Realty Executives Midwest (Darien)

Brian Bischoff

Brian Bischoff

Blog

THE FIRST-TIME HOMEBUYER’S GUIDE TO APPLYING FOR A HOME LOAN

(Published on - 11/4/2017 8:29:39 PM)

THE FIRST-TIME HOMEBUYER’S GUIDE TO APPLYING FOR A HOME LOAN

 

 

applying for a home loan

Purchasing your first home can be one of the most exciting and overwhelmingly stressful experiences of your life. Yet, armed with the appropriate knowledge and information, you can define your budget, get pre-approved for your home loan, shop for the perfect house and close the transaction with confidence.

 

1. Assess the amount of money that you can afford to pay each month for your mortgage

At the beginning of your homebuying journey it is vital to calculate your finances to determine how much house you can reasonably afford on your income.

Pro Tip: In addition to factoring in the mortgage payments also be sure to include all housing costs for each month.

Your monthly housing budget should consist of mortgage payments, homeowner’s insurance, private mortgage insurance (PMI) and property taxes. When calculating the amount of your income that can go toward monthly mortgage payments keep in mind the more money you spend on the monthly payments, the less money you have accessible to spend on anything else. Things in your life could change drastically for example having children, purchasing a new vehicle, paying for college, losing a job or going out of business.

As a general rule of thumb:

  • Keep your mortgage payments below 25 percent of your pretax monthly income.
  • Your mortgage payments should be equivalent to one week’s pay check.

It is vital to crunch your own numbers before shopping for a mortgage. Lenders may pre-approve your loan amount at 30 to 35 percent of your pretax income, enticing you to take on more home debt than you can actually afford. Never presume that just because the bank endorses it, you can bear the cost of it.

2. Verify that your finances are in order to move forward with the mortgage process

To guarantee that now is the best time to purchase your first home the bank will require that you have a good credit score, money to cover closing costs and verifiable income.

Assess your credit 

It should be no surprise that good credit is needed to secure a home loan. If you’re based in America, get all three of your credit reports free of charge from AnnualCreditReport.com to verify that there are no errors on them. If you’re based in Canada, check the two national credit bureaus, Equifax Canada and TransUnion Canada.

If you need to enhance your score quickly consider doing the following:

  • Pay down any outstanding credit card balances
  • Stop using credit cards two months prior to applying for a home loan
  • Avoid applying for a new credit card or car loan until after you have closed on your new home
  • To significantly improve your credit score, keep in mind that it may take up to six months so get started as soon as possible

Set money aside to cover the down payment, closing costs and other expenses

In addition to ensuring that your credit is in good standing it is also important to make sure that you have the cash required to make buying your first home a reality. In general a conventional loan will require a down payment amount of 5 to 20 percent of the sale price of the home. Government issued loans such as an FHA loan or VA mortgage loan can require as little as 3.5 percent down.

Example

If the purchase price of the home is $250,000, and you are required to pay a 10 percent down payment, you will need 25,000 cash to move forward with your purchase.

To avoid paying additional private mortgage insurance (PMI) most lenders will require a 20 percent down payment, instantly doubling the cash amount used in the previous example to $50,000. PMI protects the bank in the event that you default on your loan and your home’s value significantly decreases.

Closing costs can raise the upfront costs substantially and many first time homebuyers are not aware of this added expense. Closing costs can be up to 3 percent of the total loan amount. Which means on a $250,000 mortgage an additional $7,500 in closing costs is added — on top of your down payment.

Closing costs fluctuate from state to state or province to province, but they often are based on the following expenses:

  • Application fee charged by the lender (amount varies from lender to lender)
  • Appraisals
  • Attorneys
  • Government taxes collected based on a percentage of the mortgage loan amount
  • Real estate transfer tax
  • Title insurance
  • Total of percentage ‘points’ of the mortgage loan amount charged by the lender

Key facts about lender points

One kind of point that a lender can charge is called an origination fee or money charged to the lender for originating or placing the loan. There are also discount points, or compensation paid to the lender to decrease interest rates permanently.

Pro Tip: There are two ways to significantly reduce or even eliminate closing costs:

 

  • Arrange for the seller to pay the closing costs.
  • Consult with your lender about premium pricing (with this method you agree to pay a higher interest on your home loan in exchange for the lender covering the closing costs).

 

Additional expenses to be aware of:

  • Prepaid expenses or payments made in advance of the money being due. Most commonly this will consist of mortgage interest that will accrue between the closing date and month-end, real estate taxes and homeowners insurance paid into an escrow account. This expense can be equivalent to 2 percent of the total loan amount or more.
  • Utility expenses (i.e., heating, sewer, trash removal and water)
  • Homeowners’ Associations (HOA) Fees
  • Lenders cash reserve requirement (after all expenses are paid for the home the lender requires that you have a specified amount of cash left over, usually at least two months of mortgage payments, to avoid the risk of defaulting on the loan early. The funds are not directly deposited with the lender however they must be available in a verifiable source (i.e., a checking or savings account or a money market fund).
  • Home Inspection

Estimated amount of cash needed to purchase a $250,000 with a 10% down payment:

Cash needed upfront to purchase $250,000 home

Down payment 10% of $250,000 $25,000
Closing costs 3% of $225,000 $6,750
Prepaid expenses 2% of $225,000 $4,500
Utility expenses Approximate estimate $600
Required cash reserves $1,000 mortgage payment x 2 $2,000
Total cash required   $38,850

Using the example above the numbers can add up quickly when buying a home. This is why it is very important to add up all of your upfront costs when planning your home buying budget. Doing so will provide you with a realistic snapshot of how prepared you are to move forward with the home buying process.

3. Compile important documentation

After preparing a realistic assessment of your housing budget, it is important to gather documentation that will aid in verifying your finances to accompany your mortgage application. You will need the following items:

  • Bank statements
  • Copy of your credit report
  • Copies of your last two tax returns
  • Paystubs
  • Proof of freelance or self employment income (if applicable)
  • Proof of Identification (driver’s license, passport or state issued ID)
  • Social Security Number or Social Insurance Number
  • W-2 Forms (wage and tax statements from your employer)

4. Shop for your home loan

Do not wait until the last minute to shop for your mortgage, you could essentially lose your dream home if another applicant already has their financing in place. Getting a mortgage pre-approval is a free and non-binding process that can make the home buying process smoother in the following ways:

  • Knowing exactly how much you are approved to spend
  • Positions you as the buyer with the advantage if the home has multiple offers, thus giving you negotiating power.
  • Positions you as a serious qualified first-time home buyer

Get familiar with mortgage rates

There are fixed mortgage rates and adjustable mortgage rates. With a fixed mortgage rate the interest stays the same as long as the borrower is paying down the loan. With a fixed rate mortgage the interest is not dictated by the market. With an adjustable mortgage rate (ARM) the interest fluctuates, going up or down based on the interest rate of the market.

Home loans can be paid over a period of 5 to 30 years, with 30 years at a fixed rate being the norm.

Mortgage fees

But wait there’s more! Mortgage lenders charge additional fees that are not associated with the  interest rate. For example you may be assessed fees for:

  • Credit check
  • Document preparation
  • Home appraisal fees

Some lenders may provide you the option to pay mortgage points at closing that can lower your interest rate. Points are basically prepaid interest that could save the borrower money over the duration of the home loan. One mortgage point is equivalent to 1 percent of the overall mortgage value. Using our previous example of $250,000 mortgage, 1 mortgage point is equivalent to $2,500.

It is best to pay mortgage points in the following circumstances:

  • You can afford to pay out the added cash expense
  • You expect to hold the mortgage for a long period of time
  • You have less than stellar or poor credit and the lender requires it

Where to shop for mortgage rates

A good starting point is your bank because you already do business with them, but do not stop there. You can shop online and compare rates with leading industry mortgage lenders or partner with a local mortgage broker that can place your application amongst multiple lenders within his or her network. Your licensed real estate professional should be able to provide local mortgage broker referrals if you need assistance.

Purchasing your first home can be a very fun and exhilarating experience.It is also an experience that can be confusing and frustrating if you are not adequately prepared. Before you go house hunting do your homework, get your finances in order and shop around for the best mortgage rates to be adequately prepared for the overall process.

This post was written for Realty Executives by Ashley Neal. Ashley is a freelance content strategist focused on writing about, real estate, interior design, health, fitness and luxury for almost a decade. Ashley’s work has appeared in a number of digital and print publications including Blasting News, CBS Local Atlanta, Atlanta Business Chronicle and Huffington Post. She has also contributed to and/or been mentioned on a number of well respected media platforms including; Forbes, Small Biz Trendz and Biz Sugar.

 

 


HOW TO SELL YOUR HOME QUICKLY IN A HOT MARKET

(Published on - 11/4/2017 7:06:59 PM)

HOW TO SELL YOUR HOME QUICKLY IN A HOT MARKET

 
 

If you live in a city where demand exceeds supply and you’re looking to cash in and sell your home, how do you do so quickly and painlessly?

 

Price your home right

As tempting as it might be to pad your asking price in a seller’s market, an inflated listing price could scare away potential buyers. Buyers who are interested won’t submit offers because they don’t want to offend you, and buyers who are searching online may not even see your property because anything outside of their price range won’t show up in their results.

Research has shown that overpricing your home could result in more days on market, which will ultimately force you to drop the price in an effort to attract buyers.

“If you overprice your home, it will sit idle on the market, and if you underprice it, you’ll miss out on cash and equity that could’ve been earned in the sale,” says Mansions and Millionaires host Michael Corbett.

Be prepared to move quickly

With homes going under contract after less than 10 days in some cities according to HousingWire, expect your real estate transaction to move quickly. If your home is priced correctly, expect multiple offers which you will need time to review. Showings, appraisals, inspections and repairs are likely to occur during business hours, so if you work a 9-to-5 schedule, be sure to accommodate for this to prevent any delays.

Finally, if you don’t already have housing lined up, consider temporary housing options in case you need to move out shortly after the sale.

The basics still matter

If a fixture needs to be replaced or a structural issue needs addressed, it’s better to fix it ahead of putting your home on the market.

In fact, according to Remodeling Magazine, homeowners can recoup some or all of the money invested in these fixes during the sales process, depending on the region. (You can check the average for your neighborhood here.)

A little hospitality goes a long way

Real estate investor Brian Davis says hospitality is the easiest way to make a buyer feel at ease in your home. “There’s nothing worse than walking out of the sweltering heat and into a home that’s just as hot and stuffy. Yes, it might mean a slightly higher electric bill, but keep the home refreshingly cool at all times,” Davis advises. “If you’re present for showings, provide cold drinks for prospective buyers: iced tea, lemonade, summery cocktails, cold craft beers. These are rarely unwelcome on a hot summer day, and will make an excellent impression on prospects.”

Factor summer holidays into your timeline

Appraisers, escrow officers, mortgage officers and even buyers can have more distractions going on during the hectic summer months, including holidays. “Be prepared for longer escrow periods, as key personnel may be unavailable due to vacations,” says Adham Sbeih, CEO of real estate investment and lending firm Socotra Capital.

Whether you end up entering the market in summer, fall or in a year or two, remember: hot market or not, the easiest way to be prepared is to find knowledgeable real estate professionals in your area who understand the market.


HEALTH HAZARDS IN YOUR KITCHEN AND HOW TO AVOID THEM

(Published on - 10/27/2017 1:49:11 AM)

HEALTH HAZARDS IN YOUR KITCHEN AND HOW TO AVOID THEM

 
 

The kitchen isn’t just a place to prepare food, it’s a communal space and a place to socialize with friends and family. For such an important space in your home, health and safety are crucial.

Here are some of the most common health hazards found in kitchens and what you can to do avoid them.

 

Unclean and contaminated materials

When preparing food on countertops or cutting boards, it is easy for residue to be left behind, which can result in bacteria and other harmful substances. The same is true with used sponges. Studies have shown that sponges are an ideal place for E. Coli, Salmonella, viruses, and other pathogens to grow.

When you put something on that surface or use a sponge on food items, dishes, countertops, your phone, or your hands, the harmful substances left behind can contaminate those items.

Bacteria and other harmful substances can result in foodborne illnesses that can make you and your family sick.

In order to avoid contamination, thorough and consistent cleaning is crucial. Clean and sanitize your kitchen surfaces consistently, including countertops, inside your fridge, and your hands.

Be sure to clean your cutting board thoroughly between each use, especially if you are preparing raw meat. Having two separate cutting boards, one for meat and one for other foods, is recommended.

Mold

Since mold often grows in warm and damp areas, the Environmental Protection Agency warns that this can lead to mold in areas such as walls and cabinets.

According to the EPA, mold can lead to allergic reactions, sneezing, red/itchy eyes, throat and lung irritation, asthma attacks, and wheezing.

To avoid this, be sure to check your pipes regularly. If they are leaky or if there is water damage, seek professional help.

If you already have mold, you have a couple of options. The EPA suggests scrubbing the mold off of hard surfaces with detergent and water. Softer more porous materials like rugs and ceiling tiles should be thrown away. Professionals can also be hired, especially if you believe your water or air circulation systems have been contaminated.

Toxic gas

If you have a gas stove, this is especially pertinent. Cooking with gas can release carbon monoxide, a toxic gas, into the air. This odorless, invisible gas can lead to nausea, dizziness, fainting, and even death when the levels are extremely high.

A carbon monoxide detector will alert you when carbon monoxide levels are dangerously high so you can vacate the home, but be sure to have your stove inspected regularly to make sure it is not leaking large amounts of carbon monoxide.

Besides carbon monoxide, fumes can be released during cooking and cleaning from smoke, burning grease, and even cleaning products.

Air purifiers can help cleanse the air of these harmful fumes. Also, keeping plants in your home is recommended because they absorb toxins and release clean oxygen into the air.

Equipment safety

According to nonprofit organization Consumer Reports, cooking fires are the leading cause of injuries in the home and kitchen.

The National Fire Protection Agency reports that 480 people die each year as a result of kitchen fires, and 46 percent of all home fires are the result of cooking. The NFPA further reports that unattended cooking is the number one cause of kitchen fires, so remaining in the kitchen while you have food on the stove or in the oven is recommended.

Also, keeping a fire extinguisher handy is always a good idea.

Knife injuries, as well as accidents with cookware, food processors, microwaves, and blenders are also known to cause injuries in the kitchen.

Be extremely careful when using knives, as they cause more injuries than any other of hand-held tool. Make sure they are sharp – dull knives lead to more injuries than sharp ones. Keeping knives in a knife block, not a drawer, is recommended in order to avoid any accidental cuts.

Implementing and consistently following these simple tips should go some way to improving the safety conditions of your kitchen.

 

This post was written for Realty Executives by Elliot Walsh.

 

VA Loans

(Published on - 10/17/2017 3:22:52 AM)


Follow up question to VA loans

(Published on - 10/17/2017 3:19:18 AM)


;

Copyright 2018 Realty Executives All Rights Reserved

SFR

Brian Bischoff

Contact
Disclaimer: Each office independently owned and operated. Please disregard this message if you are already under contract with another real estate professional.