The ‘Debt to Income’ Ratio and How It Affects Your Home Purchase

Real Estate Terms: The 'Debt to Income' Ratio and How It Affects Your Home PurchaseThe real estate market is rife with terminology that can make a home purchase seem more than a little complicated. If you’re currently looking for a home and are considering your loan options, you may have even heard the term ‘Debt to Income’ ratio. In the interest of simplifying things, here are some insights on what this term means and how it can impact your home investment.

Determining Your ‘Debt to Income’ Ratio

It’s important to consider what exactly your DTI ratio is before your home purchase as this will quickly determine how much home you can actually afford. To calculate this number, take your monthly debt payments – including any credit card, loan and mortgage payments – and divide them by your monthly gross income to get a percentage. In the event that your monthly debt is $700 and you make $2800 in income, your DTI is 25%.

What Your DTI Means To The Bank

The DTI is a very important number when it comes to a home loan because it enables the bank to determine your financial situation. A DTI of 25% leaves some wiggle room, as most banks will allow a DTI percentage that runs between 36-43%. In the case of the above example, this means that the most debt this person could take on per month is about $1200. While banks vary on this percentage, credit history plays an important part in the DTI that will be allowed.

Paying Down Your Debt Or Purchasing A Home

In the event that you have a DTI ratio that exceeds what your bank will allow, you will need to consider your debts before moving on to investing in a home. If you’re planning on purchasing a home in the next year, it’s a good idea to tackle high-interest debt first. However, if you happen to have a chunk of money saved up that you’re planning on putting into a down payment, it’s worth considering that putting more than 20% down may slightly increase the DTI percentage your bank will accept.

There are many fancy terms that go along with the world of real estate, but it’s important to understand what they mean so you can make them work in your favor. If you’re calculating your DTI ratio and are planning a home purchase down the road, you may want to contact your trusted mortgage professionals for more information.

Luxury Selling: How to Qualify Potential Buyers to Ensure They Can Afford Your Home

Luxury Selling: How to Qualify Potential Buyers to Ensure They Can Afford Your HomeLuxury estates can be a challenge to sell. The more expensive a home is, the less potential buyers there are. The biggest hassle is going through the process with people who can’t actually afford the home, only to have it fall apart at the last minute.

Here are some ways to make sure the property is only being viewed by qualified buyers.

Only Accept Offers From Buyers Who Are Pre-Qualified From A Lender

One of the only ways to guarantee a buyer will be able to afford a luxury home is to let the bank do the work on your behalf. By only accepting offers from people who have been pre-qualified by a lender, it allows the seller the peace of mind of knowing that every offer is a legitimate one.

Luxury Agents Will Have Vetted Their Clients

Working with a real estate agent with a specialty in luxury properties is one way to make sure the vetting process is handled effectively and legally. These agents do not have time to waste with people who can’t afford a home in this price range and they will have a roster of clients who are not only looking for a new luxury house, but can afford one. Talk to the neighbors and see who their buying agent was. This will give an idea of which professionals are working with clients who can afford the neighborhood.

Use Broker Open Houses Over The Traditional Open House

Hosting an open house in a luxury home is a dangerous prospect. There is no way of knowing how many visitors can actually afford the home and how many just want to look around to see how the other half lives. On top of that, it’s a serious safety risk as luxury open houses bring out potential thieves to case the place and see what the security is like.

For luxury sellers a broker open house is the best course of action. These open houses are closed to the public and only available to brokers who have clients that are looking for a luxury home.

There are more luxury homes on the market than buyers and standing out is important if you want to sell quickly. Trying to sell a home like this on your own is a disaster waiting to happen. Make sure to talk to real estate agents in the area who deal with luxury properties until you find one you are comfortable with. Contact your local real estate professional today for more information.

Dealing with the Summer Heat? How to Keep Your Home Cool Without Using a Ton of Energy

Dealing with the Summer Heat? How to Keep Your Home Cool Without Using a Ton of EnergyMany people look forward to the long, relaxed, sunny days of summer, but they also dread opening up their energy bills throughout the summer months. Cooling a home can be costly, and many are searching for convenient ways to lower cooling costs without sacrificing on comfort inside the home on the warmest days of the year. These are just a few of the cost-effective and convenient options that can help homeowners to reduce cooling costs throughout the summer.

Keep The Blinds Closed

A significant amount of heat can enter a home through the windows, and blinds and curtains provide an extra layer of insulation between the window glass and the interior of the home. Some types of blinds and curtains are more effective at blocking heat than others, and homeowners may consider making an upgrade for the best results. For example, wood blinds can block significantly more heat than thin, almost translucent sheers.

Run The Ceiling Fans

Another way to keep cooling costs lower throughout the summer months is to run ceiling fans regularly. Ceiling fans help to circulate the air, and this helps the central cooling system function more efficiently. In addition, ceiling fans also can make those who are in the room feel cooler, and this may mean that homeowners can keep the home’s thermostat set at a slightly higher level than it otherwise would need to be set at for comfort indoors.

Use Heat-Generating Features At Night

There are numerous appliances and types of equipment that may be used indoors throughout the summer that can generate a considerable amount of heat, and running these at night can reduce the need to run the central cooling system as much during warm days. Consider that everything from running the washing machine and dryer to using the dishwasher and oven or range can emit heat in the home, and these serve to counteract the work that the cooling system is doing. When possible, limit the use of these features to cooler nighttime hours.

Keeping the home cool throughout the summer is a top priority for most, and the good news is that there are easy ways to reduce the cost associated with keeping a home cool. These ideas all can be beneficial in a homeowner’s quest to reduce energy costs during the summer.

What Are The Top Ways To Win A Bidding War?

What Are The Top Ways To Win A Bidding War?Right now, there are not a lot of houses for sale, as inventory and new home construction continue to lag behind buyer demand. In addition, low mortgage rates are accelerating demand, meaning that in many situations the sellers are receiving multiple offers. Therefore, it is important for potential buyers to do everything they can to win a bidding war. What are a few ways buyers can give themselves an advantage?

Get Pre-Approved For A Home Loan

The first thing interested buyers need to do is to get pre-approved for a home loan. Because many sellers have options, they might be more willing to take a cash offer because they know the money is going to be there. In order for potential buyers to compete with cash offers, they need to get pre-approved for a home loan, which tells the seller that the buyer has already been approved for a home loan by the lender. Getting pre-approved can make buyers more competitive.

Present The Best Offer First

Because many properties are receiving multiple offers, buyers need to be ready with their best offer at the outset. If they can convince the seller to forgo listening to other offers, they have a better chance of securing the home. Therefore, buyers have to work with experienced professionals who can help them figure out what their budget is, what comparable homes are selling for, and how they can make a competitive offer that could convince the seller to say yes quickly.

Act As Quickly As Possible

Finally, buyers have to be ready to act fast. Properties are not staying on the market as long as they once did. For example, one site says that homes are spending 20 days fewer on the market now than they did one year ago. Therefore, buyers do not have time to wait. If they have trouble getting their work schedules set, traveling to the area, or lining up a showing, the home could be off the market by the time this is done. Buyers must act as quickly as possible.

Get Ready To Win A Bidding War

These are just a few of the most important steps buyers need to take in order to win a bidding war. While the market is hot, it is possible to find a home at a fair price.

The Top House Appraisal Tips For Home Buyers And Sellers

The Top House Appraisal Tips For Home Buyers And SellersThere are a lot of steps that come with buying or selling a home. One of the routine steps that have to be accomplished is called a home appraisal. When it comes to a home appraisal, this is something that can cause both buyers and sellers to pause for a second. For those who might not know, a house appraisal is where a trained professional will take a look at the fair market value of the home. It is important to understand what happens when a home appraisal is conducted. 

Compare The Home To Similar Properties

When a home appraisal is conducted, its value is usually compared to homes in the area that are similar. The value of a home is always determined by what similar homes in the area have sold for recently. This is what the lender is going to look for. For example, if someone is selling a condo, and the value of that condo is going to be compared to other condos in the building that have sold recently. Even though there might not be identical houses in the area, the same process is going to happen for free-standing homes. 

Make Improvements To The Home

For those who are going to be selling their home in the near future, one of the easiest ways to drive up the value of the home is to make improvements. If the countertops, floors, or cabinets have not been updated recently, then performing these updates can drive up the value of a home. In some cases, homeowners might be able to get a bigger increase in the value of their home than the amount of money they spent on the improvements. 

Get A Second Appraisal

In some cases, home buyers might not like the appraisal that came in on the home. In this case, they might be able to challenge this first appraisal by getting a second appraisal. Even though this might cost a bit of money, if the home comes back at a significantly reduced cost, then there might be opportunities for the buyer to renegotiate the price of the home. Everyone wants to make sure they are getting a fair deal when a home changes hands.

Looking For A Major Lifestyle Change? Consider Buying A ‘Micro’ Home

Looking For A Major Lifestyle Change Consider Buying A 'Micro' HomeWith the sometimes high cost of buying and maintaining a home and the concept of being sustainable becoming more popular, many people are considering moving to a smaller home to minimize their impact. It’s important, however, to consider what living small is really like before deciding that it’s the right move for you.

If you’re curious about life on a smaller-scale, here are some things to contemplate beforehand.

Getting Rid Of The Excess

It’s just a fact that a smaller amount of space means a smaller amount of stuff, but many people don’t realize this works two ways. While you won’t be able to accumulate the same amount of stuff in a smaller home, you also won’t have the luxury of being able to take everything from a larger house with you. It may not be a big deal for you to pack things away or discard the old, but if you’re the type of person who likes stuff, you may want to re-consider micro.

Will You Miss The Space?

Many homeowners spend a lot of time outdoors or even traveling for work, so the size of their home may not matter that much. However, if you’re the kind of homeowner who loves to nest and have their space, the idea of lounging around a small home may not be for you. A micro-sized space can minimize costs and be easier to decorate, but if you like being able to spread out and luxuriate in a variety of surroundings, something undersized can be quite limiting.

Forget The Home Maintenance

Whether you live on a massive estate or in a studio apartment, there are minor things that need to be done to keep your space clean and clutter free. When it comes to smaller living though, there will be a lot less to do, and this can greatly impact your free time. It’s great if you’re the kind of person who has plenty of hobbies to keep them busy, but if you like taking care of the yard and doing an assortment of home maintenance duties, it may be a struggle to own a property that needs less tending.

It’s never been more popular to go ‘micro’ when it comes to home ownership, but it’s important to make sure small living is right for you before taking the leap. If you’re currently in the market for a ‘micro’ home, contact your trusted mortgage professional for specific lending information.

Managing Finances Before Applying For A Mortgage

Managing Finances Before Applying For A MortgageAre you planning on using a mortgage to help cover the cost of a new home? If so, you will want to prepare your finances and figure out how you will manage all those wallet-draining monthly expenses. Let’s take a look at how to run a quick financial health check to ensure you are ready to apply for a mortgage.

Update (Or Start) Your Monthly Budget

First, it is essential to get the basics out of the way. If you haven’t already, it’s time to start a monthly budget to keep track of your income and expenses. Once you have a mortgage, it will be important to prioritize your monthly payments so that you don’t end up falling behind.

Starting a budget is easy and can be done with mobile apps, software, a spreadsheet or a pen and paper. List all sources of income so that you know exactly how much cash you are working with. Then, list out every one of your expenses. It can be tough to remember them all, so consider using debit and credit card statements from the past few months as a reminder.

Get A Copy Of Your Credit Report

Next, you will want to get a copy of your credit report so you can see what potential mortgage lenders will see when assessing your financial history. This is a free service that you can request once per year, so be sure to take advantage. Note that you will want to use government-approved websites for requesting your credit report. Be wary of scams.

Do You Have A Down Payment?

A down payment is not required for every home purchase, but having one saved up can make the buying process easier. The amount you will want to have saved up will depend on the cost of your home, whether you plan on carrying private mortgage insurance and a variety of other factors. If possible, try to save up an amount close to (or more than) twenty percent of the home’s purchase price.

Ready? Chat With A Professional

Now that you have your financial health in check, it is time to meet with a trusted mortgage professional to discuss your financing options. 

Recently Inherited a Home That You Don’t Need? Here’s How to Get It Sold Without Too Much Stress

Recently Inherited a Home That You Don't Need? Here's How to Get It Sold Without Too Much StressHas a loved one or family member recently passed on and left you with their home? Inheriting a house can be a delightful gift, but it can also present a significant number of challenges that you must navigate.

Let’s explore how to deal with an inherited house and, should you decide to, how to sell it without incurring too much stress.

Are Emotions Involved?

The death of a family member or other loved one can be a trying time emotionally. Depending on how the deceased left the property, you may also have to deal with cleaning out personal belongings and reviving old memories. A battle over a will or the proceeds of an estate can compound the situation, making things worse.

If you are emotionally involved, it is best to work with a real estate agent who can do much of the heavy lifting. That way you can focus on supporting your family and keeping your stress levels down.

Understand Your Legal Obligations

Although real estate inheritance is common, there are still some legal issues that must be considered. As such, you will need to understand what your legal obligations are regarding the will or estate process. Are you the executor of the will, or is someone else? Is the property included in a trust, or is it free-standing and gifted directly to you? Has the probate period passed, or can a family member or relative still challenge the will? If you haven’t already, it is best to speak with a real estate professional or experienced lawyer to get their advice.

Consider The Tax Implications

As with any financial windfall, there are going to be tax implications that need to be considered when selling an inherited home. For example, it’s unlikely that you will qualify for the home sales tax exclusion unless you have been living in that house as your primary residence. Once you sell the home, you will also need to report the proceeds of the sale to the IRS. There are also a variety of different taxes that need to be factored in, including estate taxes, inheritance taxes and more.

Consult An Experienced Real Estate Agent

Selling a home that you have inherited in a will or as part of an estate can be an emotionally draining process. Before you make any moves, it is best to speak with a real estate professional. Contact our office at your convenience and we will be happy to meet with you and share our guidance.

When Is the Right Time to Buy Your First Home? Use This Easy 4 Point Checklist

When Is the Right Time to Buy Your First Home? Use This Easy 4 Point ChecklistAre you growing tired of renting? Or perhaps you’ve recently graduated from college and are looking to set down some roots? Whatever the case, buying your first home is an exciting prospect. Let’s take a look at a quick and easy four-point checklist that you can use to determine if you are ready to buy your first home.

#1: Is Your Credit In Good Shape?

How is your overall financial health? Once you have your down payment saved up, you should turn your attention to your credit rating. If you are going to borrow a mortgage to help cover the cost of your home, your lender will be doing some digging into your credit history. It is best to ensure that you aren’t late with any payments and have cleared off any black marks from past credit problems.

#2: Can You See Yourself Living In This Community?

Do you love the area you live in? Or are you thinking about moving to a community that you like a bit more than your current one? Perhaps it’s the local shops, the amenities, the walking trails or just being closer to work. It is always best to ‘love where you live,’ so ensure that you are buying your first home in a community that you can call home.

#3: Is Your Job Situation Stable?

Another factor to consider is your job or career situation. Are you likely to switch companies or be transferred to another division within the next few years? Be sure to give some thought to this as it will be inconvenient to have to move shortly after buying and furnishing a home.

#4: Are You Planning To Have Children?

Finally, have you considered what your family might look like in the future? Are you planning to get married, or if you are already married are you planning to have a family? If you have children now, do you expect to have any more of them? Keep in mind that as your children grow older, they will need a bit more space. If you have a couple of young kids sharing bunk beds, each will need their own bedroom soon enough.

When you’re ready to buy your first home, our friendly mortgage team is here to help you find the perfect financing. Give our offices a call and we will be happy to meet with you to discuss your needs.

Curious About Homeowners’ Association (HOA) Fees? Here’s What You Need to Know

Curious About Homeowners' Association (HOA) Fees? Here's What You Need to KnowIf you are thinking of buying a condominium or a home that is part of a planned community, you have likely come across the term “homeowners’ association” or HOA. In short, the HOA is a coalition of local homeowners who have banded together to manage the needs of the local community. Let’s explore the concept of the homeowners’ association, why they charge fees and what you can expect from your HOA if you buy a home that is part of one.

HOA Fees Are Meant To Make Things Easier

HOA fees are meant to make your life easier. Common sense dictates that all homeowners won’t be able to commit to investing some of their time in community upkeep. So the HOA charges a monthly fee to everyone to cover the costs of keeping everything in order. Of course, some HOAs can make mistakes or foolish investments that don’t benefit all equally. But most are well-intended and do positive work.

What Do HOA Fees Cover?

Your HOA fees will be used to pay for needs that benefit all homeowners’ in the community. If you live in a building, this will be everything from elevator maintenance to keeping the doors in good order. If you live in a townhouse complex or planned community, this includes landscaping, gardening, road maintenance and more. As long as your HOA leaders are doing their job, they will use fees to maintain and improve the community for everyone.

Some Pros And Cons Of HOA Fees

The main benefit of paying HOA fees is that you are offloading your share of the responsibility for building or community upkeep. In essence, you are trading a monthly payment so that you don’t have to vacuum the common areas, change the light bulbs or worry about repairing the gate when it breaks. The main downside to paying HOA fees is that you only have a single vote as to how they are spent and you may disagree with other homeowners about the HOA’s priorities.

All things considered, whether or not you have a favorable view of your HOA generally comes down to you. If you are the type that likes to share their opinion and is willing to commit the time to improve your local community, you may want to join your HOA. However, if you are less interested in having someone spend your money, you might disagree with their approach. Whatever the case, when you are ready to buy your next home, contact our professional mortgage team. We’re happy to help you find the right financing for your new home – HOA or not.