Is An Escrow Account Right For You?

Is An Escrow Account Right For You?When someone is looking at purchasing a home, they usually focus on the purchase price of the home and the potential monthly payment. At the same time, there are other costs that need to be included as well. This includes home insurance and real estate taxes.

As a result, many homeowners find themselves asking if they should use an escrow account or not. What do homeowners need to think about and how can they make the right decision?

What Is An Escrow Account?

First, it is important to define an escrow account. An escrow account is an account that contains money for items such as insurance and taxes. That way, homeowners are not blindsided by a major bill at the end of the year. Some people may be required by the lender to have an escrow account, but those who are putting 20 percent down may have an option to use an escrow account or to handle this on their own. With an escrow account, the money that is required for real estate taxes and homeowners’ insurance is broken up into 12 months. That way, homeowners can pay a little bit every month instead of paying it all at once, when the money might get tight. When should homeowners use an escrow account?

Savings Habits And Risks

First, some homeowners would rather handle real estate taxes and home insurance on their own because they want to be in control of their finances. While this is fine, some lenders might see this as an increased risk. If they view that homeowner as a risk, then they could use this as an excuse to raise the rate on the loan. Homeowners need to make sure they do not have to pay more for the loan simply because they are not using an escrow account.

Next, homeowners also need to think about their individual saving habits. Because home insurance and real estate taxes are often paid as one lump sum, this could be a lot of money leaving the account at once. If homeowners do not have appropriate saving habits, they might not set this money aside when the payment is due. If they fall behind on their real estate taxes, they could place themselves at risk of losing the home.

/by

A Home Improvement Loan: How To Get One

A Home Improvement Loan: How To Get OneWith more people spending time at home than ever before, many people are wondering how they can go about changing the way the home is laid out. This can be an expensive project, which is why many people are interested in getting a home improvement loan.

With many people buying outdated houses, there are numerous projects that many homeowners want to finish; however, this process is not the same as applying for a mortgage. There are home equity lines of credit, cash-out refinance opportunities, and financing through the contracting company. How is the process of applying for a home improvement loan different, and what do homeowners need to know?

Gather The Right Information Before Tapping Into Home Equity

One of the most common ways homeowners complete projects is to tap into the equity in the home. Therefore, no matter what option someone chooses, they need to make sure they gather the right information. All homeowners must make sure they have a great credit score before pursuing this option. Homeowners have the right to check their credit score once per year free of charge. They also need to have documents that verify their income, as lenders will want to take a look at someone’s debt to income ratio. Other forms of debt include car payments, credit card debt, and student loans.

Compare The Cost Of The Loan Options

Next, homeowners need to take a look at the cost of each loan. There are home equity loans, home equity lines of credit (HELOCs), and cash-out refinances. The interest rates on these loans can vary depending on the market, and many of them will have closing costs as well. Homeowners need to take a look at the costs and the interest rate to figure out which option works best for them. Some of these loans have adjustable rates on them, which can make them risky, and some of these loans have limits that are dependent on the amount of equity in the home.

Fixer Upper Loans Are Available

Those who have purchased a home in dire need of repairs might qualify for a rehabilitation loan, which is a Federal Housing Administration (FHA) 203(k) rehabilitation loan. This provides funds for renovations and repairs that are necessary to restore a home. Consider all options available before deciding.

/by

What To Know About Shopping For Mortgage Rates

What To Know About Shopping For Mortgage RatesApplying for a home loan can be an exciting process; however, this is a major financial decision. Therefore, potential homeowners need to make sure they understand how to shop for the best mortgage rate possible. A mortgage is usually a long-term loan, allowing potential homeowners to purchase a home using small monthly payments. Fortunately, there are a variety of tools available that can make the process easier. What do potential homeowners need to know when shopping for mortgage rates? 

Do Get A Pre-Approval Letter

First, all potential homeowners need to get a pre-approval letter before they start the home-buying process. Because the market is competitive, buyers need to get a pre-approval letter to show they can secure financing for a home they want to purchase. Sellers want to know the deal is going to go through if they make an agreement with someone. The pre-approval letter will allow someone applying for a home loan to compete with other offers, including cash ones. 

Do Not Go The Easy Route

One of the biggest mistakes people make when taking out a home loan is going with their existing bank. It is possible their current bank may provide competitive rates; however, applicants should not choose their existing bank solely because this is the easiest option. Instead of going with the easiest option, get the best possible rate from a lender. 

Do Work With A Professional

Applying for a mortgage is a complicated process, so potential homeowners need to work with a professional who can guide the way. A trained, licensed professional can help applicants go through this process, explaining why they need certain documents. Then, a professional loan officer can advocate on behalf of the applicant, increasing their chances of earning approval from the lender. 

Do Not Overlook Other Potential Expenses

Many homeowners overlook other potential expenses that come with owning a home. For example, homeowners also need to budget for real estate taxes and homeowners’ insurance. Even though this is wrapped into the monthly payment, this is not included in the mortgage. This can blindside homeowners who are not prepared. Homeowners also need to think about potential maintenance expenses. This is important when homeowners are trying to budget accordingly. 

 

/by

What To Know About IRS Installment Agreements And Home Loans

What To Know About IRS Installment Agreements And Home LoansWhen applying for financing, lenders want to make sure the client is going to pay back the balance of the loan. Therefore, they will look into pre-existing debt including credit card debt, student loans, car payments, and back taxes. Sometimes, applicants have IRS installment agreements. This is an agreement consumers make with the IRS to pay taxes over an extended timeframe. How might this impact someone’s ability to apply for home financing? 

IRS Installment Agreements Count Against The Debt To Income Ratio

The IRS is going to calculate someone’s debt to income ratio when figuring out whether an applicant can apply for a home loan. Therefore, lenders will view IRS installment agreements as another form of debt along with medical debt, car loans, and student loans. As long as there is not too much debt, applicants should still be able to qualify for a home loan even if they have an installment agreement with the IRS. Even though having an IRS installment agreement may reduce the size of a loan someone may qualify for, applicants can still qualify for a home loan.

Lenders Will Look At Payment Histories

Lenders will take a look at how long the IRS installment agreement has been in place. Some mortgage programs may ask for proof of timely payment history. They know that if applicants have paid their installments on time, they should pay their mortgage on time as well. Some home lenders may require a payment history of up to 12 months. It is critical to discuss all financing options with the lender when looking for a home loan. 

Applicants Must Have Proper Documentation

To qualify for a home loan with an IRS installment agreement, applicants must produce proper documentation. Lenders will ask for a copy of the agreement. Then, they will verify the payment history of this debt. Keep in mind that federal tax debt holds first priority. This means that the lender will want to protect their own interests, asking the IRS installment agreement to give up their first position in favor of the mortgage. Typically, this is not an issue; however, this is something applicants need to discuss with the loan officer. That way, they can place their application in the best position possible to be successful. 

 

/by

How To Find The Right Home Insurance Coverage For You And Your Family

How To Find The Right Home Insurance Coverage For You And Your FamilyThose who are taking out a loan for a home will probably be required by the lender to purchase home insurance. Even those who don’t need a loan will still need to make sure that they protect their property accordingly with a comprehensive home insurance policy. This is important for making sure homeowners have the money to replace their belongings and repair their property in the event of a disaster. At the same time, homeowners do not want to spend more than they must for a home insurance policy.

How can homeowners find the right home insurance policy to protect themselves?

Think About The Disasters In The Area

First, homeowners need to make sure the home insurance policy protects them against the right risks. If homeowners live in an area that is prone to floods or earthquakes, they need to find a policy that will protect them against these risks. If homeowners live in an area that gets a lot of hurricanes, they should make sure their home insurance policy protects them against hurricane damages. Not all policies include these as standard coverage, so homeowners should make sure they do not have to purchase a rider.

Make Sure There Is Money To Rebuild Your Home

Remember that the cost to rebuild a home could be more or less than the original purchase price. Lenders will want to make sure that all homeowners have a policy that gives them enough money to rebuild. Otherwise, the lender might not finance the mortgage. The local construction costs and the square footage of the structure will all play a role in the cost to rebuild. It might be prudent to work with a real estate agent to estimate this cost. The type of exterior, the style of the house, the number of bedrooms and bathrooms, and other properties on the premises will all play a role in the cost to rebuild a home.

Other Factors To Consider

Homeowners also need to think about whether their home is up to code. When the home is rebuilt, it needs to match new codes, which could increase the price. Homeowners also need to make sure their home insurance policy will cover valuable belongings in the home as well, such as furniture and electronics.

/0 Comments/by

A Complete Guide: What Is A Credit Freeze And Why Is This Helpful?

A Complete Guide: What Is A Credit Freeze And Why Is This Helpful?Due to recent changes in federal regulations, consumers are now allowed to freeze their credit free of charge. Prior to changes in these regulations, credit bureaus would charge consumers for freezing their credit. What does this mean, and why might someone want to do this?

Freezing Credit Restricts Access To Confidential Information

There are certain situations where consumers may need to have access to their credit reports. For example, they may be applying for a home loan or a car loan. There are other situations where consumers may not need access to their credit reports for an extended amount of time. In this case, it is possible to freeze the credit report to restrict all access. This makes it harder for hackers to access confidential credit information, preventing them from opening an account in someone else’s name.

Who Can Freeze Their Credit Reports?

All consumers have the ability to freeze their credit reports. Even some children may have a credit history, so it is possible for parents to freeze the profile of a child for a certain amount of time. This prevents hackers from stealing credit information regarding children as well. 

How Can Consumers Freeze Their Credit Reports?

It is relatively easy to conduct a credit freeze at any of the three major credit bureaus including Equifax, Experian, and Trans Union. All consumers need to do is request a credit freeze via a phone call,  letter, or an online request. The bureau has to comply, freezing someone’s credit report within one business day. Furthermore, consumers should be able to access free fraud alert services as well. That way, individuals will automatically be alerted if someone tries to open an account in their name. 

What Happens When Applying For A Loan?

If applying for a loan, consumers need to unfreeze their credit reports. Therefore, they should file a request with all three major credit bureaus. They will have to comply within one hour. Then, after the lender has the information he or she requires, consumers can simply request a credit freeze again. That way, they limit the opportunities of hackers who might be trying to steal confidential information and commit identity theft. 

 

/0 Comments/by

The Process Of Estimating Property Values

The Process Of Estimating Property ValuesProperty values are a moving target. They are important to buyers and sellers because everyone wants to get the best deal possible. Sellers want to get as much money for their investment while buyers do not want to overpay for a home. There are a lot of factors that play a role in property values including the economy, the number of people looking for homes, new home construction, schools, the job market, and more. How do real estate agents estimate the value of a home?

How Much Will Someone Pay For A Home?

The market value of a home is the amount of money someone is willing to pay for that home. This is how real estate agents estimate the value of the home. He or she will usually take a look at similarly priced homes in the area (sometimes in the same neighborhood) to see what those homes are selling for. Then, the price per square foot will be applied to that specific home to calculate its value.

Often, real estate agents use the past six months as a guideline; however, if there has not been much action, agents might go back further. Agents will usually draw a radius of one mile to ensure homes are similar; however, some homes, such as luxury homes, are harder to compare.

A Professional Appraiser Is Usually Involved

Sometimes, home values are calculated by a professional appraiser who is typically hired by a lender. Lenders want to make sure they will get their money back if the home sells in the future. If the buyer is paying more than the appraiser says it is worth, then the lender might ask the buyer to put more money down before financing it.

Real Estate Agents Could Ask For More Information

Real estate agents might also ask homeowners for more information. If one house stands out on the comps sheet, the agent might ask the homeowner what happened. What makes this house different? Is the location different? Did the home sell as furnished? All of this is important for helping realtors ensure they are doing the best possible job in guiding their clients in the right direction. Some sales may still require the help of a licensed appraiser.

/0 Comments/by

The Average Length Of Homeownership For Most Families

The Average Length Of Homeownership For Most FamiliesIt is critical for everyone to find a home that is right for them. Given the current lack of inventory, this can be a significant challenge. Fortunately, the National Association of Realtors (NAR) keeps track of numerous market aspects, including how long the average family stays in a home. For the past few decades, the average family has stayed in their home for approximately six years; however, during the past few years, that average has gone up to nine years. This means that the average homeowner is keeping his or her house longer than he or she did in the past. Why is this happening?

Why Are Families Staying In Their Homes Longer Than Before?

There are numerous reasons why this might be taking place. First, the real estate market crashed just over ten years ago. When home prices fell, homeowners were worried that they would not be able to sell their home at a price that would pay off their mortgage, also known as a home sale. Therefore, they decided to stay in their homes longer until their homes recouped their value.

In addition, there was a lot of uncertainty about the economy, causing some homeowners to think twice about making a move. They might have been worried that they wouldn’t have the money to cover emergency expenses if they paid for a move.

Finally, the homeownership rate among the younger generation, including those getting ready to have kids, has still not caught up to previous generations. When this generation starts to look for better school districts or more room, they might start looking for houses, causing them to move more frequently. Because they might not currently own homes, they are not selling homes, and thus not bringing down the median tenure.

What Is The Impact On The Housing Market?

So, what does this mean for the housing market? If families are moving frequently, they might not be in houses that are right for their family circumstances. As a result, baby boomers who are looking to downsize or parents with multiple children in a 2-bedroom house might be looking to move in the foreseeable future.  Given the current lack of inventory, this might be a bit of a challenge.

/0 Comments/by

A Comprehensive Home Maintenance Checklist For The Homeowner

A Comprehensive Home Maintenance Checklist For The HomeownerThere are many people who purchase a home with a target monthly payment in mind. This monthly payment usually includes major expenses such as the monthly mortgage payment, real estate taxes, and homeowners’ insurance. At the same time, there are other costs as well, such as home repairs and maintenance.

In general, homeowners should budget between one and three percent of the home’s value every year to cover typical maintenance and repairs. This does not include renovation expenses, which might require additional funding. What are a few examples of maintenance expenses homeowners need to consider?

Monthly Home Maintenance Tasks

There are a few straightforward tasks that homeowners need to do every month. These maintenance tasks can help homeowners prevent larger bills down the road. A few examples include checking the filters on the HVAC system, looking for leaks that might be present around sinks and toilets, and taking a look at the filter in the kitchen vent hood. Homeowners also need to make sure their smoke and carbon monoxide filters are working properly. Finally, go for a walk around the outside of the house to look for any cracks in the foundation.

Winter Maintenance Tasks

There are a few maintenance tasks that need to take place during the winter as well. Homeowners in the colder climates need to watch for the buildup of ice dams on the roof, which could trap snow as it melts. Homeowners should also inspect the home for any drafts under the doors or windows, which could drive up heating bills. Finally, depending on where your home is located you may need to cover the air conditioning units to protect them against snow and ice.

Spring Checklist Tasks

While winter can be tough on a home, there are several maintenance tasks that should be done during the spring as well. It is important to order an HVAC inspection during the spring to make sure it is working properly. The roof should also be inspected by a professional for any signs of issues. Sometimes, the gutters can be clogged by leaves and ice buildup, which should be addressed before spring storms arise. Finally, make sure the doors and windows are sealed as well.

Following these spring maintenance tasks can reduce the risk of repairs down the road.

/0 Comments/by

Financial Preparation: Millennials Are Getting Ready To Buy Homes

Financial Preparation: Millennials Are Getting Ready To Buy HomesIn the current economy, there are a lot of millennials who are thinking about buying a home; however, the price of homes is rising quickly. It can be challenging for millennials to save the money they need to buy a home. When this is combined with other monthly expenses they have, millennials might be financially unprepared to buy a home.

Finding the right house takes patience and discipline, so millennials need to avoid jumping in unprepared. What do millennials need to do to make sure they are ready for the expenses that come with owning a home?

Be Aware Of How Much Money Is Required

The first thing that millennials need to do is make sure they have enough money saved up. If prospective homeowners do not have enough money saved up, they could be denied financing by a lender. Conventional mortgage lenders will ask for 20 percent down to avoid PMI, but it might be possible for homebuyers to get a home for as little as 3.5 percent down from some lenders. If the home costs $250,000, then 3.5 percent down is going to be $8,750. If prospective homebuyers have less than this saved up, they could be denied a loan.

After saving up enough money for the down payment, homebuyers also need to cover closing costs. This could include the inspection, the appraisal, and any fees that come from the closing attorney. Even if millennials have parents and grandparents to help them, they still need to save up an emergency fund to cover any possible repairs that are needed. It is a solid rule of thumb to save up and move at least three to six months of emergency money in a liquidity fund. If this money is not there, it might be better to wait.

Millennials Should Wait For The Right Time Instead Of Jumping In Unprepared

Even though it is a great investment to own a home, it is better to wait for the right time instead of jumping in unprepared. Millennials need to make sure they have enough money saved up for a down payment. Then, they should have an additional two to five percent of the loan’s value saved up to cover closing costs. Finally, homeowners should also have a liquidity fund with three to six months of living expenses set aside.

 

/0 Comments/by