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5 essential money moves for first-time homebuyers

5 essential money moves for first-time homebuyers

You’ve decided to go for it while mortgage rates are still at attractive lows.

Buying a house can be thrilling — and nerve-wracking — for a first-time buyer. The learning curve is steep, but doing a little financial homework will help you navigate the process.

Take these five steps to make your homebuying experience go smoothly.

1. Check your credit

The homebuyer’s credit score is one of the most important factors in qualifying for a loan.

“In addition, the standards are higher in terms of what score you need and how it affects the cost of the loan,” says Mike Winesburg, a former mortgage planner and wealth adviser in Wheeling, West Virginia.

Scrutinize your credit report for mistakes, unpaid accounts or collection accounts. Get your credit report and credit score for free today at myBankrate.

Just because you pay your bills on time every month doesn’t mean you have excellent credit. The amount of credit you’re using compared with your available credit limit, known as your credit utilization ratio, can hurt or help your overall credit score.

The lower the utilization rate, the higher your score. Ideally, first-time homebuyers should have a lot of credit available, with less than a third of it used.

But if you owe more compared with your income than lenders like to see, your credit may need work. Start tidying up your credit at least six months before you start shopping for a house.

2. Evaluate assets and liabilities

So you don’t owe too much money and your payments are up to date. But how do you spend your money? Do you have a lot left over every month, or are you on a shoestring budget?

A first-time homebuyer should have a solid idea of what is owed and what is coming in.

“You should understand a little bit about monthly cash flow,” Winesburg says. “If I were a first-time homebuyer and I wanted to do everything right, I would probably try to track my spending for a couple of months to see where my money was going.”

Buyers also should have an idea of how lenders will view their income, and that requires becoming familiar with the basics of mortgage lending. For instance, some workers who are self-employed or work on straight commission may have a harder time getting a loan than others.

The self-employed or independent contractor will need a solid two years’ earnings history to show a lender, Winesburg says.

3. Organize documents

When applying for a mortgage, homebuyers must have proof of income and taxes.

Mortgage lenders typically request two recent pay stubs, W-2s from the previous two years, tax returns and bank statements from the past two months. They want every page of the statements, even the blank ones.

“Why it has to be every single last page, I don’t know. But that is what they want to see. I think they look for nonsufficient funds or odd money in or out,” says Floyd Walters, owner of BWA Mortgage in La Canada Flintridge, California.

Knowing which documents you need and where to find them can save time.

4. Qualify yourself

As a first-time homebuyer, you should know already how much you can afford to spend before the mortgage lender tells you how much you qualify for. Bankrate’s “How much house can I afford?” calculator will help.

By calculating debt-to-income ratio and factoring in a down payment, you will have a good idea of what you can afford, both upfront and monthly.

A standard rule for lenders is that monthly housing expenses should consume no more than 28 percent of your gross income. This percentage is called the front-end ratio.

The back-end ratio includes all debts, including housing expenses, credit cards, car loan, etc. This ratio should be 36 percent or less, but some borrowers get mortgage approval with back-end ratios of 45 percent or higher.

“Find out what you can afford and then you can back into everything else. We know the money you have available to put down, we know the monthly payment and we can solve (the equation) for the third variable, and that is the home price,” Winesburg says.

5. Figure out your down payment

It takes effort to scrape together the down payment. There are programs that can offer financial assistance to help buyers qualify.

“I’ve helped arrange assistance loans for $10,000, which are interest- and payment-free, and forgivable after five years. Although considered a loan, they’re more like grants. Other programs can provide up to $40,000 interest-free,” Winesburg says.

“Each state is different, but most of this money comes from the HOME Investment Partnership Program, which is a federal block grant to create affordable housing,” he says.

Finally, talk to mortgage lenders when you’re starting the process. Check with friends, co-workers and neighbors to find out which lenders they enjoyed working with and ask them questions about the process and what other steps first-time homebuyers should take.

Source: bankrate.com ~ By: Sheyna Steiner ~ Image: pixabay

Getting Ready to Downsize? Factors to Consider

Getting Ready to Downsize? Factors to Consider

As you age, you may decide that less is more. When you downsize your home, there can be less to pay for, less to take care of and less to worry about. Although the decision sounds simple, there is a lot to consider before you put your current home on the market.

Finances

Depending on where you live and where you intend to live, it may not be financially possible to relocate. For instance, you may have a large house in the Midwest, but a desire to move to a smaller property with an ocean view. There’s a chance you won’t make enough money from the sale of your house to buy a new home without the help of a mortgage.

If you’ve lived in your home for some time and are looking for a newer house, you may not be able to afford the home of your dreams without financing. Even if an even swap is possible between your current and new homes, there may be association fees or higher property taxes that exceed your budget. Be sure that you know the financial details well in advance of the move.

Family Size

As you age and children leave the nest, you may think that you no longer need as much room. But what if the children come home again? The Pew Research Center found that in 2016, 15 percent of millennials were living in their parents’ home. This is nearly double the number of people of the same age group living in their parents’ home in 1964. The job market, college debt and the rising cost of living all contribute to this change. Keep in mind that it may not just be your children moving home—they may also bring their partners and their children.

Location

Location is important for more than just resale value. If you want to travel, or if you want to be easily accessible to friends and relatives, you probably want to live in a town near an airport. Also, give great consideration to the community that you’re interested in moving into. Choose a community that has the resources that are important to you; these may include houses of worship, community centers or public transportation.

If you’re considering a gated community, look into the services offered. You’ll likely want to continue doing activities you enjoy and maybe even find new hobbies. If you love gardening, don’t move to an association that won’t let you plant outside. If you’re a fan of woodworking, some associations have hobby rooms with tools available for you to use. If you’re a card shark, it might be hard to find people to play cards with during the day if most people in your neighborhood are younger and at work.

Layout of the Home

There’s a lot to be said for a two-level house, including privacy and the small dose of exercise one gets from going up and down a flight of stairs. But what seems a minor inconvenience when you’re 55 years old might be a major difficulty when you turn 70. If you decide to get a home with more than one level, choose one with a bathroom on the same floor as your bedroom. Or, look into whether the home can be outfitted with assistive devices, like chair lifts.

Other things to consider include easy access to a washer and dryer, outdoor access and parking.

What You’ll Take With You

If you’re moving from the home where you raised a family, you’ll likely have many things to contend with. You may need to decide what you can live without. Sure, you can take pictures and all of your children’s middle school awards, but are you prepared to let go of other cherished belongings if you move to a smaller home? Give thought to whether you can truly downsize your life and still feel at home.

Finally, realize that if you haven’t found exactly the right setup for your lifestyle, you can always move again. After all, if a home is a person’s castle, shouldn’t you be happy in yours?

Source: blog.rismedia.com ~ By Nancy Kupka, Ph.D., RN

What to Consider When Selling Your Home in a Rising Rate Environment

What to Consider When Selling Your Home in a Rising Rate Environment

There are many economic variables to consider when selling your home when interest rates are rising. If that’s the only changing economic variable, you’re generally going to see a negative impact on both home sales and home prices. This means as interest rates rise, the buyer pool for your home is going to shrink.

In 2008, the Federal Reserve set rates at 0.25 percent because of the recession and the lack of buyer confidence or demand. Since then, buyer confidence and buyer demand have risen. In December 2015, rates climbed to 0.5 percent and continued to rise to where they are today at 1.5 percent. The Fed has noted rates will rise to 2 percent in 2018 and then 3 percent by 2020.

What Happens to the Ability to Sell Your Home With These Rises in Interest Rates?

If interest rates rise 1 percent and all other economic factors remain the same, purchasing power for homebuyers will decrease by just over 11 percent; therefore, every quarter-percent (0.25 percent) rise of interest rates reduces homebuyer purchasing power by 3 percent.

That means for a home purchase of $300,000, a 1 percent interest rate rise reduces buying power to just under $267,000. So, someone who potentially may have been able to purchase your home may no longer have the buying power to do so. This creates a smaller buyer pool and less demand for your home. It’s also likely to increase supply as fewer people are able to purchase homes.

If mortgage rates rise, it becomes more probable for indecisive buyers to rush into the market, and the short term will likely see a decent boost; however, it could add extra pressure if rates continue to rise without leveling out.

While interest rates play a role in the housing market, there are a variety of personal and economic factors to consider, as well.

What Other Economic Factors Play a Role?

Supply and demand play crucial roles in determining the movement of home prices. If supply goes up, home prices go down. If supply goes down, home prices will probably go up. If demand increases, home prices mostly likely will as well; however, if fewer people are looking to buy homes, then prices will most likely decrease. As a seller, these are important factors to consider when putting your home on the market.

The sale of new homes is another factor to consider alongside rising interest rates because supply and demand will always play a factor in the home-buying process. Supply increases when new homes are created. Assuming that interest rates don’t rise too rapidly, paying attention to new-home inventory levels will give you an indication of what to expect as a seller.

Monthly income, as it relates to monthly mortgage payments, is a more important variable to gauge than interest rates alone. Your debt-to-income ratio plays a larger factor in your ability to qualify for a mortgage than interest rates alone. When monthly income rises, your ability to absorb higher interest rates does, as well. This means that as long as people are making more money, they’ll also be able to pay off any increase in debts.

When the real estate market crashed in 2007-2008, monthly payments of principal and interest were nearing 25 percent of the U.S. median family monthly income. Even with a rise in interest rates, Americans are currently seeing the highest monthly median income in the last 35 years. Because of this, the percentage of monthly income going toward monthly payments is still well below levels that analysts consider dangerous.

Overall, we seem much more hesitant to take out mortgages than we have been in the past.

One of the largest surprises is the percentage of all-cash transactions for home purchases. Even with interest rates at historic lows, the percentage of all-cash transactions is higher than normal because we’re more cautious about taking on debt than we have been in recent decades.

High stock market valuations allow people to diversify their percentage of assets, cash out and reinvest in real estate to keep their portfolio balanced.

The number of distressed properties is a result of a strong job environment. This allows folks to pay their mortgages without defaulting, while also helping to keep prices up even with a rise in interest rates.

While interest rates play a large factor in selling your home for top dollar, they’re in no way the only deciding factor. All of the factors mentioned above should be taken into consideration before you rush into selling your home because of high interest rates.

Source: rismedia.com ~ By Ryan Fitzgerald

10 Simple Home Spruce-Ups for Under $75

10 Simple Home Spruce-Ups for Under $75

Making a few upgrades to your home and yard doesn’t have to cost a bundle. Décor advisors at This Old House Magazine offer 10 easy spruce-ups you can do in just a few hours for $75 or less:

Enhance your bath space. Install a stainless-steel shower caddy with adjustable shelves to hold soaps, shampoos and more. Find one at the home store for $30 or less.

Add a backsplash to the vanity. Tile the wall behind the bathroom vanity with a wide variety of suave or colorful tiles available for about $1 per tile at home stores.

Create kitchen counter space. Hang the microwave in a wall-hung cubby. An oak microwave shelf kit is available from rtacabinetstore.com for under $50.

Bring the outside in. Brighten up your kitchen with a small potted fruit tree and harvest oranges every winter. Try a Dwarf Washington Navel Orange tree for $40 from fourwindsgrowers.com.

Revive wooden floors. Make dull wood floors shine without sanding with a coat of Minwax Hardware Floor Reviver, about $15 at Sears and other retailers.

Jazz up a swinging door. Got a plain swinging door? Give it some character with a pair of attractive push plates, like the hand-rubbed bronze plates (about $55) or other styles from CharlestonHardware.com.

Maximize natural light. Make a small room look larger by hanging mirrors that bounce light. Find a large selection of shapes and sizes at home and hardware stores for under $75.

Organize your entry. Hang a mail and key holder just inside the door. Target has them for under $10.

Line a closet with cedar. Lowes and other home stores carry cedar v-groove plank paneling at a cost of $60 for two boxes, enough to cover 30 square feet.

Hang a tree swing. Hang a rope swing from a limb that’s at least 8 inches thick. Use a ⅝-inch stainless-steel eyebolt secured with a washer and two nuts. A swing with a disc-shaped wood seat is about $45 from the originaltreeswing.com.

Source: rismedia.com

SOLD – 1624 BRAYTON AVE Escalon

SOLD – 1624 BRAYTON AVE Escalon

SOLD for $405,000

Charming downtown Escalon home with lots of curb appeal. 2330 Sq Ft, inside laundry room, 3 car detached garage, office or 4th bedroom and three bathrooms. Formal living and dining room with a large family room with a functional floor plan. Pool with waterfall, pool room with toilet & sink, RV parking and more. New pool pump motor & pool sweep. 1/3 acre lot with alley access.

SOLD – 13451 9721 Salinas St. La Grange

SOLD – 13451 9721 Salinas St. La Grange

SOLD for $350,000

Spacious foothills custom home with views of Lake Don Pedro. A two story home with over 2000 Sq ft, 4 bedrooms and 2 baths, featuring a sunroom with balcony, separate laundry room, upstairs office, and a large loft perfect for game room or pool table. This home also includes a small workshop with outside access and a good sized steel storage shed with roll up doors. New laminate flooring and brand new upstairs bathroom. Great home for vacation or year round. Many recent improvements, must see.