale at a reduced price.
With record levels of unemployment and underemployment, many homeowners are falling further behind on their mortgages. Currently, thereâs a federal moratorium on the most common mortgage programs through December 31, 2020. Unless further homeowner protections are in place, the foreclosure market will see an unfortunate rise.
In fact, according to mortgage and real estate analytics company Black Knight, 2.3 million homeowners are already seriously past-due on their mortgages.
As devastating as it is to have more homes undergoing foreclosure, it also means that prospective home buyers, who were otherwise priced out of buying a home, might have greater access to homeownership. Hereâs what you should know if youâre thinking about buying a foreclosed home.
Buying a foreclosed home can be a win-win situation. You get a good price, and (usually) you can easily fix the property up.
Buying a Foreclosed Home
There are many ways you can buy a foreclosed home, depending on what stage of the process the foreclosure is in:
Pre-foreclosure. Many homeowners are willing to sell before theyâve officially been foreclosed on. Depending on how much equity they have, they might need to do a short sale.
Short sale. Homeowners can seek approval from their lenders to sell you the home for less than they owe on the mortgage. The bank will get less than itâs owed, but it still often approves short sales since they usually cost less than a foreclosure.
Auction. Once a home is foreclosed itâll often be auctioned off by the bank. But youâll need cash on hand for this, and thatâs not an option for most folks who need mortgage financing.
Real-estate owned (REO) properties. Alternatively, banks can simply sell the foreclosed home through more traditional markets, just like a normal home.
Itâs usually easiest to buy the foreclosed home once the bank takes over and it becomes an REO property. Thatâs because you can take your time and go through the mortgage underwriting process. You can also work with a realtor, and â importantly â write contingency clauses in the contract that let you pull out of the deal if a home inspection reveals more repairs than you expected.
Related: How to Add Real Estate to Your Investment Portfolio
7 Caveats to Buying a Foreclosed Home
Buying a foreclosed home isnât exactly the same as buying one directly from the homeowner. Youâre potentially buying a home from a bank who took over after the previous homeowners were unable to afford the home anymore. This introduces a few twists into the home-buying process for you.
1. Youâll Need a Realtor Who Specializes in Foreclosed Homes
The world is full of realtors, even including your Uncle Bob and Cousin Carolyn. But not everyone is equipped to handle the nuances of buying a foreclosed home. There are a lot of issues that can crop up â unplanned property damage, squatters, homeowners who settle the bill and try to reclaim ownership, etc.
If youâre serious about buying a foreclosed home, seek out a realtor with extra experience in this area. There are even special designations that some realtors can get, such as Short Sales and Foreclosure Resource (SFR) or Certified Distressed Property Expert (CDPE).
2. Houses Are Sold âAs-Isâ
With a typical home sale, you have the change to get the property professionally inspected before signing on the dotted line. Itâs not uncommon for new issues to arise, and in a normal home buying transaction, you can often negotiate with the sellers to either fix the damage or discount the price.
Thatâs not the case when you buy a foreclosed home. If a home inspection reveals unexpected damage â like the need for a full roof or a septic system replacement â banks often arenât willing to negotiate. Itâs a take-it-or-leave-it sale.
3. Expect to Put In Some Work
The above point is especially important considering that most foreclosed homes do, in fact, need a lot of fixing up.
Think about it: the previous homeowners lost the house because they couldnât afford the mortgage. Thereâs a good chance they also werenât able to keep up with routine maintenance either. From their perspective, even if they did have the cash, whatâs the point of spending money on repairs, if they know theyâll lose the home in a few months?
You can save money by putting in some sweat equity (HGTV, anyone?), but even then youâll need the cash to pay for materials. This also means that the home might not be move-in ready. If you do move in, you might need to put up with construction debris for a little while. On the bright side, though, this does give you a chance to upgrade the home to your own aesthetics.
4. You Might Need Creative Financing
This brings up another issue: how do you pay for those renovations? Generally, you canât just ask for a bigger mortgage to cover the necessary repairs. Most lenders will only lend you as much as the current home appraisal is worth, minus your down payment.
You have a few options, though. You can hold some money back from your savings to pay for it in cash, but this means youâll have a smaller down payment. An alternative is getting a loan from a different lender, like a personal loan, a 0% APR credit card, or even a home equity loan or line of credit if youâre lucky enough to start from a position with equity.
Finally, there are some special ârenovation mortgagesâ available through Fannie Mae and other lenders. These mortgages actually do allow you to take out a bigger mortgage so you can pay for renovations. You might need to provide a higher down payment or have a higher credit score to qualify, however.
5. Watch for Liens on Foreclosed Homes at Auctions
If you have a big pot of cash and can pay for a home on the same day, an auction might be your best bet. But then you have to worry about a new factor: liens.
If the property had any liens attached to it (such as from the previous homeowners not paying their taxes, or a judgement from unpaid debt), youâll inherit that bill, too.
This is usually only the case for auctioned homes. If you buy a foreclosed home as an REO sale, the bank generally pays off any liens attached to the property. Still, it may be worth double-checking if you have interest in a specific property.
6. Be Prepared to Act Fast
Youâre not the only one with the bright idea to get a low-priced, foreclosed home. Chances are good that there are a few other buyers interested in the property, which increases competition. Even though the home is listed at a big discount, this competition can still drive prices up. You might need to be ready to act fast, just the same as in any hot real estate market.
7. Be Prepared to Wait
On the flip side, thereâs a lot of extra bureaucracy involved in buying a foreclosed home once the seller accepts your offer. Thereâs often extra paperwork to fill out or other complications.
For example, the home appraisal might come back lower than expected, which might make it harder to get enough financing for the agreed-on purchase price. If itâs a short sale, it might also take longer for the bank to approve the lower sale price for the home, based on what the homeownerâs mortgage is currently worth.
Pros and Cons of Foreclosed Homes
Buying a foreclosed home isnât necessarily a good or bad idea on its own. It all depends on your own goals â for example, are you willing to figure out financing for repairs to get a deal on the home purchase price? Also consider how important it is for you to have a âmove-in readyâ home with no hassle.
Weigh these pros and cons carefully, and whatâs most important to you when buying a home.
Pros
Cons
Can get a deal thatâs lower than market price
Property is sold âas-isâ and might not be move-in ready
Can customize the home to your specifications with repairs and upgrades
Likely needs a lot of repairs and upgrades
Requires creative financing for repairs and upgrades
Foreclosure process is long and might fall through
The Bottom Line
Buying a foreclosed home can be a win-win situation. You get a home at a good price, and (usually) you can bring the property back to good, working order by fixing it up. As long as you go into the deal knowing that itâs not the same experience as a typical home purchase, buying a foreclosed home is a great way to launch into homeownership or real estate investing.
Keep Reading: How to Buy a Second Home that Pays for Itself
The post What to Know Before Buying a Foreclosed Home appeared first on Good Financial Cents®.
Figuring out how to deal with bad neighbors can be a major struggle. There’s nothing worse than buying a house and then realizing you have nightmare neighbors. But you don’t just have to grin and bear your neighbors’ undesirable behavior or tension on the block. With the right approach, you can turn it into an opportunity to build a good relationship, create a more positive environment for you and the rest of your neighborhood.
Here’s how to deal with bad neighbors
First off, make sure you’re not the bad neighbor.
It’s easy to see what your neighbor is doing to drive you nuts, but it’s a little harder to understand how your behavior might be affecting them. Because you’ll never get a neighbor to shape up if they think you’re the problem, make sure you’re as close to a model homeowner as possible before approaching them. A few hard questions to ask yourself:
What’s your noise level like? Loud TV, music, or machinery can drive neighbors bananas any time of day. And even normal noise, from say, lawn mowing, shouldn’t be waking them up in the morning or preventing them from enjoying a peaceful evening.
Are your pets quiet and friendly? Noisy, threatening, or roaming dogs â and even roaming cats â can become a sore spot for neighbors.
Do you keep things tidy? If your lawn is overgrown or your kids’ toys are strewn all over the place, it can become an eyesore. Neighbors may start to worry about your poor home maintenance hurting their home value.
Do you respect property lines? Don’t let your trees, fences, or any other property encroach on a property line, unless your neighbors specifically say they’re fine with it. It may seem fussy, but it can prevent all sorts of disputes.
Are you playing tit-for-tat? If you started parking over the property line because their dog barks too much, you’ll never sort out who was really in the wrong â or find a solution. Revenge, no matter how minor, is never successful at dealing with bad neighbors.
Once you’re confident that you’re not engaging in any bad-neighbor behavior, you can approach your neighbor to talk about what’s bothering you.
Develop a friendly relationship.
Trulia’s Neighbor Survey showed that one in two Americans doesn’t even know the names of their neighbors â and that can be a major hindrance to resolving conflicts peacefully. Introduce yourself at the first opportunity so that you have a strong rapport to build upon if a problem arises. It will be a lot harder for your neighbor to keep causing you grief if they see you as a friendly face.
To start a pattern of good communication, tell your neighbor in advance any time you’re having a party, doing a renovation, or anything else that could create noise or commotion.
Assume good intentions.
Don’t go in guns blazing when you approach a neighbor about what’s bugging you. Drop by and approach the subject in a friendly fashion, or, should you need to gently escalate the situation, request that they meet you for coffee. That will indicate that the issue is a big deal to you.
Neighbors often don’t realize that they’re creating a problem, and it’s best to avoid seeming like you’re accusing them. Put yourself in their shoes, and start by assuming that their problematic behavior is not because of any ill will towards you.
Be sympathetic if your neighbor complains.
While it’s important to bring up problems to your neighbor in a constructive way, it’s just as crucial to be thoughtful and cooperative when you’re the one accused of poor behavior. The complaint may not make much sense to you â for example, leaves from a tree on your property falling into your neighbor’s yard. But it’s more important to be friendly and accommodating than to be “right.” Respond to any complaints or requests the way you’d like them to respond to yours. If you’re willing to try to make their lives better, they’ll be more likely to do the same for you.
Document everything, just in case.
With luck, you won’t ever need to involve a third-party when sorting out how to deal with bad neighbors, but it’s always possible. While it’s worth doing everything you can to resolve an issue peacefully and willingly, you should also document every step along the way just in case. On the off chance that you need to involve a homeowner association (HOA), a neighborhood group, the city building department, or even the local police or an attorney, maintain a record of relevant dates, times, emails, texts, and even photos, so the facts are at your fingertips if you need them.
Research the rules before taking action.
Before turning your complaint into legal action or a formal complaint, make sure you know what you’re talking about. Contact the local housing department, consult a lawyer, talk to your HOA, or just do some solid Googling to get a sense of what the neighborhood rules and the law have to say about your issue. You want to make sure you’re on the right side of things before making a big deal out of i. (For one of the most common neighbor problems, check out this handy guide to easements.) Then â again, in a gentle and friendly way â you can let your neighbor know that the law or rules are on your side.
For critical issues, contact the authorities.
Of course, friendly conversations don’t always fix everything, even if you’re in the right. If you’ve tried everything else and the problem neighbors haven’t stopped their offending behavior, it may be time to get the authorities involved. Just make sure you consult the right authority about the issue â and always make the police your last stop. For instance, an issue with trash all over someone’s lawn can probably be resolved with the city’s code enforcement department. And a noisy or frequently loose dog might warrant a call to your HOA before the police or animal control.
Avoid scenarios likely to cause conflict.
Some situations between neighbors are almost guaranteed to cause conflict â for example, buying a home next to one that shows signs of being a hoarder house or one with a shared driveway. No matter how likable your neighbors may seem, tensions are likely to rise in situations like this. So unless you know your neighbor extremely well, it’s best to avoid the possibility entirely.
Find out what homes are available in the friendliest neighborhood you know on Trulia.
The post What to do when you have problem neighbors appeared first on Trulia's Blog.
Making the leap from being a renter to becoming a homeowner is a process that includes taking stock of your financial situation and determining whether you’re ready for such a massive responsibility. For most people, the primary question is affordability. Do you have enough cash in the bank to fund a down payment, or do you have a credit score high enough to qualify you for a home loan? But there are other considerations, tooâand plenty of misconceptions and myths that could keep you from making that first step.
Below, our experts weigh in on why some situations that may seem like roadblocks are actually not as daunting as they appear.
1. Buying a home means heavy debt
Some may argue that continuing to rent can spare you from taking on heavy debt. But owning a house offers advantages.
âBuying a home and using a typical loan would be spread out over 20 to 30 years. But if you can make one extra payment a year or make bimonthly payments instead, you can shed up to seven years from that long-term loan,â says Jesse McManus, a real estate agent for Big Block Realty in San Diego, CA.
Plus, as you pay your mortgage, you gain equity in the home and create an asset that can be used when needed, such as paying off debt or even buying a second home.
âCurrently, mortgage interests rates are at their lowest point in history, so … it’s a great time to borrow money,â McManus says.
2. At least a 20% down payment is needed to buy a home
âContrary to popular belief, a 20% down payment is not required to purchase a home,” says Natalie Klinefelter, broker/owner of the Legacy Real Estate Co. in San Diego, CA. “There are several low down payment options available to all types of buyers.â
These are as low as 0% down for Veterans Affairs loans to 5% for conventional loans.
One of the main reasons buyers assume they must put down 20% is that without a 20% down payment, buyers typically face private mortgage insurance payments that add to the monthly loan payment.
âThe good news is once 20% equity is reached in a home, the buyer can eliminate PMI. This is usually accomplished by refinancing their loan, ultimately lowering their original payment that included PMI,â says Klinefelter. âSelecting the right loan type for a buyerâs needs and the property condition is essential before purchasing a home.â
3. Your credit score needs to be perfect
Having a credit score at or above 660 looks great to mortgage lenders, but if yours is lagging, thereâs still hope.
âCredit score and history play a significant role in a buyerâs ability to obtain a home loan, but it doesn’t mean a buyer needs squeaky-clean credit. There are many loan solutions for buyers who have a lower than the ideal credit score,â says Klinefelter.
She says government-backed loans insured by the Federal Housing Administration have lower credit and income requirements than most conventional loans.
âA lower down payment is also a benefit of FHA loans. Lenders often work with home buyers upfront to discuss how to improve their credit to obtain a loan most suitable for their needs and financial situation,â says Klinefelter.
McManus says buyers building credit can also use a home loan to bolster their scores and create a foundation for future borrowing and creditworthiness.
4. Now is a bad time to buy
Buying a home at the right timeâduring a buyer’s market or when interest rates are lowâis considered a smart money move. But don’t let the fear of buying at the “wrong time” stop you from moving forward. If you feel like you’ve found a good deal, experts say there is truly no bad time to buy a home.
âThe famous saying in real estate is ‘I donât have a crystal ball,’ meaning no one can predict exactly where the market will be at a given time. If a buyer stays within their means and has a financial contingency plan in place if the market adjusts over time, it is the right time to buy,â says Klinefelter.
5. Youâll be stuck and canât relocate
Some people may be hesitant to buy because it means staying put in the same location.
âI always advise my clients that they should plan to stay in a newly purchased home for a minimum of three years,” says McManus. “You can ride out most market swings if they happen, and it also gives you a sense of connection to your new space.”
In a healthy market, McManus says homeowners will likely be able to sell the home within a year or two if they need to move, or they can consider renting out the property.
âThere is always a way out of a real estate asset; knowing how and when to exit is the key,â says Klinefelter.
The post 5 Myths About Transitioning From Renter to Homeowner appeared first on Real Estate News & Insights | realtor.com®.
Earlier this year, I published the post Is Being House Poor Limiting You? While no one ever thinks they will fall into being house poor, it does happen to some. Due to this, when asking yourself the question “how much home can I afford,” it’s best to think about ALL of the expenses that go into homeownership.
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