When and How to Refinance

Whether you’ve been a homeowner for a few years or more than a decade, you may consider refinancing your home loan when mortgage rates dip. If you’ve never refinanced before, there are a few basic facts you need to know before you can decide if it’s right for you.

Refinancing basics

You may be thinking since you’ve faithfully made all your mortgage payments on time and your income has even increased a bit since you applied for the loan, refinancing should be a breeze.

But when you’re refinancing, you’re applying for a new loan. And whether you use the same lender or another lender, you’ll be subject to complete documentation and verification of your income, your assets, your debt-to-income ratio, your credit profile and your job history. Not only do you have to qualify for the loan, but your house must appraise for enough value to support the loan.

Refinancing also costs money: closing costs vary by location but average 2% to 3%, or $4,000 to $6,000 on a $200,000 loan. Even a “no-cost” refinance costs money you pay through a higher interest rate, a larger loan balance or the payment of discount points.

If you’re refinancing to lower your payments, you can do a simple calculation to determine how long it will take you to recoup the closing costs on your loan. For example, if your refinance costs $2000 and your monthly savings are $150 per month, it will take you a little over 13 months before you’ve recouped your costs and truly are saving money.

Refinancing goals

Your decision to refinance or not should be made in the context of your overall financial plan. Most people want to refinance when interest rates are low, so they can pay less in interest and lower their monthly payments. Some borrowers also want to refinance an adjustable rate mortgage (ARM) into a fixed-rate loan before rates rise faster.

Others refinance when their equity has risen and they want to take cash out of the property to make home improvements or pay off high-interest credit card debt.

Refinancing can also be a good choice if you want to reduce your loan term from a 30-year loan to a 10-, 15- or 20-year loan in order to pay it off in full faster—although even with lower rates, your payments are likely to be higher because of the shorter timeframe to repay the loan.

Loan terms and refinancing

If you’re currently financing your home purchase with a 30-year, fixed-rate loan, you should carefully evaluate your payments and your options for refinancing into a shorter term or into another 30-year loan. Typically, it doesn’t make a lot of sense to refinance early in your loan, because initially your payments are mostly interest—and you won’t have paid down the principal balance.

If you’ve been paying your loan for seven or eight years, your loan balance will be lower. If your goal is to lower your monthly payments, you’ll benefit by both lower mortgage rates and financing a smaller amount of money. However, by extending the loan term for another 30 years, you may end up paying more in interest over the life of the loan, since you’re essentially paying interest on the house for 37 or 38 years instead of the original 30-year term.

If you want to pay off your loan faster, you should compare the payments on a shorter term loan to see if you can comfortably afford the payments. Interest rates are lower on shorter term loans, which can offset the accelerated payoff pace.

Refinancing and future plans

Refinancing makes the most sense if you plan to stay in your home for a few years, because if you’re selling soon, you may not recoup the cost of the refinance. However, there are always exceptions to the rule, so if you know you’ll sell in three years, for example, a refinance into an ARM with a low, fixed interest rate for five years could be a smart decision.

Always make sure to consult a lender to discuss refinancing in the context of your individual financial plan.

Original article written by: Michele Lerner | Taken from www.realtor.com | 07/1/2014

Navigating Simultaneous Offers with Home Buyers

Guest post by Sam DeBord, managing broker of Seattle Homes Group with Coldwell Banker Danforth.

In a limited inventory market, many of our professional conversations center on multiple-offers situations for sellers. There are plenty of courses and guides on how to position a home to receive the maximum return based on competitive offers, as well as how to present multiple offers to our sellers in an organized fashion.

There is very little literature, however, on effectively writing simultaneous offers for buyers. The practice of making simultaneous offers on multiple homes at the same time can be labor-intensive and isn’t appropriate in all situations, but it does provide some unique advantages to certain segments of our home-buying clients.

Investors are one set of buyers that can benefit greatly from the practice. They’re often looking for a certain style of home, in a certain price range, and hoping to purchase multiple homes within a short time frame.

Agents who represent buyers know that in competitive markets like we’re seeing today in many cities, each week’s listings are met with multiple buyer offers. Running clients around to see new homes every week, selecting one, and being outbid by other buyers can be a vicious cycle. For an investor who has a bit of latitude in terms of style and price, writing offers on multiple homes at the same time can create the opportunity to lock up a number of properties in a short timeframe, or—at the least—to improve the probability they will secure one property in a given week.

For the traditional home buyer looking for a primary residence, the tactics may require more research and some nimble paperwork. Buyers searching for their own home will usually be much more specific and critical about the home they’d like to buy. However, there are often those who are searching in a fairly homogenous neighborhood or development in which the majority of the homes are within their desired criteria. If you’ve already been through a number of unsuccessful bidding wars with them, they may be ready to start pursuing a more aggressive strategy with simultaneous offers.

To be clear, writing simultaneous offers should only be done when the buyer fully intends to buy any of the homes involved.  This is a process that works within the professional standards of our industry when the buyers present a good-faith intent to buy—and don’t intend to fish for seller contracts only to decide later which ones were worthwhile. Buyers should be of the mindset that whichever seller signs the contract first, they’re going forward with the purchase of the specific home.

If and when that situation exists, home buyers can gain a significant advantage in a market that leans so heavily toward sellers. A typical showing schedule includes visiting the week’s new listings with our clients on Saturday and writing a single offer for their top choice on Monday or Tuesday when the sellers are reviewing offers. If, instead, we write offers on two or three homes during the weekend, we may be able to force a seller’s hand a bit.

There are a couple of distinct ways to present these offers. The first is more of a power play, which may or may not be to your advantage depending on the situation. If the home sellers in a neighborhood are regularly waiting to review offers until after the first weekend on the market (usually Monday or Tuesday at a specified time), you might submit multiple offers on Saturday. Let the sellers know your strong buyer has three offers on the table, and you’ll be pulling the other two offers as soon as one seller signs. It just might be the bold move to shift a bit of power back to your buyers.

The other option is less aggressive, yet still strategically significant. You can simply write three offers for three similarly-appealing homes and triple your clients’ probability of securing a home on any individual weekend. Given the amount of time, travel, and emotional effort buyers in these ultra-competitive markets go through on a weekly basis, the comfort of securing a home meeting most of their preferences may be more attractive than endlessly hoping for the perfect-home scenario that might never materialize.

I’ve personally handled these situations myself, as have agents on my team. It requires much more upfront discussion with clients as to the ramifications of each offer and the strategy for dealing with them upon having one accepted.

Out of respect for our industry associates and their clients, we should be prepared to immediately rescind any other open offers once our buyers have reached mutual acceptance on a home. Writing simultaneous offers might give us some leverage, but the goal isn’t to unduly burden sellers and listing agents with offers that won’t come to fruition. As long as unaccepted offers are pulled quickly and the sellers’ agents are informed in a timely manner, agents can create a strategic advantage for their buyers and still leave all of the sellers involved in a position to consider other offers. Based on the current market, they’ll likely have plenty of them.

Writing multiple offers for buyers isn’t always the right answer, but in some cases, it’s a very valuable tactic. Buyers aren’t the only ones who get burned out in this inventory-crunched market—our agents do, too. Getting buyers into contract and headed toward a successful closing often requires some creativity, coaching, and even extra paperwork. Writing simultaneous offers might just be the tactic that works for your clients and your agents.

How To Prepare Your Home For Quick Sale

Every seller dreams of a quick sale—preferably at or even above asking price. As market conditions across the country continue to improve, those dreams aren't so far fetched. While a competitive asking price is crucial to a quick sale, there are many other, perhaps less obvious elements that also come into play. How can you best present your home to potential buyers? What minor updates or fixtures "wow" home seekers? What must-haves are currently at the top of buyer's lists? Before you get too overwhelmed, we're here to offer some tips and suggestions to get your property ready for a speedy, simple sale.

Competitive Price Point

Listing your home at the most competitive price point will determine how quickly you'll receive offers. Before agreeing upon the value of your home, request for your realtor to run comps of your neighborhood. This will tell you what other homes within your community are selling for, and also provide details around square footage, beds and baths, and any updates to neighboring properties. Always agree to look over an offer, even if you think the number will be low.

Curb Appeal

Though we're taught not to judge a book by its cover, this popular saying doesn't exactly translate in real estate. The curb appeal of your home is incredibly important in that it sends a message to potential buyers, and determines whether or not individuals will request a showing. Fortunately, you can DIY some highly effective curb appeal projects at minimal costs. A new front door in a bright, trendy color invites visitors in from the curb, as do seasonal flowers and a manicured, well maintained lawn. Even the smallest of touches, like upgrading your mailbox or replacing faded pavers make a drastic difference. Replace any outdated window dressings with fresh, modern shutters or opt instead for a nice neutral coat of paint.

Declutter, Minimize and Stage

Staging your home for sale is all about highlighting its strengths and downplaying its weaknesses. The first rule of thumb is to declutter and downsize. Eliminate mail, papers or books from any counter surface, leaving it barren and clean. The Container Store offers an array of decorative bins and boxes to camouflage clutter. If you're house is full of personal mementos, minimize these items and leave buyers with a clean palette. Chunky furniture tends to drive attention away from the space itself, and also can make a room look significantly smaller. Eliminate these pieces and keep only the basics needed to complete a room.

Though it can be costly, hiring a professional cleaning service to scrub down your property from head to toe is worth it. Homebuyers want to walk into a clean, fresh environment that is both welcoming and distinctive. Garnish your entryway or kitchen with a bouquet of crisp scented flowersto add a soft feminine touch.

As for staging your home, ensure the furniture items you've kept flatter each room appropriately. Create a cohesive style that allows home seekers to get a feel for how they could potentially manipulate the space. Neutral colors for both furniture and paint are ideal, even if that means rolling up your sleeves and painting each room yourself. Keep everything organized within your home, from your cupboards to your closets, allowing viewers a chance to see how organized their own lives could potentially be.

Original article written on www.RealtyTimes.com |

How Purchasing 1 Investment Property Every Year for 10 Years Is All You Really Need

When you’re getting started in real estate investing, you hear so much advice from experienced investors, its really hard to determine a strategy on where to start.

I have one bit of advice for you in order to help break this real estate investing thing down, and give you a model that can help make you comfortable getting started. Here it is:

Let’s see you put your goal to obtaining 1 home a year, for 10 years.

I’ll explain why and how this mindset can give you a great frame work from which to start your career, and keep your expectations and perceptions in line with the reality of venturing into real estate.

As you get more experienced, you will naturally progress to speedier turn around times, more affordably and with less risks. But starting out, keep it simple.

Original article taken from "The Bigger Pockets Blog" | Written by Lisa Phillips

How A Mortgage Pre-Approval Helps Philadelphia Home Buyers

First-time home buyers may wonder if they need to spend the time working with a bank or mortgage company to secure a mortgage preapproval before purchasing a home. The short answer to this question is definitely yes.

With five major universities, Philadelphia is a hot spot for intense collegiate basketball competition. The Big Five also graduate thousands of students each year, many of whom decide to settle in the city or local suburbs. These first-time home buyers may wonder if they need to spend the time working with a bank or mortgage company to secure a mortgage pre-approval before purchasing a home. The short answer to this question is definitely yes.

In today’s market, a mortgage pre-approval has become almost a necessity for first-time buyers. To streamline the home purchase process, real estate agents prefer to work with serious buyers who have a clear idea of how much they can afford.

What Is a Mortgage Pre-Aproval?

According to the Federal Reserve Bank of Philadelphia, a pre-approval occurs when a lender examines a person’s financial position and credit, and then issues a written commitment to extend credit (in this case, a mortgage loan) up to a designated amount, for a stated period of time. The process of obtaining a pre-approval closely mirrors the mortgage loan approval process. However, after a pre-approval is secured, if the individual decides to purchase a home, obtaining a mortgage is much easier than it would be without the written commitment.

Where Can You Get a Mortgage Pre-Approval?

Online mortgage calculators provide a good starting point to give buyers a sense of how much they can afford, but an official pre-approval document must be prepared by a loan officer at a bank or mortgage company. Prior to house hunting, potential home buyers should call several banks or mortgage companies and compare rates and fees before beginning the pre-approval process. Your real estate agent may also be able to provide referrals for local mortgage lenders.

What Information Do You Need to Obtain a Pre-Approval?

To obtain a pre-approval, your must provide a loan officer with certain financial information. Prior to your appointment, spend time organizing and gathering this important financial information. For pre-approvals, loan officers may request recent tax returns, proof of income (such as paystubs), and savings account statements. Retirement account information, such as 401(k) statements, may also be used to establish financial position. A credit report will also be run to verify current debt balances and payments.

How Does a Pre-Approval Help Buyers?

In today’s busy Philadelphia real estate market, those potential buyers armed with a pre-approval have a greater chance of nabbing their dream home. Buyers should view their pre-approval as a competitive advantage in a hot real estate market. In a multiple-bid situation, buyers use their pre-approval need to demonstrate financial strength backing up their offer. A pre-approval letter offers support to a bid and provides assurance to the seller.

For those Philly Big Five grads who want their first home purchase to be a slam dunk, a mortgage pre-approval will help guarantee success.

Original article written by Jennifer A. Digiovanni | Coldwell Banker Blue Matter

How To Make Buyers Want Your Home

Your home is listed on the Multiple Listing Service (MLS) and the sign goes up in your front yard. Now what? Sit back and let the offers roll in. Of course, that's what every seller wants but that's not always what happens.

So, let's rewind a bit and see what can be done to make buyers want your home. The steps you take before you actually put your home on the market can help to ensure interest in your home.

Start by creating a "buy-me-now" attitude. How's that done?

Several ways. Take a good look at your home and decide which, if any repairs, need to be made. Are you selling "as is" or do you want to put a little money into your home and fix some surface problems that could potentially distract or concern buyers?

Next, clear away clutter. If you don't have any place other than your home to put your boxes and extra furniture that you're taking with you on the move, try storing them in the garage or on the side of the house. If you do this be sure that you don't stack your boxes so high that you block views to the outside.

When you block a view, buyers may think you're hiding something bad about the property or they may have a very closed-in feeling when they enter that particular room. Buyers do understand that you're moving and things may be a little out of order, but try to keep that to only one room or half of the garage. You want to make sure that buyers can see your entire home. Limiting them from viewing one or several rooms may discourage them. Tidy up and keep things packed away.

Always keep in mind that more room and more storage space are two things buyers really like. Create a feeling of openness and spaciousness by trading out, or removing entirely, bulky pieces of furniture that suck up square footage in a room. Instead find another piece of furniture that can fit into the room... maybe something from another area of your home. Even if it's not an ideal placement for you, do it anyway.

Remember, the idea is to show your home in its best light. More space is a huge plus. Another way to make a room look larger is to use mirrors. Strategically hanging a mirror on a wall can help open up the room.

Your agent may elect to hold an open house and prior to that list your home on the MLS but not allow any showings until the weekend of the very first open house. This can be an excellent strategy because you may end up with lots of buyers passing through for that first open house since they couldn't see your home sooner. You can then allow showings by appointment for a period of time. This strategy can generate a lot of interest and even start a bidding war. May the highest and best offer win.

Do your work and clean up before you open the doors to buyers. You don't always get another chance, so make buyers want your home by showing them that you've loved and cared for your home and now you'd like to see it go to buyers who will enjoy it like you did.

Original article from www.realtytimes.com | written by: Phoebe Chongchua

Your Home: Putting the 5 Year Plan to Work for You

Thinking of selling your house? Has it been under five years since you bought it? You might want to slow it down (unless you're swimming in equity from a crazy smart purchase you made at the perfect time or have a flip you're ready to unleash, of course). Same goes for those who are getting ready to buy - especially for the first time.

It's the five-year rule, and it's touted by experts as an important real estate guideline to follow if you want to make a smart decision that meets your financial and lifestyle needs.

"When you purchase a house, the general rule is that you want to be sure you'll be in the same location for at least five years. Otherwise, you're probably going to take a hit financially," said Money Ning.

"The first hit is your closing costs. Every time you go through closing - buying and selling - money hits the table. Depending on where your house happens to be, the buyers and sellers pay different amounts, but everyone pays something. This can easily add up to thousands of dollars, and limiting how often you have to pay that kind of money is always a good idea."

The second hit is in the interest/equity balance. "When you take out a 30-year mortgage, the vast majority of your monthly mortgage payment is going to go toward interest charges for the first few years of the loan," said Mortgage Loan. "The portion of your mortgage payment that goes toward interest is shrinking all the time, and the five-year point is typically where you begin to get some real traction in building equity, which makes your interest payments fall even faster.

So the five-year mark is generally considered the point where your accumulated equity begins to exceed what you might have saved by renting, though it may vary depending on the terms of your loan and the cost of renting vs. buying in your area."

It makes sense. But it also goes against many people's real estate human nature.

We aren't necessarily conditioned to buy a home with an expiration date in mind. Yes, there's the buyer who's already got his eye on the move-up prize with a two-year max when he's buying his first home (and many of us have been that guy, and many of us have watched that two years turn into four or six when market conditions didn't cooperate or life changes got in the way). But real estate is a largely emotional purchase, especially for first-time buyers. What we want today may not be practical a few years out, but thinking about future needs can be tough when we're seduced by gleaming floors and a wood-burning fireplace. We don't always put a "sell date" on the home we're buying. But should we?

Well, yes, if the goal is:

• making a smart purchase that has the best chance of paying off financially
• creating a long-term family plan
• creating a comprehensive savings plan if you are looking to move up
• developing a clearer vision on how to treat home repairs, updates and upgrades so you spend smart

When it comes to fixing up your house, you'll want to do a cost-benefit analysis. "Think about what you, the current homeowner, want from your home," said US News. "Homeowners can get a lot of value out of renovations before they even put the home on the market. "If you have a dated kitchen or the stove doesn't work, you can invest money now to glean some enjoyment as well as make the home more appealing when you sell it."

If you know you're going to live in the house for five years, you may opt to upgrade an older, marginally functional air conditioning unit when you move in, and not when you're getting ready to sell, so you can enjoy it during your time in the house. Ditto those crusty old kitchen appliances.

But you might not rip up your entire kitchen to the tune of 50k or renovate your attic for your seven-year-old twins who "will need the space some day." When they're 12 and you move on to your bigger house at the end of your five-year plan, you'll be happy you didn't spend $100,000 to add a tween wing.

Original article written by  Jaymi Naciri from www.realtytimes.com