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Weighing 30- and 15-year Fixed-Rate Mortgages

December 19, 2012 By Leave a Comment

Weighing 30- and 15-year Fixed-Rate Mortgages

Home MoneyOne important decision homebuyers face is whether to secure a 30-year, fixed-rate mortgage or go for a 15-year one, which carries a lower interest rate.

“All things equal, a 15-year mortgage allows you to pay off your mortgage twice as fast while saving a significant chunk of money on interest,” explains Mark Crosby, a mortgage expert in Wilmington, Del. Still, “I think the 30-year mortgage is a logical choice for most people because it has more advantages.”

For starters, mortgage payments are less expensive with a 30-year mortgage, enabling more consumers to qualify for home purchases. “With a 30-year mortgage you are almost always free to make additional principal payments necessary to pay off your loan [faster] without penalty,” Crosby says. “With the 15-year loan, you are committed to giving that extra money to your lender each month, whether you can really afford to at the time or not.”

home sales priceHigher payments that come with a 15-year mortgage make little sense if they keep you from building savings or contributing to a 401(k) plan, IRA, and perhaps your kids’ college funds, adds Dan Green, a loan officer with Waterstone Mortgage in Laurel, Md. “You could be needlessly tying up too much of your money into your house.”

Green said another reason people favor a 30-year fixed mortgage is the tax benefit that can be achieved. “This is because the amortization schedule of 30-year fixed is back-heavy, with early-term payments big on interest and light in principal,” he explains. “By contrast, the 15-year fixed is always light on interest which lowers its taxpayer benefits.”

While it’s true you gain more of a tax break from a 30-year loan, it shouldn’t be the main consideration when deciding on a term. The 30-year borrower pays less in yearly taxes because he or she pays significantly more in interest.

housing affordabilitySo it all comes down to choice and circumstances. Choose the 15-year loan if you have the financial wherewithal to assume the payments. Your interest savings will be substantial and you’ll own your home faster. Opt for the 30-year loan for lower payments and greater flexibility. You can always choose to pay more on your mortgage when the money is available.

Filed Under: 15 year, 30 year, Buy a House, Finance, First Time Home Buyers, Housing Market, Mortgages, payment, Property Investment, Questions and Answers, Real Estate, savings, Syndication Tagged With: , , ,

Watch as you Walk Through

November 14, 2012 By Leave a Comment

Watch as you Walk Through

Watch as you walk throughThere’s nothing worse than finding a great home only to discover that it’s a money pit waiting to happen. Let’s face it, sellers won’t always disclose everything that’s wrong.

No house is ever as “perfect” as it may appear, and with an inspection and due diligence on the part of you and your agent, you will learn about most potential problems. Watch for red flags.

neighborhoodStart by looking around the neighborhood. Are there many homes for sale? Are local stores and restaurants closing?  If you notice that a lot of people are looking to leave the neighborhood, there’s probably a reason why. You may have found a great home, but if it’s in a bad neighborhood, it’s going to affect the value.

You also need to pay close attention to the way the exterior of the home has been treated. If you see extra layers of roofing, boards near walls, plants growing out of the gutters or lots of cracks in the pavement, chances are not much care went into maintaining the property.

While you’re outside, look at the yard grading. If the yard slopes toward the house, it could cause a serious water problem with water running down the foundation walls or into the basement. Scour the foundation for damage as bulges or cracks bigger than one-third inch can mean the house has serious structural issues.

Don’t be afraid to use your nose as an indicator as well as your eyes. If you smell sewage, gas or anything else that’s unpleasant, it could be caused by serious issues. If you are getting close to a buy, hire a plumbing company to send a camera through the pipes to determine if there are any blockages or breaks.

Inside, one of the most important things to look at is the wiring. Flip the light switches in the home to make sure they work. Check out the fuse box and see if it looks like something out of the 1940s. Ask if the electric has been updated in the last 10 years, because that’s something that can be costly once you move in.

Next, check for bugs, ants and traps hidden in the corners or under baseboards. A savvy home seller won’t leave mousetraps out, but often they forget about the little roach motels. Not that little creatures in the house should immediately scare you away, but if you see lots of ants—especially carpenter ants around wood—it could be a sign that there’s a problem.

Remember, the job of the home seller is to make the house as attractive as possible and hide all of its faults. With a little detective work, you can save a lot of time and money in the long run and make sure that house is good enough to become your home.

Filed Under: Buy a House, Buying a Home in Utah, First Time Home Buyers, Neighborhood, Questions and Answers, Real Estate, Red Flags, Syndication, Walk Through, Warning Signs Tagged With: , ,

Buying a Home is 45% Cheaper Than Renting

September 17, 2012 By Leave a Comment

Buying a Home is 45% Cheaper Than Renting

The Buying vs. Renting question has always been a dilemma for potential homeowners. There are many factors to weigh and examine. Recently, Trulia took a deep look at this question and came back with some very interesting data.

Rent vs. Buy

The Trulia survey found that in all 100 top metros in the United States, it was indeed cheaper to buy than to rent. The average came out to 45% savings, and our very own Salt Lake City metro area came in at 45% savings! The survey took a look at multiple aspects of homeownership savings, including mortgage rates, tax brackets and length of ownership. The survey is very interesting and raises questions every potential home buyer should consider. For the full survey, visit Trulia’s blog, or click the infographic above.

Filed Under: advice, Buy a House, Buying a Home in Utah, First Time Home Buyers, Housing Market, Mortgages, Questions and Answers, Real Estate, Rent, Rent vs Buy, renting, Syndication, tax benefits, Utah Tagged With: , , , ,

Make One Final Inspection

September 17, 2012 By Leave a Comment

Make One Final Inspection

Home InspectionIn the sales contract, the sellers of your new home agreed to leave the custom blinds, refrigerator, built-in entertainment system and those fine cabinets and workbench in the garage. But when you show up on moving day, all of those amenities are long gone. Moreover, the lock on the back door is broken; there is a huge gouge in the drywall near the front bathroom.

Although these circumstances are extreme, they could happen, which is why it is important to have a final inspection of the home you are purchasing before the closing. A pre-closing inspection gives you, one last opportunity to verify that you are getting all that was promised in the sales contract. Although buyers still have legal recourse if they discover—even after closing—that the condition of the home is not as it should be. Of course, the best time to identify problems is before closing when the seller will be motivated to correct any deficiencies to close the transaction.

Typically, a buyer takes possession of a property one to three months after signing the sales agreement. And a lot can happen before the actual move-in. Appliances and fixtures can break, and walls, carpets and doors can be damaged during the seller’s final weeks in the house, particularly during move-out. Sometimes the seller will simply have forgotten that he or she has agreed to leave the refrigerator or window coverings with the house. Whatever the reason, problems identified before the closing have the best chance of being remedied.

Final Home Inspection ChecklistIf possible, schedule the inspection right before the closing, such as the day before. Ask your real estate professional to attend the inspection with you. Here’s what to do:

Using a copy of the sales contract as a checklist, first make sure that all items that should be in place (appliances, built-in furniture, window coverings, fixtures, etc.) are there.

Test each appliance to make sure they work properly. Bring along an electrical clock or radio to test each electrical outlet. Test all electrical switches and the garage door opener. Run the garbage disposal and turn on every water faucet, checking under the sinks for leaks. Flush the toilets. Inspect the floors, carpets, walls and doors for recent damage.

If you discover that something is damaged or missing, make a note of it and inform your real estate professional immediately. In most cases, the seller is usually able to take care of small problems immediately, either by making a needed repair or offering compensation to handle it. And, if there are major problems, the seller can even sign a statement acknowledging the deficiency and agree to correct it. Although pre-closing inspections take time and may be inconvenient, they are important and well worth the buyer’s time.

Filed Under: advice, Buy a House, Buying a Home in Utah, First Time Home Buyers, prudential utah e, Questions and Answers, Real Estate, Syndication Tagged With: , , , , ,

Make Your Offer Stand Out

September 10, 2012 By Leave a Comment

Make Your Offer Stand Out

writing an offerReal estate consumers are realizing that there has rarely been a better time to buy a home. In fact, historically low mortgage rates coupled with lower home prices have even sparked bidding competition in markets around the country.

A good home in a solid location may attract ample attention only hours after being listed. Home buyers can make their offers stand out from the rest through one or more of the following strategies:

PricePrice. Obviously, price tends to be the primary consideration for sellers. When you’re competing for a home, to get an edge, think about adding a clause stating that you will beat the highest offer by “x” dollars up to “x” amount. Cash offers can be more attractive to sellers as well. Although sellers will receive their money at closing whether buyers pay with cash or take out a loan, cash offers don’t require lender approval.

Financing. It’s not enough to be pre-qualified. Pre-qualification only tells how much you can afford. Pre-approval goes a step further. Your lender will thoroughly evaluate your application—including verifying employment information and financial disposition—then clear you for a loan of a determined amount. Having your loan pre-approved gives you a sizeable advantage by putting you on equal footing with cash buyers.

Good Faith Deposit. Buyers offering a larger-than-customary amount of “earnest money,” a deposit that accompanies an offer, may get a seller’s attention. By committing more money up front, buyers demonstrate greater sincerity and motivation to close the transaction. Your real estate professional can guide you as to the appropriate sum for your specific transaction.

Contingencies. Consider minimizing contingencies, those clauses that allow buyers to back out of a contract if certain conditions are not met. For example, it’s common for buyers to make the purchase contingent upon their securing satisfactory financing. Obviously, offers with the fewest conditions tend to be more attractive to sellers.

From a contingency standpoint, first-time buyers are often better prospects for a seller’s home than move-up buyers. That’s because first-time buyers’ offers are not contingent upon the sale of a present home. Even if a move-up buyer has an offer in hand, that buyer’s offer may be contingent on another contingency, and so on down the line. If one transaction derails, they all might.

Relationship. Help the seller get to know and identify with you by looking for ways to connect. Find common interests, such as a shared appreciation of gardening. You can then persuade the seller that her prize roses will be well tended. Share brief family stories. The more the seller gets to know and like you, the better chance your offer will stand out in a competitive environment.

Considerations for Short-sale and Foreclosure Transactions – Bank-owned properties represent a significant portion of today’s housing inventory. Competition can be most keen for these homes as their prices can run 10% to 20% below current market value.

Banks conduct extensive research to set these prices and generally base them on current market value less the cost of required repairs. Make your offer based on your own check of comparable sales and other due diligence. Banks won’t get offended by a low offer, yet a realistic offer will more likely keep you in the running.

Remember, patience is essential when buying bank-owned property as the process can take up to six months and longer.

home soldWork with your local Prudential Real Estate sales professional to buy your dream home or investment property. His or her knowledge, skill and expertise will help you make sound real estate decisions today or any other time.

Filed Under: Buy a House, Buying a Home in Utah, Contingencies, Earnest Money, Financing, First Time Home Buyers, Price, Questions and Answers, Real Estate, Syndication Tagged With: , ,

Costs for First-Time Buyers

September 7, 2012 By Leave a Comment

Costs for First-Time Buyers

First Time HomebuyersBuying a new home can be a huge, complex undertaking, especially when it’s your first time. That’s why it’s important to have an experienced real estate agent guiding you along the way.

In a survey conducted earlier this year by Prudential Real Estate and Relocation Services (PRERS),  a Prudential Financial, Inc. [NYSE:PRU] company, 75% of respondents highlighted the importance of real estate agents in the process of buying or selling their home, with only 24% saying agents are helpful but not imperative.

“Americans continue to see real estate agents as having a very important role in helping them price, buy and sell their homes,” said James Mallozzi, PRERS’ chairman and chief executive officer. “Although the data underscores the value real estate agents provide, it also shows that the industry needs to continue to work hard to meet clients’ unique needs.”

DownpaymentFirst-time buyers need to look at their financial situation and crunch the numbers to see if this is the right time to buy. Chances are the numbers they see today will be the best they will see for some time, which is why so many are considering homeownership.

Still, understanding the money that goes into a home purchase is important. The biggest mistake new buyers make is underestimating the costs of buying a house and maintaining it over time.

Homebuying requires more than a down payment as closing costs and future expenses will figure prominently. Many experts agree that homeowners should have 1%-3% of their homes’ purchase price in savings for improvements and surprise expenses. Mortgage experts also say it’s wise to have at least six mortgage payments in the bank after a closing.

While those numbers may not be feasible for everyone, if you are spending above your means on a new home, you may find yourself in financial trouble fast.

Inspections are important for the first-time buyer, as they list repairs that will be needed for the home. A buyer should put together a short-term and long-term plan based on the inspection so they know how much money they will need in the months and years ahead.

As renters, people are accustomed to paying rent and basic utilities. As homeowners, you’ll also pay for water, sewer and trash collection. Then there are property taxes, homeowner’s insurance and homeowner’s association dues, plus yard care, snow removal and other expenses unique to your location.

To be sure, buying a home is one of the largest investments you’ll make and when done wisely, it can be one of the best decisions of your life. Your real estate agent will help each step of the way, first helping you establish a realistic price point for your home purchase and a clear understanding of your monthly expenses.

Filed Under: advice, Buy a House, Buying a Home in Utah, First Time, First Time Home Buyers, Questions and Answers, Real Estate, Syndication Tagged With: , ,

Down Payment Tips

July 6, 2012 By Leave a Comment

Down Payment Tips

Many people dream of owning a home but don’t think it’s possible because they lack the resources for a down payment and closing costs. Here are tips for securing that down payment.

1) Borrow from your retirement account: Many people have been investing in a 401(k) plan or traditional IRA for years and first-time homebuyers may borrow up to $10,000 for their down payment without incurring a penalty. For those self-employed or if your employer allows it, you also can borrow up to $50,000 from your current 401(k) and pay yourself back over five years at a low interest rate.

2) Ask family: Sure, you may be too proud to ask for money, but if relatives can help you and your family move into that dream home, isn’t it worth it? If you do get help from a family member, the lender will ask you to sign a gift-letter form, attesting to the relationship. The lender may also require your relatives to explain where they got the money and prove that they are financially able to make such a gift.

3) Look for down payment assistance grants: Down payment assistance and community redevelopment programs offer affordable housing opportunities to first-time homebuyers, low-income and moderate-income individuals and families who wish to own a home.

4) Come to a lease/purchase agreement: Homeowners who can’t sell their homes in this market may consider a lease/purchase agreement, where you rent the home you want to buy and a percentage of your rent is applied toward the down payment. If you go this route, make sure you get a contract outlining all the details so both parties are protected.

5) Add it to the wedding registry: Several mortgage companies allow those getting married to set up a down payment registry. This is a great way to celebrate the joining of two people in matrimony.

6) Cut back and save: If none of the other ways will work for you, there’s always the old fashioned “saving for a rainy day.” Try putting aside 10% of each paycheck and make your meals instead of going out for them. If you’re married, save the money you would spend on birthday, anniversary and Christmas presents and put it toward your house. You also may need to forget that vacation this year.

These sacrifices may seem significant but they will be worth it once you’re inside your own home.

Filed Under: Buy a House, Buying a Home in Utah, down payment, First Time Home Buyers, Mortgages, Questions and Answers, Real Estate, Syndication Tagged With: , ,

Being “Open” for Open Houses

May 1, 2012 By Leave a Comment

While it may take some work to prepare for your open house, allowing interested buyers into their potential future home will make them feel at ease instantly and visualize this home as their own as they walk through and picture their belongings there.

Remember to declutter every area to accent the spaciousness of the home and it’s square footage. This will make the buyer even more interested when they see all the advantages of the space available and show the home at its best.

Photos & Clutter

Keeping personal photos or other momentos out of sight will make the home more attractive to a potential buyer. This means they can picture their own belongings in these spaces.

Ambiance

One of the most important factors when having an open house is to create an inviting atmosphere by adding scented candles to the home with vanilla, or a light scent. This will “greet” the visitors, invite them in and make them want to see more of the home. A welcome mat is also another way to greet those who are shopping and give them a sense of coming home when approaching the front entrance.

Welcome Home

Anything you can do to invite the buyer(s) in and make them feel at home instantly will mean the difference between a sale and having them walk away. A successful open house allows you to show-off your home in a way that is inviting and attractive to potential buyers.

Filed Under: Buy a House, First Time Home Buyers, Homes, Homes for Sale Tagged With: , ,

Buying a New Home Doesn’t Need to Cost More than an Apartment

May 1, 2012 By Leave a Comment

Are you thinking about buying your own home? If so, there are several great benefits in doing so. If you’re someone that is settled and doesn’t plan on moving anytime soon, here are three ways you can benefit in becoming a home owner.

Three Benefits to Owning Your Own Home

No wasted money: When you rent from someone, whether it be an apartment or a home, you’re giving them money to pay off their mortgage. What this means is, when you move out, you don’t have anything. When you get a home of your own, you don’t have to spend a ton of money, but instead get one within your price range and one that’s in your name and you’re paying off.

Design your own home: It’s a great feeling to be able to come back to your home and be able to design what your whole house looks like. From being able to paint the walls your favorite color, to being able to pick out your appliances, it’s only what you want.

Do your own landscaping: Another great perk of owning a home instead of renting something such as an apartment is the fact that you have a yard and you’re able to landscape it yourself.

As you can see, there are some great benefits to becoming a home owner. Between putting your hard earned money toward your own mortgage instead of someone else’s and being able to customize your home the way you want it, it’s worth it in the long run.

Filed Under: Buy a House, First Time Home Buyers, Homes for Sale, Housing Market, Mortgages Tagged With: , , ,

Coming Home to a Sound Investment – The Benefit of Buying a Home

May 1, 2012 By Leave a Comment

While renting can be useful for some financial situations, owning a home provides great benefits to you and, ultimately, your financial well-being.

1. Control your space. Use a spare bedroom for your own home office. Create a workout area in the garage. You own the home, you make the rules.

2. Pride of Ownership. When you own something you tend to take better care of it. A home is no different. Cutting your lawn, creating a garden, or just making improvements on the weekends becomes a thing of joy.

3. Stability. When you purchase a home with a fixed interest rate mortgage, you don’t have to worry about surprises in your monthly payment. Month after month, you know what your payments are going to be. Renters don’t have that luxury. At the end of the lease, they have to be concerned about rent increases and possibly having to move.

4. Home Equity and Price Appreciation. Over time, as you build equity in your home, you may even have a home is that is more valuable than what you paid for it.

5. When you own a home, you own an asset. After living in a home, you are often rewarded with thousands of dollars of appreciation, whereas a rental only returns your security deposit!

So, while owning a home can take some work (and money), it is something you are likely to thank yourself for–both years down the road, and after you move in.

Filed Under: Buy a House, First Time Home Buyers, Home Improvement, Homes, Housing Market, Property Investment Tagged With: , , ,
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