A home warranty is a service contract that protects your home's appliances and some systems from repairs or possible replacements. A convenient benefit of a home warranty is that when you report an item, they will assign a service provider to evaluate whether it should be repaired or replaced without the owner having to act like a middleman. Homeowner's insurance is required by most mortgage lenders when there is an outstanding loan. This coverage protects the structure and the dwelling and the homeowner's personal property from named occurrences like theft, natural disaster, or accident. Homeowner's insurance does not cover the systems and appliances for repairs or replacements due to normal wear. The fees for home warranties can vary based on deductibles and how much of the risk the homeowner is willing to accept. Additional items can be included to the standard coverage to include pool, spa, additional refrigerators, septic tanks, and other items. There may also be some … Continue reading...
Thoughts on Credit and Getting a Mortgage
Credit plays a huge role in getting a mortgage because it is a variable that helps the lender determine the likelihood that the loan will be repaid on a timely basis. Credit bureaus evaluate people's credit worthiness using a FICO score. The higher the score the better the borrower's credit. The mortgage rate charged to a borrower depends on their credit score. There is an inverse relationship between credit score and interest rate changed. The higher the score the lower the rate and the lower the score, the higher the rate. Two separate buyers with the same income, purchasing the same price home may both be approved by the lender, but they may be charged different interest rates based on their credit scores. You could save thousands of dollars over the life of a loan by improving your credit score by just a few points. A $350,000 mortgage at 3.5% has a principal and interest payment of $1,571.66. By improving your credit score to qualify for a 3% rate, it would save $96.04 a … Continue reading...
First Love, Second Wife or Third REALTOR
There is a story of a real estate agent's prayer: "Dear Lord, if I can't be someone's first love, or second wife, at least, please let me be their third REALTOR®." In a normal market with a balanced supply of sellers and buyers, this describes the preference that it might be better to be the third listing agent to help the seller after they became more realistic about their list price. In today's market, it might have more to do with buyers because of the increased competition, their chance of having an accepted offer is greatly reduced and it is only after they have lost several that they become more aggressive in the negotiations. Competition for homes being sold has greatly increased over the previous two years, according to a recent REALTORS® Confidence Index Survey from NAR. In April of 2021, there were nearly five offers for every home sold which increased from two offers in 2019 and 2020. Utah reported the highest number of offers per home sold with seven while Arizona, … Continue reading...
Simple Rates of Return
Looking for a simple way to determine if a rental property will give you the rate of return you want? This modified annual property operating data may be just what you've been looking for. There are many different rates of return that investor's consider to determine whether a property will generate the yield that they expect. Sometimes the simplest of calculations can tell you whether you want it or not and if you get the other things like tax advantages and appreciation, it just makes it that much better. The first yield we will look at is commonly called the Cash-on-Cash rate of return. It is calculated by dividing the initial investment, usually down payment and closing costs, into the Cash Flow Before Tax. To arrive at Net Operating Income, it is simply taking the gross scheduled income, less vacancy allowance and all operating expenses. From that is deducted the annual debt service which is the principal and interest payment times twelve. The remaining amount is referred … Continue reading...
Is a Home Inventory Necessary?
Most homeowners have insurance on their home that additionally, gives them coverage on their personal property. That is the first level of peace of mind to know that it is available to you if there is an unfortunate need for it from a burglary, fire, or some other insured circumstance. Personal property is handled slightly different than real property. The claims adjustor could start by asking you for a list of the things lost. You are allowed to reconstruct it but there is a distinct possibility that you'll forget things, sometimes for months or years after the claim was settled. An interesting exercise would be for you to visualize two rooms, possibly, the kitchen and main living area. Without being in the room, create a list of all the personal items in plain sight and those in the closets and cabinets. When you're through with the list, go into each room to check to see what kind of things were not on your list and what the value of those items amounted to. It could be … Continue reading...
Deciding on Whether to Move
Some homeowners feel like they may as well throw a dart against the wall to decide whether to move or not. Other people might invoke a process attributed to Benjamin Franklin. Supposedly, to evaluate the options and bring clarity to the choice, this American founding father would list all the reasons for and against the decision on a sheet of paper. After reducing it to writing, the choice would appear either by obvious majority or practicality. Buying a home is an emotional decision but selling a home can be also. Separating the rationale from the emotion can make decisions seem obvious but they may still not be crystal clear. There is an inventory shortage that caused prices to rise and market time to shorten. In many active markets there is less than 30-days' supply of homes for sale which is half of what was available a year ago. This will make it easier to sell and maximize the proceeds from your current home. 69% of economists who participated in the first quarter 2021 … Continue reading...
“Mise en Place” for Homebuying
In cooking, "mise en place" describes having all your ingredients measured, cut, peeled, sliced, grated, as well as bowls, utensils and pans ready to use before you begin cooking. The advantage is to inventory the ingredients and recognize if you have everything you need. You are less likely to leave out an ingredient or step because it is "set up" and ready to use. The same technique works well in the homebuying process, especially in today's highly competitive environment where multiple offers are normal and bidding wars are commonplace. Check your credit ... not only does credit determine if you will get a mortgage, but it will also determine the interest rate you'll pay. The best rates are for the borrowers with the best credit; lower credit scores mean higher rates because of additional risk to the lender. Free copies are available from all three major credit bureaus at www.AnnualCreditReport.com. Determine your budget ... knowing your income and immediate living expenses … Continue reading...
It’s Not too Late to Refinance
With mortgage rates below 4% since May 2019, you would think that most people would have already refinanced but according to a recent Lending Tree survey, 49% of homeowners say they are considering a mortgage refinance in the next year. The report estimated that over a third of homeowners are have mortgages above 4% and 11% didn't know what their rate was. Slightly more than a third of the people surveyed regretted missing the opportunity to refinance in 2020 when rates did hit their historical low. Homeowners should not beat themselves up on this issue because the only way to know to tell that it hit bottom is after it has started going up again. The current rates are very favorable to borrowers and some economists believe that when inflation is factored in, the rates are close to zero effectively. While there are nine specific reasons people choose to refinance their homes, two are among the most prevalent: to lower the payment or take cash out of the equity. Most reasons … Continue reading...
Writing a Successful Offer in a Low Inventory Market
With at least 40% less homes on the market currently than there were a year ago, serious buyers have probably experienced the disappointment of losing a home they wanted to buy from increased competition. Today's buyers are looking for ways to improve their odds of being the best contract without having to use the purchase price as their only tool. Buyers should reconsider, rethink, and re-evaluate their "must have" features and amenities. It is probably unrealistic in a normal market to think you can have the perfect home at the price you want but in today's market it is less possible. List the things you must have and the things you would like to have and prioritize them. Try to identify the critical from the convenient. The next step is to put together your "home" team. You are the captain of this process, but it is essential to have a strong first officer and that is your real estate agent. This professional will oversee the process, advise you on current market conditions … Continue reading...
How long do I have to keep this stuff?
"How long do I have to keep this stuff?" is the usual question you ask yourself when feeling that you are running out of room for all this "paper" that may never be needed. The paper receipt you get from your fast-food lunch may go directly into the trash. The prudent consumer may keep it to reconcile it with their monthly statement and then, trash it. The natural hierarchy with receipts and documents associated with purchases is that as the price or value goes up, the more important it is to keep them. The question becomes "but for how long?" The following table will give you an indication on how long certain documents related to your home need to be kept according to best practices of tax professionals. IRS recommends that records are kept for three years from the date the taxpayer files their original return or two years from the date the tax was paid, whichever is later. There is no time limit in the case of fraud or failure to file a tax return. Document Length of … Continue reading...