“It’s not far, if you know the way.” Maybe it is an obvious statement but there are some definite steps that will improve your success in buying a home in today’s market.
- Know you credit score – the best mortgage rates are available to borrowers with the highest scores. Unless you know what your credit score is at all three major bureaus, you don’t really know what rate you’ll have to pay.
- Clean up your credit – it is estimated that about 90% of credit reports have errors. Some are not serious but others could affect a borrower from getting the best loan terms. It is your responsibility to know what is on your different reports and correct them if possible. You’re entitled to a free copy of your credit report each year from Experian, Trans Union and Equifax.
- Get pre-approved – Taking the time to make a loan application with a qualified lender even before you start looking at homes will provide peace of mind, make sure that you are looking at the “right” homes and may help you negotiate the best price on the home you select.
- Do your homework – when you find the home that meets your needs and desires, research the tax assessments, school ratings, crime activity, possible zoning changes and comparable sales in the area.
As your real estate professional I can definitely help you with these important strategies to invest in a home to call your own, raise your family, feel safe and secure and share with your friends. Call for a recommendation of a trusted mortgage professional; there really is a difference.
It all seems perfectly reasonable: one person is not satisfied with what he can earn currently in the market and another wants to find the most attractive mortgage to purchase their home. It can be a good match but the IRS has specific rules that govern the transaction.
The loan must be done in a business-like manner with a written note specifying the loan amount, interest rate, term and collateral. IRS requires that the mortgage be a recorded lien in order to allow the interest deduction.
Sometimes, these friends and family situations have a less than normal interest rate on the mortgage. However, the rate charged in the note is regulated by the minimum applicable federal rate which is published monthly by IRS according to current Treasury securities. For October 2011, the rate is 2.95% for terms over nine years.
The seller must report the interest paid to them along with the name, address and Social Security number on schedule B when the buyer uses the property as their principal residence.
A mortgage between family and friends can be good for both parties. It may allow the borrower a slightly lower rate without the expenses of a traditional lender while giving the note holder a higher rate than they can earn in available investments. Your tax professional can guide the transaction whether you’re a buyer or seller and your real estate professional can help arrange to have the documents drawn and filed.
Rarely, does one size fit everyone and the same goes for advice. The following suggestion is not right for everyone. However, for people with job security and who don’t own a home; for people with good credit and enough savings for a down payment, there may never be a better time to buy a home.
Homes have had a significant price correction but in many markets, they have started to rise again. The lower prices combined with historically low interest rates make this an opportune time to buy a home if you can afford it.
One of the reasons homes are an attractive investment is that fact that you can use a small down payment and finance the balance for 30 years. The principle, called leverage, allows you to earn a return on the value of the home rather than the actual cash investment. Small appreciation can create a large rate of return on the initial investment of the down payment and closing costs.
The following example is a projection at the end of five years for a $175,000 home with 3% closing costs and a 5% interest rate for a 30 year term. The rate you see in each column is an annual rate of return based on the equity of the home at the end of the five year period due to both appreciation and amortization of the loan.
The nature of positive leverage will cause the returns to be higher with a smaller down payment. As you see in the table, the return is higher on the 3.5% down payment than with the 10% or 20% down payment.
If you’re curious to see if this advice might fit your situation, you really need to sit down with a knowledgeable real estate professional who can help you assess your position. It’s worth the time because there may never be a better opportunity than now.
It takes money to buy a home: yours or theirs. If you’re not going to pay cash for a home, you need to find out exactly what you can borrow and what it will cost before you start looking at homes.
The mortgage process is not as clear cut a path as it was a few years ago. It is certainly more complex, takes longer and assumes that you’re credit worthy. If you have less than stellar credit, a trusted mortgage professional can advise you how to improve your individual situation.
You are entitled to a free credit report from each of the three major credit bureaus each year. Go to AnnualCreditReport.com to get a copy of each from TransUnion, Experian and Equifax. Read the reports to determine if they’re accurate. Surprisingly, about 90% of all reports have errors.
You can try to correct them directly with the credit bureau, but a trusted mortgage professional can help you with this process too. They have tools that are not available to individuals. Some errors may not be serious but others will keep a person from qualifying.
Housing affordability is at a near record height due to the incredibly low interest rates and low home prices. Some areas are experiencing absorption of the inventories which could impact price. If you’re going to use “their” money to buy a home, the first step is to talk to a trusted mortgage professional. Call me for the name of a trusted mortgage professional.
If you had a 3.5% mortgage on your current home and were buying another home, transferring your low interest rate mortgage would be ideal. Unfortunately, lenders don’t allow that.
When buying a home today, it would be smart to think about selling it in the future. To have a good home with unique features makes it marketable. To have attractive financing that could be assumed would add to the salability.
Consider getting a FHA or VA loan to purchase your home. The present advantages are that these loans are priced competitively and a little easier to qualify for than conventional loans. The future advantage is that FHA and VA loans are assumable at the original note rate for qualifying buyers.
There’s more to sell than the home itself when you have an assumable loan. The mortgage payment could lower the cost of housing significantly. A buyer may easily be willing to pay more for the home due to the attractive financing, especially if it helps their equity grow faster.
To say the investment market is unsettling is an obvious understatement. The market is down 8.0% in the last ten days and the news doesn’t give much hope that things are going to get better in the near term.
Preservation of capital is probably today’s most important investment consideration and making a profit would be a bonus. Of all the conventional investment alternatives like stocks, bonds, mutual funds, gold, commodities, CDs and annuities, housing is the best asset class in America.
Homes have had a 30% to 40% price correction in the past four years. Mortgage rates are at near all-time low rates with 30 year terms available for investors. Rents have increased significantly over the past two years while vacancy rates have decreased. People will always need a place to live.
Five year certificates of deposits earn a little over 2.0% APR but rental properties are yielding eight to ten times more than that. Income properties are tangible assets that have benefited dramatically in inflationary times. Cash assets can be devastated by inflation and diversifying into income properties can provide real protection.
Single family homes offer investors the opportunity to borrow large loan-to-value mortgages at fixed rates for long terms on appreciating assets with tax advantages and reasonable control. Investing in rentals can provide stability, safety and a higher rate of return.
It is the mantra of people who missed a great deal. It’s the theme song of the procrastinator. It’s the refrain that reminds us of the one that got away.
Some people are still beating themselves up because they didn’t recognize the housing bubble was really going to burst. It is impossible to change the past but will they see the signs of the next housing trend?
In the past four years, prices have adjusted with 30% corrections nationally and much more in areas with high percentages of foreclosures. New homes are almost non-existent. Interest rates are slightly above record lows. Consumer goods are skyrocketing; our budget deficit and national debt are staggering and escalating inflation appears certain.
“Forget stocks. Don’t bet on gold. After four years of plunging home prices, the most attractive asset class in America is housing.” states Shawn Tully, Senior Editor at-Large for Fortune magazine in a March 28, 2011 article.
“If I would have known that this was the best buyer’s market ever, I could have taken advantage of the prices and interest rates; I should have fixed my cost of housing for years to come.” Don’t catch yourself saying this. You owe it to yourself and your family to get firsthand information to see what your options really are.
A typical household uses 185 to 300 gallons of water a day and the majority of it goes down the drain from the toilet and the shower. Updating your commodes will serve as a conservation effort while lowering your water bill.
Today’s toilets use less water, prevent staining and resist clogging better than the older toilets and you might be surprised at how easy they are to install. Replacements generally cost from $100 to $300.
Toilets made in the 1950′s used, on average, seven gallons per flush. Compare that with one that only uses 1.6 gallons per flush and it’s a big saving. Multiply by the times a toilet is flushed in a year and the number of toilets in your home and it will save a lot of water.
| Gallons of Water Saved in a Year with 1.6 gpf |
| Age of Toilet |
Gallons Per Flush |
Flush 3 times a day |
Flush 5 times a day |
| Prior to 1950′s |
7.0 |
5,913 |
9,855 |
| 1960′s |
5.5 |
4,271 |
7,118 |
| 1980′s |
3.5 |
2,081 |
3,468 |
| After 1994 |
1.6 |
- |
- |
Watch this video to see how easy the project is done and even if you decide to hire a plumber, you’ll have a better understanding of how it works.
There are homeowners that would like to have a larger/nicer home but are patiently waiting for the market to improve. A frequently heard objection is that they can’t sell their home for what it is currently worth. 
Buying up in a down market is actually advantageous because while you might get less for the home you’re selling, you’re also getting the larger home for less. For instance, if you had to sell a $200,000 home for a 10% discount, you might feel that you left $20,000 on the table. However, buying a $300,000 for the same 10% discount would put you $10,000 ahead on the sale and purchase.
The other obvious matter is that when the mortgage rates increase while you’re waiting for the market to improve, it dramatically increases your cost of housing with higher payments. The cost of housing is affected by price and mortgage rates.
To accurately evaluate your current options, you need facts and assessment tools that will provide you the information to make an informed decision.
Targeting the Mortgage Interest Deduction
It’s obviously going to be a Herculean task for Congress to balance the budget and reduce the deficit. It’s sort of like the country song lyric that goes “everyone wants to go to Heaven but nobody wants to go now.” It is estimated that the mortgage interest deduction cost the government $100 Billion last year which is why it is a target for cuts.
The Mortgage Interest Deduction has been part of Income Tax laws in this country since 1913. The United States of America is one of the few countries in the world that allow such a deduction. Our goverment has always supported homeownership as is evidenced in the different tax benefits it receives.
- Mortgage interest deuction up to $1,000,000 in acquisition debt on a principal residence and second home
- Deduction of interest on Home Equity debt of $100,000 over acquisition debt used for any purpose
- Capital gain exclusion on up to $500,000 for married couples filing jointly and $250,000 for single homeowners
- Favorable long-term capital gain rates if gain exceeds exclusion limits
- Property tax deduction
There is an interesting relationship between a good economy and a healthy housing market. Contrasted to profits from the stock market which tend to be plowed back into other investments, profits from home sales tend to be spent on consumer products that directly benefit the economy.
The National Association of REALTORS supports the MID and reports that one job is created for every two homes sold. It further states that $60,000 is pumped into the economy for each home sold and that homeownership accounts for over $2 Trillion of the U.S. gross domestic product.
American homeowers are currently paying 80-90% of all federal income tax collected. Some economists believe that a healthy housing market is a leading indicator for economic recovery and that tampering with a significant homeowner benefit like the mortgage interest deduction would hurt the economy.
