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How to's and money-saving tips from resident homeowner and mortgage professional, Cathy West

Category Archives: Purchasing a Home

Learn more about coastal living.

Is buying a home on the coast worth the expense?

Before paying a premium for oceanfront property it's important to asses the extra hassles and expenses that come with such a desirable location. These key considerations can help buyers determine if the drawbacks outweigh the rewards. 

Con: Property taxes
Homeowners can be certain that the taxes they pay on their waterfront property will be significantly higher than comparable non-waterfront homes. Zillow reported that the average price of a single-family waterfront home was more than double the national average. It makes sense that a coveted location will increase the appraised value of the property and subsequently hike up the taxes owners have to pay on it. Before purchasing a costly home on the coast, prospective buyers should consider whether they can afford the annual tax expenses that will come with it.

Con: Weathering and erosion
A house on the coast provides incredible views, but it also provides exposure to a lot of costly wear and tear. Salty ocean air can have massively corrosive effects on a home's facade. Consistent exposure may lead to a breakdown of concrete foundations and rotting of wood surfaces. Potential buyers should factor in the cost of coating and treating materials to prevent damage from salt air and harsh weather. In addition to weathering, waterfront property is at risk of devaluation due to rising sea levels. 

Con: Flood insurance
With rising sea levels come rising insurance premiums. Home insurance often does not include water damage for properties in flood zones. This means waterfront homeowners need to purchase special flood insurance and should factor in this annual expense. The New York Times reported that rising premiums have given pause to many potential buyers. 

Pro: Rental revenue
Many homeowners turn their waterfront property into an easy source of income by renting it out to vacationers or seasonal renters. Rental properties in popular vacation destinations can be a cash cow for owners, generating enough revenue to make the investment a smart one if they are not planning on living in their waterfront home all year round and are ready to take on the role of property manager.

Pro: Intangible benefits
Despite hefty concerns about the potential risks of coastal living, millions of people live happily by the water and enjoy countless unparalleled benefits. Waterfront residents appreciate the healthy lifestyle and access to activities like swimming, kayaking, water skiing and fishing. There is also a certain serenity that comes with waking up on the water that is difficult to replicate elsewhere. Homeowners often find that the joys of a coastal lifestyle outweigh the drawbacks. After all, it's tough to beat that view.

Buying a home on the coast can be a tricky decision; while the extra expenses can be quantified, most of the advantages are not measured in dollars but rather felt in emotions and quality of life. Prospective buyers should talk to local residents, real estate experts and financial advisors before deciding whether buying a home on the coast is right for them.

Down payments can be hefty. Here are important things for any homebuyer to keep in mind when choosing a down payment amount.

What’s the right number for a down payment?

Homebuyers have a lot to consider when searching for a home and deciding how to finance it. Between lenders and loans, mortgages, interest rates and down payments, things can seem overwhelming.

Here are the most important things for homebuyers to keep in mind when settling on how much to lay down for their down payment.

Think about the future
Buying a home is a long-term investment. Though the excitement of relocating life to a new space can cause homebuyers to rush through the process, the financing of a home will significantly affect a homebuyer's fiscal future. In essence, the higher the down payment, the lower the associated mortgage costs will be, SmartAsset noted. But since many homebuyers are often just beginning to establish their careers, or are in positions of financial flux (still paying student loans, thinking of growing the family, etc.), it can be hard to commit to a hefty down payment right off the bat.

When establishing a down payment amount, homebuyers must remember not only to choose an option that is optimal for their current needs and finances, but one that will remain suitable and smart as financial change occurs within the household.

A lender's point of view
When purchasing a home, the lender's confidence and trust in a homebuyer is key to establishing a fair and optimal financing plan. Factors that can affect this relationship include credit, loan and debt history, as well as the amount of the home purchase covered by the down payment. A lender will have much more confidence in loaning money to buyers who have put down a solid down payment, according to The Balance.

A typical down payment that covers a good portion of the home would be 20 percent down. This means that homebuyers purchasing a $300,000 house would be paying $60,000 for their down payment. Though for many buyers this is a huge payment, lenders will rest easy knowing that a significant portion of the home has already been covered, and the future mortgage rate is relatively low, in the case that any financial problems were to come about for the buyer.

The catch with low down payments
It can be tempting to settle on a low down payment if the option is available. Homebuyers are often in the mindset that once the house is theirs, they will continue to make the investment work for them. Hope of a salary increase and more financial stability in the future may be the reasoning for those who choose lower down payments, but even the best-laid plans don't always take form.

A low down payment has the potential to leave a buyer between a rock and a hard place when mortgage rates remain high, along with spiked interests rates – a common catch of low down payments, NerdWallet explained. These high recurring payments, as opposed to just a high initial down payment, can result in the need for more loans and a poorer borrowing reputation.

These factors are some of the many for homebuyers to keep in mind when financing their new home. 

Bring your credit score from low to excellent with these quick tips for improvement.

Improving your credit score in just a few months

When considering buying a new home, it is important that homebuyers understand how significantly their credit score may affect mortgage rates. If potential homebuyers are in a bit of a pinch with credit as they look at committing to a new mortgage, it is important to be efficient and effective in improving their credit score as much as possible before committing to a rate.

These helpful tips can assist anyone in raising their credit score in a short period of time.

First thing's first: pay off those bills
The truth of the matter is that unpaid cards and bills are the most basic factor in anyone's credit score. Completing late payments and paying all outstanding bills should be the first step in working to improve credit score, as it is arguably the most obvious one. Credit.com noted that it is not absolutely necessary to entirely pay the bills off, at least make the minimum payment and do so on time. To maximize credit score, it is most effective for homebuyers to pay credit card balances down as close to zero as possible, while continuing to make timely monthly payments in the future.

Get rid of the negatives
Late payment records are especially hurtful to credit score. Along with checking for errors or incorrect information on credit reports, potential homebuyers can dispute negative information on their credit reports in an attempt to improve overall credit score. The Lenders Network outlined that the credit bureau has only a month from receipt of the dispute request to complete investigation; if there is no accurate verification of the account found by that point, the disputed record will be deleted. This can be done through an individual creditor or one of the Credit Bureaus.

Hard inquiries, made by any lenders whom you apply for a credit card with, remain on a credit report for two years and bring down the credit score. Along with limiting hard inquiries during the time of mortgage-searching, it is also possible to dispute credit inquiries. Though these tricks require some extra effort, they are highly effective if successful.

Associate with an exemplary credit score
Associating with a credit card account that has a positive history and great standing can be extremely helpful for any homebuyer, according to Credit.com. This means being added as an authorized user on such an account. Though authorization means a cardholder is allowed to use that account, simply being added to the account without using it in any way will help improve credit score. And not to worry, the original cardholder will not be impacted by associating with someone who has a lower credit score than them.

Credit scores are highly specific and highly sensitive. Understandably, they are a significant factor in determining the mortgage rate of any homebuyer. Thankfully, these quick tricks can be extremely effective for anyone who needs to improve their credit in a time crunch.

Consider these tips for buying a new home.

Tips for finding the perfect neighborhood

While searching for a house can be difficult, many new homebuyers agree that finding the right neighborhood can be just as overwhelming. There are various factors to consider when deciding where you want to move. Do you want to live on the countryside, far from the grocery stores and other establishments? Would you like to find a community that's in walking distance from your children's high school? Beyond personal preference, you need to consider safety, accessibility and affordability.

Before looking for your dream home, you have to find your dream neighborhood. Here are a few tips for searching for the best place to live:

1. Do your research
Start your districtsearch online. There are dozens of resources you can use to find a living area that caters to your personal preferences. Plus, you can get an idea of how safe the neighborhood is before you move in and end up feeling uneasy.

"I had a client who was really worried about buying a house one neighborhood over from the one he lived in now," Rebekah Eaton, associate broker told My Mortgage Insider. "I got him to call the police station in his own neighborhood and the one in the other area. He found out the other one was safer than the one he lived in. He was just listening to friends who didn't have the right data."

Understanding the crime rate in a community can change your entire perspective on a house you thought you loved.

2. Make a list of your requirements
Once you do your research, make a list of requirements that build your dream neighborhood. Putting these factors on paper can help you get a clear understanding of what you're looking for, what you're willing to work around and what you can and can't live without. Perhaps you want to be near a park, must live in a family development and can go without living near shopping centers and restaurants. No matter what you have in mind for the perfect neighborhood, viewing your ideas on paper can help you make your final decision.

3. Go for a test walk
Don't limit your search to internet browsing. Before you commit to a community, consider taking a walk around the block to get first-hand idea of how you feel in the area. At this time, you can get an feel for how far shopping centers and schools are, how many kids live in the neighborhood and how much foot traffic to expect. This is great opportunity to talk to your potential neighbors; ask them about ongoing issues in the district, favorite restaurants in the area and other talking points that could help you make a decision.

4. …And go back for another one
Don't trust your first visit to the neighborhood. Move.org recommended visiting the area a second and possibly third time as the community could be quite different between the evenings and weekends. Saturdays and Sundays will likely be more lively, while weeknights will be more calm and secluded. You may also find that weekdays are more traffic-ridden and could make your ride to work more stressful than you're used to. Paying a second visit to the neighborhood you thought was your dream come true could change your mind and keep you from moving there in the first place. Keep this in mind before you commit.

5. Consider the school district
Whether you plan to have children in the future, you're a parent who already has kids in school or have children who will start kindergarten soon, finding a good school district may be at the top of your priority list. You might even choose your neighborhood based on your schooling decision.

While doing your research, start looking into schools in the area in which you see yourself living. Take note of the schools that spark the most interest and then schedule an appointment to meet with the administration. At this point, you can also take a tour with or without your children and get an idea of the atmosphere. Does it seem like a safe, clean and friendly environment for learning? How do you feel about the principal, teachers and other faculty and staff?

Furthermore, you can talk to the administration about test score averages, advancement programs and extracurricular activities. Feeling comfortable with the surrounding school district can ultimately help you make or break the decision about a certain community.

Whether you enjoy plenty of privacy or like being close to neighbors, there are so many factors that can make or break a neighborhood based on your personal preference. Keep these tips in mind before you commit to buying your next home.

Why it's important to get into the market now

Why it’s important to get into the market now

The housing market has largely returned to pre-recession levels, making now a great time to begin searching for a home and applying for a mortgage. Especially if you are looking to purchase your first property, a range of conditions are yielding positive trends for both homebuyers and sellers, and there is no sign they will end any time soon, especially given the widespread health of the economy at present. 

Let's take a look at why it's important to get involved in the housing market now, and the best ways to do so. 

Rising values
Perhaps the most important reason to start searching for a home now is that prices are starting to rise at a faster rate, with researchers pointing to continued acceleration through the end of 2018 and beyond. Curbed recently reported that the housing market is getting extremely competitive, and prices on existing property inventories increased 6.5 percent between 2017 and 2018 nationwide as a result. 

Although this is frustrating many homebuyers, with property values being so high and markets becoming increasingly competitive, the trend is expected to continue, which means purchasing a house will likely be tougher and more expensive down the line. 

"Two figures that stand out are rapidly rising home prices and low inventories of existing homes for sale," S&P Dow Jones Indices managing director David Blitzer told Curbed. "Until inventories increase faster than sales, or the economy slows significantly, home prices are likely to continue rising."

Importantly, this is based on national data, meaning that certain areas are going to be a bit easier to navigate and properties are more affordable in some cities compared to others. Purchasing a home for a lower price in a burgeoning area is vital to ensure that the value continues rising throughout the lifespan of a mortgage and general ownership. 

Where to look
MarketWatch, citing data from real estate website Trulia, pointed out that certain major cities have seen flat housing prices over the past year. Camden, New Jersey; Milwaukee, Wisconsin; and Sacramento, California, have all experienced no change in median prices through the past year. Houston and Dallas-Fort Worth, Texas, have seen minimal changes, while Sarasota, Florida, and Denver remained beneath 1 percent increases. 

Considering the fact that more millennials are beginning to purchase an affordable home in urban centers and continued economic health, these cities might be great areas to begin your search. Especially in Sacramento, Houston and Denver, where solid housing markets can be found, first-time buyers might have better luck finding the right property at a competitive price, without dealing with many headaches. 

Another important tactic here will be ensuring that your credit score and history are strong so as to get a low interest rate on your mortgage and not end up paying too much above the actual home's listing price throughout the lifespan of the loan. By taking a 360-degree approach to your home search, now can be a financially advantageous time to purchase a property. 

How can millennials improve their chances of mortgage approval?

How can millennials improve their chances of mortgage approval?

After a long period of time in which researchers and economists worried that Millennials would never start purchasing homes en masse, it appears the generation is now pushing forward toward property ownership. The Washington Post reported that millennials now account for the highest volume of prospective house shoppers in the country, and that the group is viewing homebuying in a far more favorable light compared to several years ago. 

While this is good news on the whole, there are plenty of challenges that millennials face when trying to find the right property and, more importantly, get approved for a mortgage. Let's take a look at some of the ways members of this generation can better position themselves to afford their desired first home. 

The financial management side
Millennials who take care of their credit scores and finances will generally have a strong opportunity to purchase a home comfortably – and get approved for a mortgage – regardless of where or when they choose to apply, The Virginian-Pilot explained. This does take a lot of effort, especially in the age of high student debt that holds many younger families from even trying to purchase a home. 

However, carefully monitoring credit scores and saving cash can be manageable, and will improve chances of qualifying for a home loan. According to the news provider, young adults will also want to ensure that they are capable of proving at least two years of work history to increase their favorability among potential lenders, and should keep in mind that a 20 percent down payment is not necessarily required to successfully purchase the home. There is always mortgage insurance when this sum is simply too high, and that can be removed when financial situations improve. 

Finally, The Virginian-Pilot suggested looking into a preapproval process before applying for an actual mortgage, as this can reveal some of the finer points of a loan that they would be able to acquire, such as interest rates, terms and the dollar amount. 

Home shopping best practices
The other side of this coin involves the actual home search process, which will be equally important in the grand scheme. For example, jumping on the first home visited will rarely be a wise financial decision, and a failed mortgage application could hurt the applicant's credit score. As such, NerdWallet urged millennials to be patient in the home search and wait to apply for a mortgage until they have found the right property. 

The publication noted that inspections of the property, along with a strong idea of desires with respect to the type of neighborhood and home that would best serve the millennial's needs, will also help to ensure that the purchase is a financially smart one. Homebuying can be extremely stressful, but a well-informed, persistent and patient approach will help to expedite the process and reduce the risks of setbacks due to credit score issues. 

New or previously owned: Which home is right for you?

New or previously owned: Which home is right for you?

 

When you start looking to make your first home purchase, there are so many factors that will need to be considered. This includes location, the home type such as a condominium or larger house, price, quality of amenities and more. However, one of the primary distinctions to make in your search is between a newly built home and one that was previously owned, each of which coming with varying perks and potential pitfalls.

The housing market is changing rapidly today, and there is an increasingly large push in states throughout the nation to at once increase new inventory of homes and find ways to match sellers of existing properties with viable buyers. You will need to decide which path is best for you in accordance with your unique need, goals and preferences.

A look at the market
New residential construction starts have continued to rise steadily throughout the past several years on the national stage, the U.S. Census Bureau reported this May. The entity tracks three major data points to monitor new home starts, including permit applications, starts and completions. All three of these areas have fluctuated somewhat from month to month, but have been on a steadily rising trend since April 2013.

Back in April 2013, new residential housing construction starts were below 900,000 units, while that number has increased above the 1.2 million this year. Simply put, this is one of the major reasons why national housing inventory has started to outpace the number of active buyers who are looking to move in. This also means that individuals who want to purchase a brand-new property that has never before been lived in will have a wealth of options.

Deciding between new and used
First and foremost, the final decision will likely rely on your personal preferences, as well as the actual options available in the area in which you want to live. However, there are some common themes involved in the debate between purchasing a new or resale home.

For example, older homes, especially those built more than a few decades ago, tend to have a better track record of holding up against the elements, The Balance reported. These properties also offer more stable neighborhoods on the whole, but can require more maintenance, as well as high-cost projects for plumbing, than newer properties.

The site also pointed out that newer properties tend to be more energy efficient and might even be more affordable in the long run as a result, all the while coming with higher average square footage. These are not hard-and-fast rules, but do apply to a wide range of new and resold homes. At the very least, they provide a framework that you can use to check out the particular properties you are interested in.

With so much inventory available in some of the nation’s hottest areas, now is a great time to begin searching for your first home, be it new or old.

How to improve your home search

How to improve your home search

A home is often the biggest purchase you will ever make, as well as the most important one from a financial health perspective. As such, you need to ensure that you are taking an informed and intelligent approach to the search, positioning yourself at all times to be ready to make a move on a property when the time comes. 

This is especially important if you are self-employed and anticipate the desire to move on a home in the near future. A combination of seeking properties the right way and maintaining financial health can go a long way toward ensuring you meet your goals and end up living in the house you most desire. 

Focus and discipline
When it comes to the search, you will want to have a very good idea of what you are looking for and try to stick to those specifications as you sift through available properties. Homes & Land argues that the key deciding factors should start with location and branch out from there, building an understanding of what you can afford and how much you want to spend on things like property taxes. 

According to the site, writing a list of what elements of a property will either make it too unattractive or of minimum quality to purchase can help to reduce the number of houses you are deciding upon. It will always be better to look at fewer houses that fit your desires than a countless number of properties that might include several that you would never even consider purchasing. 

Once you are in a house that seems attractive, though, HGTV suggests getting incredibly critical of the various elements therein, such as through the evaluation of every minor detail like the insides of cupboards and drawers. Pay particularly close attention to issues that could cost you a pretty penny, as these could either represent deal-breakers or bargaining chips when trying to get the seller to reduce the price. 

Further, if you are using a realtor, HGTV recommends being entirely honest and open with them about the houses that they have shown to ensure that they understand your large and small demands.

Understand your financial standing
On the flip side of all this, you should have a good idea of what you can afford and how large of a mortgage you might be eligible to receive before going into the search. This way, if you are looking to move quickly on a property in a competitive area, you will have a bit of an edge on other prospective buyers. 

Speak to your financial institution to ensure that you know where you stand, how much you can afford to spend as well as what the monthly payments, total interest paid and other terms will involve for homes at various price levels. All of these pieces of information will come in handy when haggling with sellers and making a final decision on the home you like the most. 

Why selling this year may make sense

Why selling this year may make sense

Timing is everything when it comes to selling a home, and 2018 might be an advantageous year to put your property on the market on account of several active and pending trends within and outside of the housing market. The decision depends on a wide range of factors, including ones that are highly localized to your particular neighborhood, but nationally, the time seems right to sell.

Let's look at a few reasons why selling your home this year makes good financial sense.

Rising value, speedy purchases
The May Realtor.com's monthly housing report for the month of May showed  the average value of sold homes in the U.S. reached a staggering $297,000, representing the highest sum on record. This marked the third straight month of 8 percent value increases in a row, and continues a long trend that saw 10 percent growth in February.

Although overall inventory of houses on the market dropped 6 percent compared to May 2017, that figure did rise by 6 percent over the total recorded in the previous month. What's more, the firm stated that homes on the market sold at a record-low 55 days on average, proving that buyers are motivated and likely getting the mortgages they need at a higher rate than in previous years. Still, there are some signs this might cool in the next few months. 

"We're in the thick of the hottest home-buying season of all time," Realtor.com® director of economic research Javier Vivas explained. "The pace of U.S. home sales has officially reached a seasonal and historical high, but we're also beginning to see slight signs of deceleration."

All of this data indicates this year is a great time to put your house on the market. 

Continued low mortgage rates
In addition to the front-end element of selling a home, you will likely want to purchase another property in its stead. All signs currently point to mortgage rates, which have been at or near historic lows for several years running, beginning to rise by the end of the year. In fact, many analysts thought this would occur toward the end of 2017, but rates have in fact remained steady. 

Bankrate reported that slight declines were recorded across four major mortgage products, including 30-year fixed dropping to 4.35 percent, and 15-year fixed to 3.78 percent. According to the news provider, these are much lower figures than seen before the economic decline and housing crisis of 2008, and conditions are ripe for taking out a mortgage currently.

Still, there is the lingering threat that regulators and officials will begin to boost mortgage interest rates in the coming months. All of these factors make 2018 an opportune year to put your home up for sale and purchase a new one, especially given the uncertainty of the housing market and mortgage interest rate conditions going into 2019 and beyond.  

Home buying after foreclosure or bankruptcy

Homebuying after foreclosure or bankruptcy

The housing crisis left many Americans wondering if they could ever purchase a home again with the help of a financier, especially those who saw their houses go into foreclosure or experienced bankruptcy. In both cases, the process of getting approved on a mortgage will be more difficult than for those who have never gone through these calamities, but plenty of individuals have already successfully purchased a new home after losing one in the past or seeing their credit diminish following bankruptcy. 

The tactics involved vary depending upon your specific financial situation at the present moment, but let's take a look at some of the best practices following either foreclosure or bankruptcy. 

Getting approved after foreclosure
Realtor offers several suggestions to previous homeowners who went through foreclosure and want to take out a new mortgage. First and foremost the website states that most individuals will need to hold off on applying for a mortgage until about seven years after the foreclosure occurred, as banks will rarely offer approval at any point earlier. Notably, that is only if you intend to apply for a traditional loan. 

Those mortgages backed by the Federal Housing Administration, U.S. Department of Veterans Affairs and other government agencies have shorter wait time requirements, Realtor noted. This is not to say that you should simply watch the time go by and not make any changes, though, as some tactics can reduce the amount of time it takes to gain approval even from traditional banks. 

For example, the website states that rebuilding credit and finding ways to prove that whatever calamity caused the past foreclosure is no longer hindering your financial health could expedite approval on a new mortgage. 

Getting over bankruptcy
The Mortgage Reports explains that waiting periods for a mortgage after bankruptcy are similar to those involving foreclosure, but notes renewed health in both the lending and housing markets are making matters a bit better for prospective homebuyers. The big difference here, though, is that many individuals who declared bankruptcy also saw their homes go into foreclosure. 

As such, the website explains the order of events, or when the foreclosure occurred relative to declaring bankruptcy, could have an impact on application wait times and approval odds. Because these matters are often dictated by the federal government and major credit bureaus, the specifications vary depending on current conditions and recommendations of officials. 

The site adds that the type of bankruptcy declared will have an impact on approval odds, as will the category of foreclosure. For these reasons and many more, it is always advisable to speak with a representative from your chosen lender or bank when embarking upon the loan application and home search journeys. 

Every person's financial situation is different, so getting specialized support and guidance can go a long way toward improving approval odds and speeding up the time it takes to get a new home following foreclosure or bankruptcy.