March 2017 | Balner & Co.Balner & Co.

Category: (5)

Mar

Do I Need to Sell Before I Buy?

Although every situation is unique, it is not uncommon for homebuyers to qualify for a mortgage on a new home while still living in their primary residence.

Perhaps you are outgrowing your current house, or have been forced to relocate due to a job transfer? Regardless of the motivation for keeping one property while purchasing another, let’s address this question with the mortgage approval in mind:

So, Do I Need to Sell Before I Buy?

Yes. No. Maybe. It depends.

Welcome to the wonderful world of mortgage lending. Only in this industry can one simple question elicit four answers…. and all of them may be right for the right situation.

If you are in a financial position where you qualify to afford both your current residence and the proposed payment on your new house, then the simple answer is NO!

Qualifying based on your Debt-to-Income (DTI) Ratio is one thing, but remember to budget for the additional expenses of maintaining multiple properties. Everything from mortgage payments, increased property taxes and hazard insurance to unexpected repairs should be factored into your final decision.

What If I Rent My Current Property?

This situation presents the “maybe” and the “it depends” answers to the question.

If you’re not quite qualified to carry both mortgages and housing expenses, you may have to rent the other property in order to offset the mortgage payment.

In that scenario, the lender will typically only count 75% of the monthly gross rent you are proposing to receive. So if you are going to receive $1000 a month in rent and your current payment is $100, the lender is going to factor in an additional $750 of monthly debt in your overall Debt-to-Income Ratios.

If you would like more information on whether you need to sell before you buy, please contact us today!

Mar

Home Inspections

We’re often asked if a home inspection is required. The answer is usually no, but that doesn’t mean you shouldn’t have one done. You’re making a large investment. Having a professional inspector alert you to potential problems can save money and surprises in the long run.

There are other reasons to have a home inspections too. If the appraiser sees an apparent deficiency in the condition of the home, an underwriter may ask to see the related section of the home inspection (sometimes called the engineer’s report). In this instance, having secured an inspection up front can save you valuable time. Additionally, identifying problems early in the process may mean the seller will remedy them prior to sale.

purchasing a home with the assurance of good condition-or at least the knowledge of any potential issues-makes for more accurate pricing and cost expectations. Both of these are clearly to your benefit. By comparison, the cost of an inspection is small.

Please contact us when you have questions or need referrals to qualified professionals.

Mar

Updates to Conventional Financing

In the world of conventional financing, specifically, Freddie Mac, there are a number of policies changes relating to income requirements. Below are the changes pertaining to loans submitted to underwriting on or after March 6, 2017:

Employment Income
- Pay stubs are no longer required to reflect at least 30 days of earnings. A pay stub documenting all YTD earnings for the most recent calendar year is now acceptable.
Commission Income
- Commission income that is less than 25% of the borrower’s total income will not require 1040s and will not need un-reimbursed expenses to be deducted.
Dividend or Interest Income
- Year-end asset account statements for the most recent two years reflecting the dividends/interest paid out may now be used in lieu of tax returns.
Self-Employment Verification
- If a business is in existence five or more years, one year of tax returns must be provided. If less than five years, the two most recent years of tax returns must be provided – regardless of Streamline or Standard documentation feedback.
- A Verification of Business (VOB) can now be dated 120 days prior to the Note Date.

If you have any questions regarding your qualifications for a home loan, please contact me today. Balner and Co can provide resources to get your questions answered!

Mar

If You Really Love That Home…

DON’T LOSE THE BID

In this housing market, the best deal doesn’t always come with the lowest price.

Price vs Payments – If you’re financing your purchase, you’ll probably never come close to paying the actual price. You’re making a comparatively small down payment and then paying interest on the loan until you refinance or sell. Yes, you will have a higher payment if you pay more for the home, but an extra $10,000 of mortgage money can add less than $50 per month on a low-rate, 30 year loan.

Relative Prices – Our natural tendency to pay as little as possible is not as meaningful for an investment, such as a home, as it is for a consumer product. In this case, what you pay now can affect your sales price later. There may be little difference in total earnings if you pay less or pay more and sell for more.

Influencing Value – For appraisers, the last sale or “comp” in an area sets the value for similar home. Whatever you pay helps establish what your home and comparable properties are considered to be worth.

Setting the Trend – If you pay less for your home than was paid for the last similar home, you may be contributing to a downward price trend, which can be difficult to reverse. Conversely, helping to maintain a trend of price appreciation can end up paying you back many times over.

One Chance – No two homes are ever exactly the same. Even when structure matches, your land, your view, your address and your immediate neighbors will always be different. You truly may have only one chance at the right house. Industry professionals have all seen buyers lose out on what they really wanted. We don”t want that to happen to you. Nor do we want you to pay more tomorrow for something less than what you could have had today as a result of increasing prices and rates.

Reach out, and we’ll be happy to help you weigh your options for the home you really love to own today.

Mar

Renting vs Buying A Home

Buying a home versus renting is a big decision that takes careful consideration.

While there are several biased sources that can make arguments for or against owning a home, we’ve found that most home buyers base their ultimate decision on emotion.

Yes, there are some tax advantages of owning real estate, as well as the potential to earn equity or pay a mortgage note off after several years.

However, let’s address some of the more obvious topics:

Benefits of Renting

Lower Acquisition Cost
Compared to the cost of about 1-3 month’s rent payment, it’s obvious that renting a home makes financial sense in the short term.

Lower Qualifying Standards
Generally, proof of employment / income and a decent credit history (or a good explanation) is needed to rent.

Increased Mobility
If you’re planning on moving in the next 3-5 years, then it may become cost-prohibitive if you own due to the amount of equity you’ll have to gain in the short-run just to cover the cost of paying an agent, buyer closing costs, and transfer taxes.

Less Maintenance and Cost
If something breaks, a simple call to the property management company will generally solve the issue in 48 hours or less.

Benefits of Owning

Pets Are Allowed
It may seem like a funny benefit to mention first, but the millions of dog and cat lovers would definitely rank this towards the top of their list.

Peace-of-Mind and Security
You don’t have to worry about a landlord’s financial ability to make mortgage payments on time.

Pink and Purple Walls
You can paint the inside of your house any color.

Tax Benefits
The IRS has created certain tax incentives making it possible for many homeowners to exceed the standard yearly deduction.

Stability
Remaining in one neighborhood for several years lets you establish lasting friendships, as well as offers your children the benefit of educational continuity.

Appreciation of Property
From 1972 through 2005, home prices increased on average 6.5%, according to the National Association of Realtors.

Forced Savings
The monthly payment helps in repayment of the principal amount.Increased Net Worth
Few things have a greater impact on net worth than owning a home.

While the available tax advantages and potential for earned equity are generally highlighted by most industry professionals as the top reasons to own real estate, it’s important to remember that markets go through cycles. However, owning real estate that appreciates more than the rate of inflation may help contribute towards your overall investment portfolio.