Smart Financial Planning Must Come Before Home Ownership

Whether you’ve got house envy about your best friend’s new place or just want to start buildingequity instead of renting, the first time you think about becoming a homeowner is the moment you should start financial planning.

While it may be tempting to begin looking at homes for sale, you need to be financially prepared so you don’t fall into the trap of identifying your perfect home—and then realizing you can’t afford to buy it. Casual visits to open houses or random Internet searches are fine to see what homes cost where you want to live, but you will need to start working on your finances, too.

The most important elements of the financial planning you need to put in place before buying a home are developing a budget and starting to save.

Financial Planning for Homeownership

When you are ready to consult a lender to find out if you can be approved for a loan, the lender will base a decision on your credit profile, income, assets, job history and debt-to-income ratio.

Your debt-to-income ratio for the lender’s purposes is based on the minimum monthly payment for all of your credit card debt, student loans, car loans and personal loans—compared to your gross monthly income. In many cases the amount a lender will say you can borrow is higher than you may feel comfortable borrowing. It’s crucial you decide what you think you can afford for your monthly payment and work with that number when you begin searching for a home.

Your comfort level should take into consideration other financial goals you have—saving for child-raising expenses, college tuition, retirement and even things like vacations, skiing or golf. Most of those expenses won’t be part of your lender’s calculation of what you can afford to spend on a housing payment.

Most lenders allow a maximum overall debt-to-income ratio of 43%, and some allow only a 41% ratio. The housing payment portion of your income should be a maximum of 31%, so if your annual income is $60,000 and your monthly gross income is $5,000, then your housing payment should be $1,550 or less.

Housing Payment

Homeowners have extra expenses renters don’t, such as property taxes and homeowners insurance. Your mortgage payment will include those costs as well as the principal and interest on your loan. You may also pay mortgage insurance if you make a down payment of less than 20%. If you live in a condo or a community with a homeowners association (HOA), you will pay condo or HOA fees separately.

You should also budget for maintenance and repairs on your home, at least 1% of the home value.

Before you become a homeowner, you should create a budget based on your current finances and consider how you can adjust that budget to accommodate extra savings to allow you to buy a home and to afford potentially higher housing payments.

Saving Strategies

There are countless resources for living frugally and finding ways to save on everyday expenses such as your cable bill and groceries, but in order to save for a home you will need discipline to set aside money for the future.

Here are some ways to do that:

• Create a special savings account for your home purchase and have part of every paycheck automatically transferred to that account. Start with as little as $100 if you can afford it so you get used to living on less and then gradually increase the amount.
• Consider saving the difference between your rent and anticipated housing payment. This increase your savings, and you’ll also show a lender an established savings pattern and the ability to afford the housing payment.
• Work extra hours or take on a second job temporarily to increase your income. Even something simple like walking dogs each evening or babysitting can help your savings accumulate more quickly.
• If you get a bonus, a tax refund or a cash gift, deposit it into your home-buying account.

The simple process of creating a financial plan should be the beginning of a long-term plan to buy a house—and to keep it.

Article Taken From: www.realtor.com | Written by: Michele Lerner

Buying A Historic Home: What You Must Know First

Although a historic home has an appeal and charm for many buyers, there are certain restrictions and expenses you must know before sealing the deal.

If you’re a home buyer, you may have fallen in love with a historic home or with a home in a historic district.

While being the proud owner of a literally one-of-a-kind home is alluring, you may run into unexpected complications when purchasing vintage houses.

For example, older properties may have serious structural problems you wouldn’t encounter in a new house, as well as hidden problems which will only surface later.

Owners of historic homes are also required to follow strict home rehabilitation guidelines—many of which allow you to repair, but not to rebuild or to replace.

To help protect your future home investment, here is some vital information and expert advice about buying a historic home.

What constitutes a historic home?

A home is deemed historic or “architecturally significant” by the National Register of Historic Places—or by the local historic board—if it exemplifies a signature architectural style, captures the essence of a given time period, or is associated with famous people from the past.

Also included in this category are homes located in neighborhoods designated as historic districts.

Benefits of buying a historic home

The aesthetic beauty of historic homes is a magnet for many home buyers, as is the often unmatched architecture that has withstood the test of time.

If you’re thinking about buying a historic home, you’ll be happy to learn additional benefits may come with the purchase of a historic property.

Many states and local governments offer tax incentives in the form of tax credits or lower interest loans for preserving and restoring historic structures. You have to qualify for these tax abatements, and while the amounts won’t make you rich, they’re still benefits you wouldn’t otherwise receive when buying a new house.

Advice for buying a historic home

Now that you have set your sights on a vintage home, it’s time to get down to the nuts and bolts of purchasing your coveted property.

Before you sign on the dotted line, here are some tips on buying an older house:

• Have a formal home inspection conducted by a qualified home inspector who specializes in older homes and/or by a structural engineer.
• Get price estimates from contractors regarding all necessary repair work.
• Make sure the house meets safety and health standards, including passing asbestos and lead paint tests.
• If your dream house suffers from major structural problems, walk away. The long-term headaches will far outweigh your emotional attachment.
• Carefully study the Standards for Rehabilitation of Historic Buildings imposed by local/state laws on owners of historic structures. You may have remodeling/expansion plans that you will not be able to fulfill.

Historic home restrictions

Since the goal of historic home renovation is to preserve a home’s true nature and original construction, a home buyer wishing to renovate must obtain special permits and therefore is subject to restrictions aimed at protecting the character of the property or neighborhood.

Here are some of the typical restrictions and extra costs you need to know about before buying an historic home:

• Additions: Rarely are homeowners permitted to add footage to historic homes, including extra stories.
• Windows, shutters and roofs: Since house exteriors such as windows, shutters and roofsembody the original architecture or design style, they are to be preserved and can only be replaced in kind. If costly construction materials are involved, this may be an added expense you didn’t anticipate.
• Taxes: Although you may qualify for tax benefits for investing in a home or in a district where preservation and restoration are priorities, tax levies for merely living in a historic neighborhood may be higher than other neighborhoods.
• Utility bills: Before you seal the deal, study the previous year’s energy bills. It may cost you significantly more to heat and cool an older home than a new one.

If you’ve done your homework and the pros outweigh the cons for you, enjoy becoming the proud owner of a historic home.

Original Article From: www.Realtor.com | Written by: Realtor.com Team

Tips For Winning A Bidding War In A Hot Home Market

Cash isn’t always king in a bidding war. Get the home you want without blowing your budget, using these Realtor-tested strategies

With the real estate market finally recovering, some markets across the U.S. are seeing the return of the bidding war. While this is great news for sellers, it’s a source of stress for buyers who not only don’t want to overpay, but also may not have the flexibility to wait for the market to cool off. Here are some ways to win a bidding war without spending more than you’d planned.

Miller + Miller Real Estate

Put your lender on speed dial. Realtor Mary Ann Teixeira says winning a bidding war isn’t always about paying in all cash or even being the highest bidder; it’s about making your offer the most attractive one to the seller. And that starts by making sure you’re preapproved for a loan.

Teixeira says that while an agent should never push a client toward a specific lender, she does have a few trusted lenders who will gladly accompany her when she makes an offer on a property for a buyer who happens to have borrowed from them.

“This is part of the strategy, because if there are any questions about the ability to get the loan, they can be addressed right then and there,” says Teixeira.

Nathan Varney Photography

Present the offer in person. Teixeira says you should expect your agent to literally go the extra mile to present your offer in person. “This helps convince the seller and his or her agent that the people on the other side of the table are serious and willing to do whatever it takes to make that deal goes through,” she says.

Anders Lasater Architects

Consider waiving contingencies. Teixeira says that in the San Francisco Bay Area, where she works, buyers need to waive contingencies to be competitive, as high demand and low supply have created a market where many offerings result in bidding wars. Waiving contingencies speeds the closing process and calms any nagging fears the seller may have that you’ll back out at the last minute.

One contingency that often gets waived is the inspection, which can expose buyers to a significant amount of risk. This does not, however, mean that you’re going to buy the house without an inspection.

Julie Angelos of Berkshire Hathaway California Properties points out that in markets where multiple bidders abound, sellers will often hire an inspector to report on the house before it’s listed to help the house sell more quickly. They will then include both the inspection report and the disclosure agreement on the MLS so buyers’ agents can provide that information to their clients.

Teixeira says it’s important to read these documents carefully and have your agent call the inspector directly with any questions. If there’s enough time before the offer date, Teixeira suggests that you also hire your own inspector to look at the house before you make your offer. That way there’s no question about what you’re getting into.

Pauli & Uribe Architects

Tailor your offer. Tailoring your offer to the sellers can make it more attractive them. For instance, if the sellers are moving because of a job transfer on a certain date, you can put your offer together in a way that speeds closing or allows them to stay in the home until they find a place in their new city.

MILLER ARCHITECTS PC

Get personal. Adding a personal touch to your offer means you’re not just a name on a piece of paper, but a human being who loves and appreciates the home the seller has created. Consider enclosing a personal note with your offer that includes something that illustrates your common ground. For example, if you notice that the seller is a gardener, you might want to talk about your own appreciation for gardening.

Teixeira also has had clients who won bidding wars simply by being perceptive. “I had one buyer who noticed some San Francisco Giants paraphernalia in the home,” says Teixeira. “The buyer had season tickets to the Giants, so as part of their offer, they gave two tickets to the father and son.”

In the end winning a bidding war can be as simple as convincing the seller that you’re a good person who just wants the transaction to go as smoothly as possible — which is a win-win, because of course that’s what you want, too.

Original Article From: Houzz.com | Written By: Christine Tusher

7 Types of Loans: Which One Fits Your Needs?

Conventional Loans

Whether you’re looking for a new home or need to do some considerable remodeling, you’re probably going to need a loan. In order to choose the best one that best fits your financial and home-ownership needs, you’ll need to figure out which one is best for you. To help you navigate the process, here are seven common types of loans and what they cover.

Conventional loans are mortgage loans from mortgage lending institutions not backed by an agency of the government such as the U.S. Department of Veterans Affairs or the Federal Housing Administration. Conventional loans can be either conforming or non-conforming.

Conforming Loans

A conforming loan conforms to the guidelines set by Fannie Mae and Freddie Mac. The main guideline is the maximum loan amount. This amount can vary depending on the home’s location—for example, a house in a high-income area can be eligible for a larger loan than one in a general income area.

Other qualification guidelines are concerned with the borrower’s debt-to-income ratio, loan-to-value ratio and credit history.

Non-Conforming Loans

Non-conforming loans do not conform to the qualifications and guidelines set by Fannie Mae and Freddie Mac corporations.

If you require a loan larger than a conforming loan, you will be looking at non-conforming loans, such as jumbo loans.

Secured Loans

With a secured or collateral loan, you leverage personal property to obtain the loan. If you default, the property is transferred to the lender.

The interest rate and loan amount can vary depending on the value of the property you leverage. Generally, higher value property can get you a larger loan and possibly a better interest rate, although other factors—such as loan length and credit history—will also be taken into consideration.

Common examples of personal property used to secure a loan include these possessions:

• Houses
• Vehicles
• Savings accounts and CDs

Unsecured Loans

Unsecured loans are not backed by collateral, so the interest rate and size of the loan is determined by your credit history and income. Unsecured loans are also known as personal or signature loans.

If you have a good income, sterling credit and a solid payback plan, these can be a good option.

Open-ended Loans

Open-ended loans are loans with a fixed-limit line of credit that can be borrowed from again after they have been repaid. Credit cards are one type of open-ended loan.

A home equity line of credit, or HELOC, is another. HELOCs work like this: The lender approves you for a certain amount of credit based on a percentage of your home’s appraised value, minus the balance owed on your mortgage. The sum acts as a credit line you can borrow from, pay back and borrow from again.

Homeowners renovating their home may want to consider this option to fund the project.

Close-ended Loans

Closed-ended loans are loans that cannot be borrowed from again, like student loans, mortgages and car loans. The loan decreases with each payment. If you want more credit, you have to apply for a new loan. If you need a set amount of money and nothing more, this is a common way of doing so.

Article from: www.realtor.com | Written by: Craig Donofrio

4 Rules To Live By When Making An Offer On A House

From pinpointing a magic number to wowing the seller, making an offer can be like walking a tightrope.

Buying a house is a little like asking someone to marry you. In both cases, you make your offer believing there's a good chance you'll get a yes, but you know you could get a no. If the answer is yes in either situation, your fates will be linked for many years to come – possibly until death do you part. But if you don't get an immediate answer, the wait can be excruciating. We may not be able to help you with your love life, but if you want your house offer to be greeted with a yes – and a quick one – here are four rules to follow.

Be likable. Money talks, but so do you. And you don't want to say anything that could turn off a seller.

"You're most likely buying someone's home that they have memories and a lot of emotional ties to," says Marc Takacs, a real estate agent with Keller Williams Realty in Atlanta. So if the seller is present when you see the house, keep quiet about your grand plans for landscaping or repainting the living room.

"Don't tell someone how bad, ugly, stupid, et cetera, that someone's house is, and then try to buy it. That doesn't work," Takacs says.

Well, it might, if the homeowner is desperate and primed to sell, but if there are other buyers circling, you've given the seller an excuse to reject your offer and accept someone else’s.

Another no-no, according to Takacs, is being high-maintenance. "Don't overstay your welcome," he advises. "I don’t think anything irritates a seller more than when a buyer visits a house too much or stays for too long."

He also suggests that when you submit your offer, avoid making unreasonable demands such as a lightning-fast closing date. "Try to be considerate of the fact people are trying to carry on with their lives, move and all the other stuff that goes along with that. Being pushed out of your house can be very unsettling," Takacs says.

Don't be stingy with your offer, but don’t overreach. If you offer exactly what the seller is asking, you will get his or her attention and probably their respect and appreciation. In many cases, your offer will be accepted. Offer a tad bit more, and you may chase other buyers away whose offers are at or below the list price.

At the other end of the spectrum, a lowball offer may insult the homeowner. In some instances, it may be shrewd to offer significantly less than the list price, but first consult your real estate agent, who will probably have the best read on what your seller is likely to accept.

If you’re looking to make the strongest offer possible, make sure it’s not so high that you can’t afford it, warns Kelly Long, a Chicago-based money coach and member of the National CPA Financial Literacy Commission. "Don't offer more than you can practically afford, even if you're approved for more," she says, adding that this can easily happen if you're looking at a house that's out of your price range.

"If you buy it for more than you can afford, you'll end up hating the house and yourself in the long run," she says.

That’s because the more expensive your house is, the higher your monthly payments will likely be. Long cites the rule of thumb that a monthly payment shouldn't exceed more than 28 percent of your gross income. That includes taxes and insurance, she adds.

Be ready for a yes. If the seller says no, the next steps are clear enough: You make a better offer, or continue house hunting. But even if the seller accepts the offer, you don't have those front door keys yet.

"You may be preapproved based on your credit report and supplying your W-2, but the [mortgage] application process is much more involved and requires extensive documentation in a short window of time," Long says. "Make sure you have some time set aside to gather all the necessary information in the week following the offer’s acceptance. You’ll also need to schedule, attend and pay for an inspection in that first week, so make sure you have the money on hand to pay for that."

You may also be asked to offer earnest money, a deposit you give a homeowner to show you're serious about your offer. Generally, earnest money is anywhere from 1 percent to 3 percent of the house's total purchase price. You can get the money back if the sale doesn't go through, but you can also lose it if you flake out and decide not to buy the house for no reason, or you don't follow what you've agreed to in the purchase contract.

Don't sabotage yourself to seal the deal. Speaking of that contract, be careful about what you put in it.

Yes, you want the house. You want the sellers to like you. But in an effort to get those keys from the sellers, don't be their doormat.

According to Kent Sisk, an account executive at NexTitle, a title and escrow agency based in Bellevue, Washington, "the market is so hot right now [that] many buyers are waiving the inspection period, sometimes waiving the inspection altogether, in order to get their offer approved."

Not smart, Sisk says.

After all, you don’t want to learn after you buy the house that the roof leaks or there's mold hidden away in the ventilation. Or you may end up berating yourself if you waive the appraisal contingency, which lets you back out of the deal if the lender concludes the appraised value is less the sale price, and later learn that you vastly overpaid for your home.

Ideally, your offer will be one that makes everyone, the seller and you, happy and reassured that everything between now and the closing will go smoothly. If you feel like you need to win this house at all costs and things go badly after your offer is accepted, not only will you lose – it will definitely cost you. 

Original Article From: USNews.com | Written by: Geoff Williams

Home Automation: What To Know

As smart devices and connected appliances spread into every nook and cranny, home automation is big business.

Evidenced by Google’s $3.2B acquisition of Nest and Comcast’s increased push into controlling all aspects of a house, the home automation market shows no signs of slowing down.

But there’s a large wrinkle for a canny company to capitalize on—what aboutrenters who want an automated way to control the place they lease?

A tenant’s quest for an automated rental property could lead to sticky issues of ownership, compatibility, and even privacy.

That’s where Remotely enters the picture.

Designed by Rentbits, the app aims to provide a home automation solution that makes tenants and property managers happy. By positioning itself as a value-added solution for property owners, it hopes to become an essential app on the smart phones of renters nationwide.

We spoke with Rentbits CEO Dan Daugherty to get his thoughts on the future of home automation in the rental market.

What home automation inefficiencies is Remotely solving?

The home automation market is expected to reach over $12B by 2017, but we saw major holes in the rental market.

On average, renters are in an apartment for around a year, and it doesn’t make sense for them to get locked into an expensive multi-year home automation contract or install hardware that they won’t be able to keep when their lease is up.

On the property manager side, we solve inefficiencies with regards to off-the-shelf home automation systems. If every resident of an apartment community bought a home automation system of their own, nothing would be integrated.

A property manager wouldn’t be able to go keyless; they wouldn’t own the locks, thermostats, or motion detectors within each unit.

What can a tenant control with the app? 

A tenant can control their entire apartment or rental home with the app. They can lock and unlock doors, control their thermostat, control lights, control music, detect motion, moisture, and more. We even have some users who wanted to automate their dog feeding dish.

We built Remotely to be completely agnostic, meaning we currently work with over 1,000 smart devices, and we are able to connect to most new smart devices.

Apartment complexes are also using Remotely for common areas including the pool, front gate, leasing office, game rooms and laundry facilities.

A renter has about 15 automations occur each day in their apartment. It doesn’t take much convincing for residents to download the app—they see the immediate benefits of simplifying their life.

What about residents without smartphones?

For residents who don’t have smart phones, they would still be able to set automated rules on any computer and enter the apartment either with a key or a 4-digit code.

Over time, the system would be able to at least save them on energy bills even if they never proactively used the app or the web interface.

Do landlords and tenants see the same view of a property? 

Tenants only see what is relevant to them. They control their apartment, but they also have access to pay their rent online and submit maintenance requests if the property manager opts them in.

Could a landlord use the data they collect against a tenant?

Remotely does not give out any usage data at the apartment unit level.

What are the major roadblocks Remotely faces in growing adoption?

As with any new technology, you have first adopters and then everyone else. Home automation has reached an inflection point where we are now seeing more early adopters because the technology has been proven and can scale.

What does the future of home automation hold?

In the U.S., we have around 25 million rental units in our sights, and we believe our total addressable market is around $3B. The long term vision for Remotely is to positively affect the lives of millions of renters through home automation software.

We also believe that home automation should learn about you over time. For example, the software should automatically set the temperature to the ideal energy saving position when you’re gone and set it back to a comfortable level when you come home. Or it should automatically turn on your lights when you’re on your way home from dinner.

The possibilities are endless. We are building the personalized operating system for every rental home and apartment.

Original article titled: Home Automation Q&A: Rentbits CEO Dan Daugherty taken from www.realtor.com | By: Erik Gunther

6 Tips To Save To Buy A Home

Interest rates remain historically low and even though housing prices are increasing in many areas, the market still offers lots of opportunities to become a homeowner. But what's holding many back is saving enough for a downpayment.

Reaching any goal requires dedication to that goal and a mindset that enables you to sacrifice to achieve what you desire. Often that's easier said than done. However, if you analyze your spending and lifestyle habits you can determine where you can conserve to create enough of a reserve to comfortably buy a home without feeling totally deprived.

Here are six tips that can help you put away $50 to hundreds of dollars each month. Start with a fresh sheet of paper or a digital document that you can refer to frequently. Keeping it fresh on your mind will help you achieve your goals.

1. Write down what you owe versus what you earn. Get clear about how much is coming in and how much is going out. This alone will help you see where money is being spent and how much is being spent on things that could be cut back or cut out completely.

2. Consider getting rid of recurring expenses for services you don't really use or you use infrequently. Maybe it's a gym membership that's adding up to more than a $1,000 for the year; but you really only use it three or four times a month. That makes no sense. Get rid of it and find a workout buddy and a free place to exercise. Or it could be an audio or video membership that's going to waste. Sure, it might be $20 a month but over a year, that adds up.

Try listening to podcasts.  They're free!  Some podcasters are very entertaining and their podcasts can be excellent sources of information and resources for business and personal development.

3. Stop the coffee run each morning. Do the math. That fancy coffee drink can cost $40 a week, especially if you add a bakery treat. Your waistline and your wallet will take a beating.

4. Cut back on eating out or dine out early. Make more meals at home. This will allow you to take leftovers for lunch the next day. When you do decide to eat out, dine out earlier in the day. You can often take advantage of eating the same great meal at a less expensive price by ordering from the happy hour menu. These days,  lots of people find saving and living lean to be hip and cool. They'll be happy to join you for an earlier meal.

5. Start a side job. If you're working a full-time job, evaluate what your skill set is and see if you can freelance. I spoke with a client recently who had a "day job" and was earning additional income. He was already up about $50,000 from his side job of selling auto parts. It may take a bit to figure out where and how you can earn your side income,  but it's worth exploring. This could even turn into a full-time job. Lots of people are making money working from home using the Internet. Explore your options and see how you can generate some extra cash each month.

6. Use momentum to pay back your debt.  Work hard to pay down cards with the highest interest rate first. As one card is paid off, transfer the money you were paying on that card to another card. By combining whatever you were paying on the paid off card to another balance that you're paying down, you're giving it some momentum and you'll get that next card paid down even faster.

Remember that reducing your spending is critical to having what you want. So don't add to your debt. Once you save for your deposit, you'll want to make sure that you also save enough to have a cash reserve for emergency repairs and any unexpected crisis that might occur. Also, make sure that you make this process a good experience rather than a painful one. Keep your eye on the goal and understand that the decisions you make today will impact your future and your opportunity to become a homeowner.

Original Article From: www.realtytimes.com | Written by: Phoebe Chongchua