Recently, I had the privilege to be interviewed by Haley Freeman of Executive Agent Magazine. In the article, we discussed my background, our mission, and other information that don’t get much public viewing. Here is the online version or can be downloaded here.
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!
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.
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.
Home loan payments are now often less than rent payments
If you don’t intend to stay in your home long-term, need extra mobility or are unsure about your employment prospects, renting probably makes good sense for you. But if you’re planning to stick around, owning may prove to be more financially rewarding.
Here are 5 good reasons to own a home:
Housing is a precious commodity that we all need every day. It’s your choice to rent or to own, yet buying a home for yourself usually benefits more than buying one for your landlord.
If you’re ready to make that leap to home ownership or to find out more about what it means to own a home, please contact us!
Check out these tips for smooth filing:
File online. Homeowners earning $64,000 or less per year may file for free using an online system like the IRS FreeFile.
Claim credits. If you earned $53,930 or less in 2016, you may be eligible for an earned income tax credit of up to $6,318.
Ask for help. For federal tax help, use the IRS self-help resources. For help with your state taxes, live chat with a representative from the Franchise Tax Board.
File anyway. File your taxes even if you can’t make the full payment on time. Penalties for late payments may cost you up to 0.5% of your overdue tax bill every month past the deadline.
Apply for extension. Submit a tax extension form (IRS Form 4868) to the IRS by mail or online. Note: Your payment will still be due on April 15, although you may receive up to six months’ extension for filing.
Double-check. Review your documents for incorrect information or mathematical errors. Common mistakes include incorrect Social Security numbers and calculations.
Looking to buy or sell a home? Call me today!
Tips for increasing the value of your home while on a budget
Tip 1: Spend an Hour with a Pro
Invite a realtor or interior designer over to check out your home. Many realtors will do this as a courtesy, but you will probably have to pay a consultation fee to a designer. Check with several designers in your area; a standard hourly fee is normally less than $100, and in an hour they can give you lots of ideas for needed improvements. Even small suggested improvements, such as paint colors or furniture placement, can go a long way toward improving the look and feel of your home.
Tip 2: Inspect it
Not every home improvement is cosmetic. Deteriorating roofs, termite infestation or outdated electrical systems — you can’t fix it if you don’t know it’s broken. Hire an inspector to check out the areas of your home that you don’t normally see. They may discover hidden problems that could negatively impact your home’s value. Small problems (such as a hidden water leak) can become big, expensive problems quickly; the longer you put off repairs, the more expensive those repairs will be.
Tip 3: Paint, Paint, Paint
One of the simplest, most cost-effective improvements of all is paint! Freshly painted rooms look clean and updated — and that spells value. When selecting paint colors, keep in mind that neutrals appeal to the greatest number of people, therefore making your home more desirable. On average, a gallon of paint costs around $25, leaving you plenty of money to buy rollers, painter’s tape, drop cloths and brushes. So buy a few gallons and get busy!
Tip 4: Find Inspiration
An alternative to hiring a designer is to search for remodeling and decorating inspiration in design-oriented magazines, books, TV shows and websites. Simply tear out or print off the ideas you want to try and start your to-do list. Keep it simple — when remodeling on a tight budget, do-it-yourself projects are best.
Tip 5: Cut Energy Costs
The amount of money you spend each month on energy costs may seem like a fixed amount, but many local utility companies provide free energy audits of their customers’ homes. They can show you how to maximize the energy efficiency of your home. An energy-efficient home will save you money now, which can be applied to other updates, and is a more valuable and marketable asset in the long run.
Tip 1: Plant a Tree
If you aren’t planning to sell your house today, plan for the future with a landscaping improvement that will mature over time. Plant shade trees — not only will mature trees make your home more desirable but a fully grown, properly placed tree can cut your cooling costs by as much as 40 percent. Mature landscaping is also good for the environment, providing a necessary habitat for wildlife while adding valuable curb appeal to your home.
Tip 2: Low-Maintenance Landscaping
Paul Cox
No question that shrubs and colorful plants will add curb appeal to any home, but when shopping at your local garden center, make sure that you “think green.” Purchase plants that are native to your region or plants that are drought-tolerant; these require less water and maintenance, which means more savings to you and more green in your wallet.
Tip 3: Money-Saving Luxury
Speaking of water, here’s another way to tap into extra savings; install a water filtration system in your kitchen. Not only do these systems purify your water, they will also lower your grocery bills — no more bottled water. A water filtration system is an inexpensive addition, but it’s the sort of small luxury that homebuyers love.
Tip 4: Improve the air Quality Inside Your Home
Air quality isn’t just about the conditions outdoors. If you have older carpets in your home, they might be hiding contaminants and allergens. The first step to determine if these need replacing is to hire a professional company to test your indoor air quality. If the results prove that your carpets should be replaced, choose environmentally friendly natural products like tile or laminate floors. Hard-surface floors are much easier to keep clean, don’t hold odors, give your home an updated look and, in general, are more appealing to buyers.
Tip 5: Save the Popcorn for the Movies
Finally, what’s on your ceiling? Few structural elements date a house more than popcorn ceilings. So dedicate a weekend to ditching the dated look and adding dollar signs to the value of your home. NOTE: some older ceilings could contain asbestos so before undertaking this project, have yours tested by professionals.
Once you’re in the clear, this is a project you can tackle yourself. First, visit your local hardware store for a solution to soften the texture, then simply scrape the popcorn away. Removing a popcorn ceiling may not seem like a big change but one of the keys for adding value to your home is to repair, replace or remove anything that could turn buyers away.
Tip 1: Clean up the Lawn
Overgrown or patchy lawns and outsized bushes will cause your home to stand out — in a bad way. The good news is that taming your jungle is an easy fix. For a few hundred dollars, hire a lawn service company to trim your lawn and shape your hedges. Your curb appeal will go from messy to maintained without blowing your budget.
Tip 2: Cleanliness counts
The old adage that you only get one shot at a first impression is true. So, make the interior of you home shine from the moment someone walks through the door. For less than $400, hire a cleaning service for a thorough top-to-bottom scrubbing. Even if you clean your home regularly, there are nooks and crannies that you may miss or overlook. Let a cleaning service do the dirty work to really make your home sparkle.
Tip 3: Visually Increase Your Home’s Square Footage
The size of your home dramatically affects the value, but square footage isn’t the only space that counts. Visual space or how large a home feels also counts. The key is to make each room in your house feel larger. Replace heavy closed draperies with vertical blinds or shutters to let light in — a sunny room feels larger and more open. Also, try adding a single large mirror to a room to visually double the space. Finally, clear the clutter. The more clutter, furniture and plain old stuff you have in a room, the more cramped it will feel. For less than $400, add an attractive shelving unit to an underused space and store your clutter out of sight.
Tip 4: Small Bathroom Updates Equal a big Return
Bathroom updates are always a smart move. Even if you can’t afford a full remodel, small changes such as replacing dated wallpaper with a faux or textured finish and replacing old lighting will update the room without denting your wallet.
Tip 5: Add new Energy-Efficient Fixtures
A functional, decorative ceiling fan is a beautiful thing. It provides necessary light and, in warm months, creates a soft breeze reducing the need for expensive air conditioning. But, an outdated, wobbly, loud or broken ceiling fan is a useless eyesore. Replace old fixtures with new ones to make your home more enjoyable for you now and to increase the bottom line should you decide to sell.
Tip 1: Big Return on Bathroom Updates
A great room to update for less than $750 is the bathroom. The two rooms that benefit most from even small renovations are the kitchen and bathroom. One cost-effective change — like replacing an outdated vanity, old plumbing and lighting fixtures or adding a new tile floor — will guarantee a lot of bang for your buck and give your bath an updated, modern look.
Katy Lyons
Tip 2: Any Kitchen Update Equals Added Value
The same rule applies in the kitchen. You don’t have to start from scratch to create a winning recipe. For maximizing your home’s value, kitchen updates are key. Start by swapping out just one item, such as a stained sink or ancient microwave for shiny new stainless models. Even small kitchen updates will add big value to your home.
Experts tell what kitchen improvements offer the most bang for your buck.
Tip 3: Replace Worn Carpets or rugs
Take a look at your home’s soft flooring. Are your carpets and area rugs stained or worn? Nothing turns buyers off more than the thought that they will immediately need to replace all of the flooring in a home. Ideally, you may want to replace them all, but if a limited budget puts a snag in that plan, start by replacing the carpet in the room that shows the most wear and tear and replace the others as your finances allow.
Tip 4: Keep up With Regular Maintenance and Repairs
Walk around your home and make a list of all the little things that are broken or in need of repair. Individually, small repairs might not seem important, but if every room has just one thing wrong, those small things will add up to create the impression that your home has been neglected. If you don’t feel comfortable tackling the repairs yourself, hire a handyman for a day and watch your “to do” list disappear. Staying on top of maintenance today eliminates problems down the road should you decide to sell.
Tip 5: Get Help with Getting Organized
Hire a professional organizer for a day. They will show you how to organize various rooms in your home and teach you tricks for keeping it organized. How does this increase your home’s value? Simple — a clutter-free home appears cleaner and larger, which is more attractive to homebuyers and therefore more valuable.
