Tips For New Homeowners

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Change your Locks … As a new homeowner, you have no idea who may have a key to your new home. Re-keying the existing locks or installing new locksets will add an increased level of security and peace of mind.

Discarding boxes … Placing the box of a new TV on the curb could be an unintentional announcement to thieves.  Breaking those boxes down and putting them in your receptacles could be a safer way to dispose of them.

Displaying Your Name … Even though you may be very proud this is your home, it is probably better not to use name plates on your mailbox or door.  It may be more prudent to make it less convenient to tell strangers who you are.

HOA or Mail List … It is good to communicate with the neighbors because you have shared interests.  Recommendations of vendors, to local customs and posting for help locating a lost pet can be very easy through a website or by email.  It makes it easy to stay up to date with what is going on in the neighborhood.

Home Inventory … You’ve probably purchased some new things now that you have a new home and you may have gotten rid of some things that you had in your old home.  It is a good time to make a new inventory of your personal belongings.  You can do it with pictures or video or download this free Home Inventory.

Water Shut Off … Locate the main water shut off valve and learn how to use it.  If a water key or special tool is needed, purchase one and put it in a convenient spot so you can get to it quickly in an emergency.

Downsizing is an Alternative

 

Dream home concept

It is estimated that over 15% of the population in the U.S. are over 65 years of age.  With one of the most common fears of seniors being their money will run out early, it is understandable that downsizing may be strategy to meet their goals.

Once the kids are grown, have careers, relationships and get a place of their own, parents find they may not need their “big” home like they did before.  In other situations, their lifestyle might have changed, and the house just doesn’t “fit” anymore.

The benefits of a smaller home can include the following:

  • Easier to maintain
  • Lower utilities
  • Lower property taxes
  • Lower insurance
  • More convenient location
  • Single level
  • Possibly more energy efficient
  • Possibly lower maintenance

Like any other big change in life, it is recommended that a person should take their time to consider the possible alternatives and outcomes.  Are they going to stay in the same area?  What type of property would suit their needs for the future?

The tax-free exclusion allows a homeowner to take up to $250,000 of gain for single taxpayers and up to $500,000 for married taxpayers.  Part or all of this could be used to generate income for retirement.  Other uses for the equity could include paying off other debt, taking the trip of a lifetime or making a special gift.

There will be expenses involved in selling a home as well as the purchase of a new home.  These will lower the amount of net proceeds you’ll have to invest in the new home.

Homeowners should consult their tax professionals to see how this applies to their situation.  Please contact me at (206) 979-9632 or David@TheHarlanTeam.com if you have any questions about what your home is worth or how long it might take to sell it.  Other things that could be of value are our Homeowners Tax Guide or Sellers Guide.

Steps in Home Buying Process

showhome viewing

The process of buying a home can be different based on the price range and whether a mortgage is needed.  While some things are different, others are similar regardless of price, financing or local customs.

Each year, the National Association of REALTORS® surveys buyers and sellers who have purchased or sold in the previous twelve months in order to identify the process and steps taken.  It provides a lot of information for the people who will be going through the process now and in the near future.

44% of all buyers looked online for properties for sale.  This might be considered a logical first step to determine the prices of homes in certain areas and what features they offered.

17% of all buyers stated that their next step was to contact a real estate agent.  In another REALTOR study, it is reported that 87% of all buyers purchased their home through a real estate agent or broker.  Buyers identify a wide range of services the agents offer that is considered valuable in the purchase of a home.

The next step identified by most buyers is to look online for information about the home buying process.  In many cases, agents share this information in their first substantial meeting but since it is identified as the third highest steps taken by buyers, some people may not be getting adequate information from their agents or they are verifying the process as explained to them.

The fourth step identified by buyers is to contact a bank or mortgage lender.  The position this step takes place is interesting because many real estate professionals suggest that it be one of the first things buyers should do.  The reason is to find out how much mortgage they can qualify for, so they are looking for homes in the right price range.  This can save a lot of time and frustration.

The three next highest steps included driving by homes and neighborhoods, talking with a friend or relative about the home buying process and visiting open houses.

The buyers in this study mentioned that they depended on several sources for information during the home search.  The most frequently used were online website, their real estate agent, mobile search device, open houses and yard signs.

The three most difficult steps listed were finding the right property, the paperwork and understanding the process and steps.

You can download a Buyers Guide that has a lot of interesting information.  We have an array of Financial Apps that can provide insight on things like Rent vs. Own, Mortgage Payment and Your Best Investment.  And of course, I’d be happy to schedule an appointment with you to go over all these things and talk to you about finding your next home.  Call me at (206) 979-9632.

Invest in Equity Build-up

Which color do you like the most?

Equity build-up could be one of the biggest advantages to buying a home.  There are two distinct dynamics that take place to make this happen: each house payment applies an amount to reduce the mortgage owed and appreciation causes the value of the home to go up.

It is easy to make a projection based on the type of mortgage you get and your estimation of appreciation over the time you expect to own the home.  Even conservative estimates can produce impressive results.

Let’s look at an example of a home with a $270,000 mortgage at 4.5% for 30 years and a total payment of $2,047.55 payment including principal, interest, taxes and insurance.  The average monthly principal reduction for the first year is $362.98. If you assume a 3% appreciation on the $300,000 home, the average monthly appreciation is $750 a month.

The total payment of $2,047.55 less $1,112.98 for principal reduction and appreciation makes the net monthly cost of housing, excluding tax benefits, $934.57.  If this hypothetical person was paying $2,500 in rent, it would cost them $1,565.43 more to rent than to own.  In the first year, it would cost them over $18,000 more to rent.

Together, the items in this example contribute over $1,100 to the equity in the home .  This is one of the reasons a home is considered forced savings.  By making your house payments and enjoying increases in value, the equity grows and the net cost of housing decreases by the same amount.

In this same example, the $30,000 down payment grows to $133,991 in equity in seven years.  While this is equity build-up, the extraordinary growth is attributed to leverage.  Leverage is an investment principle involving the use of borrowed funds to control an asset.

To see what your net cost of housing and the effect of leverage will have on a home in your price range, see the Rent vs. Own.  If you have questions or need assistance, contact me at (206) 979-9632.

One Loan for Purchase & Renovations

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The FNMA HomeStyle conventional mortgage allows a buyer to purchase a home that needs renovations and include them in the financing.  This facilitates the purchase of the home and the renovations in one loan rather than getting a separate second mortgage or home equity line of credit.

The combination of these loans should save closing costs as well as interest rates which would typically be higher on a home improvement loan.

The borrower will need to have an itemized, written bid from a contractor covering the scope of the improvements.  Any type of renovation or repair is eligible if it is a permanent part of the property.  Improvements must be completed within 12 months from the date the mortgage loan is delivered.

  • 15 and 30-year fixed rate and eligible adjustable rate loans are available.
  • Typical FNMA down payments are available starting as low as 3% for a one-unit principal residence to 25% for three and four-unit principal residence and one-unit investment properties.
  • Borrower must choose his or her own contractor to perform the renovation.
  • Lender must review the contractor hired by the borrower to determine if they are adequately qualified and experienced for the work being performed. The Contractor Profile Report (Form 1202) can be used to assist the lender in making this determination.
  • Borrowers must have a construction contract with their contractor. Fannie Mae has a model Construction Contract (Form 3734) that may be used to document the construction contract between the borrower and the contractor.
  • Plans and specifications must be prepared by a registered, licensed, or certified general contractor, renovation consultant, or architect. The plans and specifications should fully describe all work to be done and provide an indication of when various jobs or stages of completion will be scheduled (including both the start and job completion dates)

Up to 50% of the renovation funds may be advanced for the cost of materials after the closing of the loan.

This mortgage does have a provision for the borrower to do a portion of the work themselves if it doesn’t exceed 10% of the total project and it must pass inspection on completion just as the contractor’s work.

It is recommended that borrowers thoroughly research this program before they commit to a loan.  For detailed information, see FNMA HomeStyle Renovation Mortgage and Selling Guide Announcement SEL-2017-02.   It is important to work with a mortgage officer who is familiar with these loans who can guide you through the process.