How To Sell Your Home And Buy One At The Same Time (Or In The Quickest Possible Succession)

For some people with enough funds and other houses to live in, selling a home and buying one at the same time can be relatively easy since there is not much pressure involved. But for those who need the equity from their old house to buy a new one, things can get quite stressful--especially so when they have no other place to go while trying to sell the house they’re living in.

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Most people caught in this situation have a number of options at their disposal. However, one must be aware of the factors that should affect his or her decision. Below is a guide on how to successfully pull off this feat, depending on what scenario you might be in:

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Scenarios in which you have to SELL FIRST:

Scenario #1: You're in a seller's market in which you’ll be caught in a bidding war for the house you want to buy.

In hot markets, it’s unlikely for you to stand a chance in a bidding war if you make an offer contingent on the sale of your current home. If you’re up against multiple buyers, the best way you can stand out is to make a clean offer, with no contingency. Since you’ve already sold your home, you’ll have enough cash on hand to make this possible.

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The game plan:

  1. Find a reasonably priced rental with flexible terms, and stay there while staging your home to sell.

  2. Once you sell your home, use the money to make a clean offer on the house you want to buy.

  3. If everything goes well, you can move out of the rental in a few months.

Scenario #2: You’ll be moving to a new city in a few months.

Whether it’s to start a new job, relocate with a loved one, or to accommodate any lifestyle change, you’ll be needing the money from your home equity to uproot yourself and start a life elsewhere. Besides, if you’re moving to a new city, it may be wise for you to rent a bit and explore different neighborhoods before buying your new home.

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The game plan:

  1. Declutter your home until it is adequately staged to sell.

  2. Be sure to find a buyer who will agree for you to stick around for a bit until you’re ready to move to your new city. You can either negotiate a longer period until closing or offer to rent back your home for a few weeks.

  3. Find a short-term rental in your new city and use the time to begin your home search.

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Scenarios in which you have to BUY FIRST:

Scenario #1: You’re selling in a seller’s market, and buying in a buyer’s market.

It is easy to buy a house where the market is slow since there won’t be too many people to bid against on the house you want. If you’re in a hot market, you can quickly find a buyer for the home you’re selling, so it’s improbable that you’ll be stuck with two mortgages for longer than you can practically afford.

In some cases, there won’t be anyone to compete with, and the seller may even accept an offer that is contingent to the sale of your home (also called a “contingency offer”). This way, you won’t have to worry about paying two mortgages at the same time.

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The game plan:

  1. Start staging your home to sell long before you plan to move out. This way, it can sell quickly once you put it on the market.

  2. Make an offer on the house in the area you’ll be moving to. If you’re making a contingency offer, negotiate a 30-day contingency period. If not, consider using an escrow account to secure the offer while waiting for your home to sell.

  3. Put your house on the market once your offer on the new house has been accepted.

  4. While this is highly unlikely to happen in a seller’s market, it is wise to consider a bridge loan if it takes you awhile to find a buyer.

Scenario #2: You have enough resources to make an offer NOW, even while your home for sale is still on the market.

Not many home buyers find themselves in this position, given that most people are only capable of making a down payment on a new home once they have already sold the previous one.

However, for those who have the money, consider these:

  • If you buy first, you can immediately move to your new home and have your previous home staged and presented in its most appealing state. If you do an impressive job on this, you can get an excellent offer on your home by marketing it vacant and ready for occupancy.

  • You’ll only have to move once! No more looking around for a rental unit or storage space.

  • You can be more at ease knowing that you already have a home that is yours to stay in while dealing with the stress of selling your previous home.

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The game plan:

  1. Gather your funds from the sources you have in mind, and make a solid offer on the house you want to buy.

  2. Move into your newly purchased home and stage your previous house to sell.

  3. Once your home sells, pay back the accounts you’ve tapped by using the money you earned from the sale.

3 Most Important Things To Remember When Selling A Home That You Still Have To Live In

luxury of living elsewhere while selling the house they do have. It’s pretty common for home sellers to have to deal with the challenge of selling the same home in which they still have to eat, sleep, and bathe in -- so it’s nothing to be embarrassed about. However, it can be quite a challenging feat, and it can cost you a lot if you don’t pull it off seamlessly.

Below are the top three (3) things you have to do to keep the situation under control and not hurt your chances of getting a good offer. Keep them in mind if you want to breeze through the sale with as little setbacks as possible.

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There are a lot of things you can achieve by simply starting to pack up your things. One of them is making things easier for you once you need to move out of your house for real. Packing is an activity a lot of people dread and end up procrastinating on. Even just packing your suitcase for a vacation can seem stressful when you do it at the last minute, so just imagine how much stress it would cause you to pack up everything you own! So our advice is to pack ahead and stow away things you won’t be needing in the near future. For example, if winter isn’t coming anytime soon, start packing away those thick jackets and sweaters. Put them in a storage unit or a relative’s garage.

Another advantage of packing up early is being able to depersonalize your home. Most potential buyers are turned off by a house that feels too unique or too individualized. If they can’t picture themselves living in your home, they will definitely feel out of place and lose interest in buying. So this is as good a time as any to start taking down family portraits from the walls and wrapping them up so you can safely transport them when the time comes.

And lastly, it’ll give you another chance to experience living in a spacious and uncluttered house again (at least until the offers come in). It can even inspire you to permanently rid your future home of all of the unnecessary clutter you had to pack from your old one.

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Yup, this means a general cleaning of your home unlike anything you’ve ever done in the past months, or even years. It is the kind of cleaning that will take you days to complete, lest you opt to pay extra for professional cleaners that can have it done for you in a day.

This may sound like a huge undertaking, but there are a lot of upsides to it as well. AND, you only have to do it once. Once your house is thoroughly cleaned and practically spotless, it’s easier to just keep it that way until it gets sold. If you have the budget to spare, we highly recommend that you hire professionals to clean every part of your home, including all the nooks and crannies. Years of living in a house (even one that you regularly clean) can build up so much more dirt than you can imagine, so it’s better to leave all the comprehensive cleaning to professionals.

Of course, you can’t hire people to keep your home at this level of cleanliness every single day. The trick is to come up with a system with your family about how you’ll go about living in a house which you are already selling. Entail the help of each member of the household by reminding them to cover all tracks of their activities. Wash dishes immediately after use, do the laundry at night so it doesn’t distract viewers during the day, and clean up everything the night before.

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While you want to be as accommodating as possible, you also have to look out for yourself. Potential buyers are always going to inspect every area of your house—this means opening drawers, cabinets, and taking a close look at your garage and storage rooms.

If you still have to live in your house while it’s being shown to potential buyers, it’s understandable to still have a few personal belongings inside. However, it would be wise for you to safeguard all valuables and belongings with sensitive information. Keep them in a locked drawer or a safe, and keep them in a room where people don’t tend to gather. Don’t keep any gadgets lying around, and make sure your computers have strong passwords.


As always, keep in close contact with your real estate agent and ask them for their feedback as well.

Best of luck, home sellers!
 

10 Smart Tips For Buying A New Construction Home

In an analysis conducted by the National Association of Home Builders (NAHB), it was found that there was a larger percentage of new homes, especially single-family homes, that cater to the preferences of many home buyers today. Significantly, new construction is addressing the substantial demand for homes with special features — two bathrooms, an open kitchen-dining area, and an open floor plan. Some of the cities with the largest new construction markets include Dallas, Houston, and New York, according to 2017 data analyzed by Trulia.

For buyers who have already looked at existing homes for some time but still couldn’t find the home they want, a new construction home is a good option. There are three ways that you can purchase a new home: you can buy a new home that was already built; choose a semi-custom home built from a set of finishes and upgrades, or have a custom home designed entirely to your preference.

However, just as how the home buying process in existing homes goes, there are certain things buyers must do if they want a new construction home. Here are some tips to help you throughout the process:

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1. Weigh out the pros and cons

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The best way to figure out if a new construction home is the best route for you is to analyze first its pros and cons and whether it is going to suit your lifestyle. Do your research and ask yourself a few questions. Some of the pros and cons of new construction homes are:

 

Pros

  • There’s no need for long hours of lifting the hammer or using a paint brush to do any customization or repairs. If you’re that type who doesn’t want to do any immediate repair work once you moved in, then it’s a good choice for you.

  • New homes often come with modern design elements and lifestyle upgrades, such as open floor plans, open kitchen, etc.

  • They are also often built-in with the latest smart home technologies and are constructed using more energy-efficient materials that could help lower your energy bills.

  • You can have the builder customize the home based on your personal color palette before construction is even completed.

Cons

  • New homes can cost more than similar existing homes. Hard to break it to you, but those fabulous amenities and upgrades can also add up to the costs.

  • The home probably won’t be located in a tight-knit, well-established community of neighbors.

  • New homes, unless it’s purely customized, often have less architectural detail, charm, and character compared to older homes.

  • New homes are not for those who feel great pride and value in doing the upgrades and repairs themselves.


2. Find your own agent who has experience in new construction

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Find a top local real estate agent who can best represent you and your interests during your home search and the home building process. Be sure that it’s someone who has experience in new construction and regularly deals with builders, but isn’t affiliated with the builder. Find a trusted agent even before visiting a builder’s home construction site. Many model homes are represented by a real estate agent who has a relationship with the builder, and many builders won’t allow you to hire your own agent once you already visited their sales office without representation. Seeking the help of a knowledgeable professional who regularly deals with builders and knows the local communities by heart will save you time and money. Besides, it will cost you nothing as a buyer to be represented by an agent since it is typically the seller who pays for the commission. Many builders are also happy to work with agents, so it can be a win-win situation.


3. Do your research on the builder and its reputation

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Conduct research on the builders of each development that you’re interested in. Search for online reviews, testimonials, and any news and updates you can find. Then check for the validity and trends in those reviews, since many builders will surely have a history of both happy and unhappy clients. If possible, also talk to local homeowners or current residents. Connect with them in online groups or communities through social media to better educate yourself before making a decision. Also research on the location and the community where the new construction is being built where you can learn about your potential neighbors as well. Ask your real estate agent if they’ve worked with the builder before and gain insights about their reputation.


Bonus Tip: When talking to the locals or current residents, don’t forget to ask about other costs associated with owning a home in that development, such as property taxes and the average utility costs.


4. What you see isn’t always what you get

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It’s normal to be fascinated by that picture-perfect model home, but don’t let it blind you. Model homes are, of course, decorated to look desirable and striking. They have been furnished and staged so that rooms will appear bigger. Model homes were often constructed using a mix of standard materials and fixtures and include many upgrades which don’t necessarily represent what you can get, so it’s crucial to note what exactly you will be getting. Enlist the help of your agent to get a list of the standard features and common upgrades, together with their associated costs.


5. Find other ways to negotiate and get discounts

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Most builders are reluctant to lower their prices because it may set a precedent for future buyers in the development who may expect similar discounts. The best way to negotiate with a builder is through upgrades. Consider asking for the builder to negotiate “on the back end,” such as paying for closing costs and performing upgrades at no additional charge. This is the less obvious way for builders to sweeten the deal while still maintaining the value of their neighborhood. With the help of your agent, research the builder’s negotiating style so that you can plan for an effective way to make a creative offer.


6. Do your research to find a good lender and the best loan for you

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Consider other sources where you can find a lender who will offer you the best deal. Don’t automatically use the builder’s own lender without shopping around for better options. Builders often have their preferred lender so that they can be fully informed of your personal progress as a borrower. However, they may not work with your best interests in mind. Your agent can also help you by referring his or her trusted list of private lenders where you can choose.

For some instances where the builder’s preferred lender is the only option, find out if there are incentives, special offers, or competitive rates available to you if you agree to use the builder’s own lender. In some situations, it can be a cost-efficient option since they are often willing to offer competitive rates and terms, especially if the builder owns the lending company.


7. Get a home inspection

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You might think, “Nah, it’s a new home, so why would I need to have a home inspection?” Well, that’s a huge mistake. New homes can also have problems or defects since construction workers can make mistakes as well. There may be problems with the HVAC or plumbing installation that only a licensed home inspector can detect. Getting an independent inspection is always a good idea since any problems can be identified before a builder’s warranty expires. It will also help you learn more about the home. A home inspection will guarantee that everything is safe and up to code.


8. Secure everything in writing

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Even if you are working with a respectable builder, make sure that everything you have negotiated and agreed upon will be included in writing. They may honor your requests, but verbal conversations are not binding so they may forget about the promises they made to you. Make sure that everything important will be put in binding documents that must be signed by all parties. It’s especially crucial if you are buying a home that is not yet complete. Your experienced real estate agent can help you ensure everything is in writing and that all documents are properly signed.


9. Get a guarantee

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If you buy a home that is not yet completed, one thing you need to guarantee by the builder is a completion date, which should be specified in your purchase agreement documents. However, review these documents thoroughly because many builders may add provisions that make the completion date dependent on several variables, such as on city permit approvals or availability of building materials from several suppliers. A guarantee is especially important if you have to make living arrangements until the home is built.


10. Find out what things are included in warranties

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Last but definitely not the least: ask about warranties. Find out what is and isn’t covered and for how long, since not all warranties are created equal. Most builders use third-party warranties that cover materials and workmanship. Builders often use construction materials from different manufacturers or suppliers, like for windows or tiles, so those products may have separate warranties. There’s a great chance the builder might refer all issues to the manufacturers instead of handling the issues directly. Get the builder to specify each product’s warranty information so you can prepare your offer documents to address any concerns before closing. Warranties will also help you understand the process you need to follow once something needs to be fixed.

 

Buying a new construction home, with their absolutely perfect “new house smell,” can be considered a luxury of its own. Especially if you’re the type of buyer who’s really dreaming of owning a piece of the American Dream in a particular development. Heed these smart tips and when in doubt, don’t be afraid to ask questions! Most builders and developers will use a handful of lingo and phrases you may have never even heard of. Ask questions if there’s something you’re unclear with, take down notes, and get everything in writing. Hopefully, you’ll have a top local realtor to educate and assist you in this important milestone.

10 Thoughtful and Heartwarming Gift Ideas for First-time Homeowners

The spring real estate market is already here. Despite the strong competition, it’s a great time for home buyers to score their dream home because of high market inventory. And soon, there will be fresh batches of buyers who have just finished closing and will soon be moving.

Purchasing a new home is a big milestone for anyone, so welcome your friend or loved one to their new life with a thoughtful housewarming gift. It could be something practical, sentimental, or anything in between. Remember that they can have a list of things they are going to need for their new home but they might have a tight budget after paying the down payment and other costs, so a nice thoughtful gift will be appreciated.

In case you need help in coming up with ideas, we’ve collected some of the best gifts you can give to new homeowners. If you’re still in doubt about what to choose, remember that it will always be the thought that counts.

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1. Fresh flowers or a plant in a beautiful vase

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Who wouldn’t love smelling a lovely bouquet of fresh flowers, especially if you’ve been surrounded by boxes and packages in the last few days? Brighten up their new abode with some colorful blooms that will be more attractive if you put them in a beautiful vase that new homeowners would love to keep. Studies have long established that flowers can help decrease anxiety and worries, so they can definitely help reduce moving-related stress. If you want to give something that will last longer than a bouquet, pick out a plant that is low-maintenance but could still add life to an otherwise empty space. Gift a succulent (which is a growing trend nowadays) in a cute vase, or go for a good luck bamboo or a snake plant.

2. A welcome mat

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A welcome mat can certainly make a new home feel pleasant and welcoming. Perhaps this is something they were planning to buy later, so you’d be doing them a nice favor by giving this simple yet thoughtful gift. You can always get something plain and basic. But if you want to make a lasting impression, go for a custom-made mat with their initials, a fun saying, or a quote that you know the homeowner would love. Yes, it will be better to pick up something beyond those that say “Welcome!”

3. Gift certificates or gift cards

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There’s nothing more wonderful than receiving gift certificates for a certain restaurant or service. Since a new homeowner may still be overwhelmed with a lot of things to do, help them take a break by giving them a gift card for a nearby coffee shop or restaurant. It will allow them to get more acquainted with their neighborhood and discover new weekend favorites. Since packing and moving all require hard work, you could give them a certificate for a massage and spa to help them relax after all the hard work.

4. Tool kit/toolbox set

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Being a homeowner means getting ready for important home maintenance and repairs (as well as the costs!), so give them a set of essential hand tools, including a hammer, measuring tape, screwdriver, wrench, pliers and such. A toolkit can be especially useful for those who are moving to their very first home and have not immediately thought of acquiring most of these basics. You could also gift a humble set of gardening tools if you know the new homeowner has a green thumb and is now itching to tend to their garden during this spring season.

5. A spa-like gift set

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Scented candles and oil diffusers are one of the best housewarming gifts due to their aromatherapy properties. Candles can evoke feelings of warmth and relaxation and can be a nice addition to a new home. Choose a fragrance that the new homeowner loves and could help them relax, like lavender, vanilla, or eucalyptus. You can even personalize these candles by attaching a card or putting a lovely rustic packaging for that stylish look, then bundle them with a nice set of bath towels and aromatic soaps to complete that perfect spa-like gift set.

6. A fun household game

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There’s no stress a fun game couldn’t relieve, especially for a young family who just moved in. It’s especially perfect for anyone who’s invited friends over to their new place. Bring in fun card games like Cards Against Humanity and Uno, or classic board games like Scrabble and Monopoly, that will surely be loved by the new homeowner and enjoyed by everyone.

7. A trinket dish or any lovely home decor

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Because not all gifts should have a functional purpose, why not give a trinket dish or any stylish home decor for a new homeowner who also aims to make his/her home “instagrammable.” Trinket dishes, decorative plates and bowls, and even marble coasters would look beautiful on a tabletop, mantel, or desk. Choose a decor with a natural but elegant design, and perhaps made out of unique materials like exquisite wood or marble.

8. Freshly baked goods and sweets

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Who can resist the smell of freshly baked goods and sweets? Especially if the homeowner has a sweet tooth, you can bake a fresh batch of sweets yourself and bring them over. Or, if you’re not the type who loves to bake homemade goodies, head to a local bakery near their new place or pick up something from their favorite bakery in their old neighborhood. The aroma of those baked goods can certainly evoke special memories and make everything slightly better.

9. Cooking spices

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Since cooking spices and herbs are a staple in every pantry, why not give a starter set for the new homeowner, especially if he/she also enjoys cooking. It’s both a flavorful and essential gift for any home cook. There are spice gift boxes already available in major supermarkets, so you can just wrap them up in lovely ribbons before giving them as gifts. If you’re a lover of homemade gifts, you can also get ideas online to help you create the perfect DIY spice mixes.

10. Cozy blanket

A home wouldn’t be complete without a cozy blanket. And since a first-time homeowner can never have too many of those, it can still be appreciated especially on cold nights where you only want to snuggle down and relax with friends and loved ones. Include a decorative or trendy pillow and you’ll be wishing a good night’s sleep to the homeowner who, after what could be years of house-hunting and surviving the stressful closing, finally have a place they can really call their own.

 

If you’re a home buyer or a new homeowner, you might as well share this with your family and friends, too! That way, they’ll have an idea of what to give you on your future housewarming party. Cheers and Happy Housewarming wishes in advance!

What's In A Mortgage? Breaking Down the Components of A Mortgage Payment

In simplest terms, a mortgage is a long-term loan designed to help borrowers purchase a house. It allows individuals to become homeowners without making a large down payment and thus, fulfilling The American Dream. Once you become a homeowner, a mortgage represents one of your life’s biggest financial commitments. So it’s important to understand the structure of your payments — what percentage goes to principal, interest, and taxes, and what you currently owe on your loan balance.

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I’m a first-time home buyer. Once I closed on my new home, when will my mortgage payment start?

Mortgage payments usually start one full month after the last day of the month in which the home purchased closed. Unlike rent payments, which are usually paid in advance on the first day of the month, mortgage payments are paid in arrears. It means the payment is expected to be made at the end of the month. For an instance, after closing on your new home on March 28, the first full mortgage payment, which is for the month of April, is then due on May 1.

 

2 primary factors to determine your monthly mortgage payments

  • Size of the loan - refers to the amount of money borrowed.

  • Term of the loan - the length of time within which the loan must be fully paid back.

Remember: Longer terms result in smaller monthly payments. This is why the 30-year mortgage remains the most popular mortgage financing option among many home buyers.

 

Remember PITI: The 4 Major Components of a Mortgage Payment

 

PRINCIPAL

The actual amount of money you borrowed from the lender without the interest. It is the face value of your mortgage on the first day. For an instance, if your mortgage is $250,000 with a 4.5% interest rate, your principal remains at $250,000.

A portion of each mortgage payment goes to the repayment of the principal. If you take a mortgage with a fixed-interest rate, your principal repayment will be the same for the life of the loan. A greater amount of the principal is paid during the back half of the loan because the majority of the payment in the first few years goes primarily to interest.

To calculate your starting principal balance:

Principal Balance = Purchase Price + Fees Rolled into Mortgage - Down payment

 

INTEREST

The interest is another big part of your mortgage payment. It is basically the profit that goes to the lender. Think of it as the lender’s reward for taking a risk and lending money to a borrower. Lenders will want to earn their interest back in the first few years of the loan repayment before they start reducing principal. Meaning, the majority of your mortgage payment goes to the interest in those first few years, but every month you pay down a little bit of principal as well. This is the method banks use to protect themselves in the event of a default. But the more payments you make, the lesser amounts goto interest and a bit more goes to the principal. For a 30-year loan, the first seven years will go mostly towards the interest.   

Higher interest rates = higher mortgage payments

Interest is accrued annually regardless of whether you have a fixed-rate mortgage or an adjustable-rate mortgage. It’s important to note that the interest rate on a mortgage has a direct impact on the size of a mortgage payment. The average 30-year fixed-mortgage rate until March this year is 4.54%, which rose slightly higher since November 2017.

To calculate how much of your payment goes to interest:

Interest Portion = Current Principal Balance 𝒙 (APR ÷ 12)

 

Side Note: What is amortization?

Amortization is a sliding scale that shows how much of your monthly mortgage payment is going towards principal and how much is going towards interest. It also includes a breakdown of every payment for whatever term you select. To have an idea of where your monthly payment typically goes, visit your lender’s website and print off a copy of your amortization schedule. There are also free amortization schedule calculators online that you can use as a guide to estimate the monthly payment on your mortgage.
 

TAXES

Almost all lenders require you to include, or escrow, the taxes into your monthly payment. It is because property taxes take first priority over everything else. The tax portion of your payment could vary from year to year depending on the town where you live and your property’s value. Real estate taxes are assessed by governmental agencies and used to fund various public services, including the school district, road construction, the police and fire department services, and others.  

The amount that is due in taxes is divided by the total number of monthly mortgage payments in each year. If you escrow, you place the next tax payment in advance with your lender and they pay the taxes for you. If you have an extra amount in your escrow account at the end of the year, your lender may cut you a check and then simply roll it over to next year.

 

INSURANCE

Insurance payments, just like property taxes, are also part of each mortgage payment and held in escrow until the bill is due. This is done to ensure that you are always covered in the event of an emergency. The taxes and insurance typically don’t experience much fluctuation, unless there is a run on foreclosures or if your neighborhood was hit by weather issues, then it could change significantly.

 

Common Types Of Mortgage Insurance Included in Mortgage Payments

 

Private Mortgage Insurance (PMI)

This type of insurance is mandatory for homeowners who purchased a home with a down payment of less than 20% percent of the home’s purchase price. It protects the lender from financial loss in the event that a borrower defaults on the loan. The rates for PMI differ from loan to loan and depends on several factors, including the borrower’s credit and the amount of down payment. Typically, this insurance costs between 0.3% to 1.15% of the mortgage loan amount.

For most conventional loans, the payment for PMI is necessary until you have at least 20 percent equity in your property. A borrower also has the option to choose from different payment plans: annual, monthly, and upfront payment.

 

Homeowner’s Insurance

This is a form of property insurance that covers losses and damages to an individual’s house and assets in the home. It also provides liability coverage against accidents in the home or on the property. Homeowner’s insurance is often bundled with mortgage payments. It’s important that homeowners educate themselves on the amount of their homeowner’s insurance premium every month.

 

Mortgage Insurance Premium (MIP) in FHA Loans

The MIP is an insurance policy used in FHA Loans. It protects lenders against losses that result from defaults on home mortgages. In an FHA loan, both upfront and annual mortgage insurance are required for all borrowers, regardless of the amount of down payment. Borrowers can check the annual MIP rates on the FHA website.

The ABCs of Real Estate: Real Estate Terms Every Buyer And Seller Needs To Know

Whether you are a first-time home buyer or a third-time home seller, the real estate transaction can be confusing and stressful enough even without the many terms and acronyms used during the process. But don’t be overwhelmed — we’ve compiled a mini-glossary of the important terms you should know and familiarize yourself with to help you better understand what’s going on with the home sale.


It’s good to remember what Steve Jobs said: “There’s always one more thing to learn.”

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The ABCs of Real Estate

A: An appraisal is a professional estimate of the value of the property by a certified appraiser. Lenders always require a home appraisal before they will issue a mortgage. Appraisers look into similar homes in the area that have been sold recently, also known as “comps,” and also take into account the home’s condition, square footage, location, and quality to make an accurate assessment of how much the home is worth. There are many myths surrounding the home appraisal that buyers and sellers should be aware of to better understand this valuable process.

 

B: A backup offer is a secondary offer on a home that is under contract between the first buyer and the seller. It becomes active when the primary sale falls through due to a number of reasons. A backup offer can be a useful tool to keep a buyer motivated to get the home that he/she wants.

 

C: A contingency in a real estate contract is anything that puts a condition on the buyer’s willingness to proceed with the purchase. Some of the most common contingencies include the financing contingency, inspection, sale, title, and appraisal contingency. A buyer will typically reserve the right to recover her earnest money if the contingency is not satisfied.

 

D: Down payment is the amount of money a home buyer pays directly to a seller and ranges between zero to 20 percent of the home’s purchase price, depending on the type of the loan. In the 2018 NAR Aspiring Home Buyers Profile, many home buyers have indicated that the most difficult step in the home buying process is saving for a down payment. However, there are popular loan assistance programs that can help buyers afford a mortgage, including the FHA loan, where buyers can get a mortgage with as low as 3.5 percent down payment. Likewise, the VA and USDA loans require no down payment at all for eligible home buyers.

Bonus: The Debt-to-income ratio (DTI) is a personal finance measure that compares an individual’s debt payment to his or her overall income. A low debt-to-income ratio demonstrates a good balance between debt and income. Borrowers who have lower DTIs are more likely to successfully manage monthly debt payments. Reducing your debt-to-income ratio can help improve your credit score, which lenders will evaluate when you’re applying for a mortgage loan.

 

E: Escrow is a term for a neutral third party that handles the exchange of money and documents (purchase agreement, deed, loan documents, etc.) in compliance with the Purchase and Sale Agreement and any escrow instructions. Escrow handles the transfer of the buyer's loan documents and property taxes and works with a buyer's lender and real estate agent to make sure the title of the home is clear of liens before the transfer of ownership.

Bonus:  The Earnest Money Deposit is the money a buyer pays soon after a home seller has accepted his/her offer on a home, and is different from a down payment. Once the sale of the home has been completed, the earnest money the buyer paid will be applied toward the closing costs. If the buyer backs out of the sale due to a failed contingency, he/she can recover the earnest money in full. However, if the buyer backs out of the sale for reasons not covered by contingencies, he/she will forfeit the earnest money.

 

F: Foreclosure is a process that transfers the right of home ownership from the owner to the bank or lender after the owner defaults on his loan.

Bonus: For-Sale-By-Owner, more commonly known as FSBO (pronounced “fizbo”), is used to describe a homeowner who is selling their property without the help or representation of a real estate agent. FSBOs remain at an all-time low of 8 percent, according to the NAR 2017 Profile of Home Buyers and Sellers. At least 89 percent of home sellers continue to work with real estate agents to sell their homes.

 

G: The GreatSchools Rating by GreatSchools.org provides essential information to parents so they can choose the right school for their family. Since proximity to good schools is a major factor especially for buyers with children and young families, the GreatSchools Rating is a helpful tool for parents in evaluating the schools and school district they’re considering.

 

H: Homeowners’ Association (HOA) is a nonprofit organization that manages a shared housing complex, including condos and other planned developments. The HOA provides funding for repairs, grounds maintenance, and security by collecting money from homeowners. It also creates and enforces rules for the properties.

 

I: An inspection, or typically known as a home inspection, is a thorough investigation of a property’s condition by a licensed inspector. It is the home inspector’s job to assess the condition of the property and look for any flaws that need to be fixed, even if a house looks like it’s in great condition.   

 

J: A jumbo loan or jumbo mortgage is a loan whose principal value exceeds the standard limits for Fannie Mae or Freddie Mac, the two government-sponsored enterprises that buy loans from banks. This type of loan is available for borrowers who do not qualify for a conforming loan and is commonly used for luxury homes.

 

K: Key rate refers to the specific interest rate that determines bank lending rates and the cost of credit for borrowers. In the US, the two key interest rates are the discount rate and the Federal Funds rate.

 

L: List Price is the price of a home for sale set by the seller and his/her listing agent. Real estate agents help set the price of the home right by doing a Comparative Market Analysis (CMA) to provide an accurate home valuation. Setting up a correct list price won’t turn off potential buyers and increases the chances of the home getting sold.

 

M: The Multiple Listing Service (MLS) is a suite of around 700 regional databases, wherein each regional MLS has its own listings. Agents pay dues to access and post homes on each one, and they may become a member of more than one MLS if they want to have a broader reach for their clients. Only licensed real estate agents and brokers can list homes for sale on the MLS.

 

N: Net Proceeds is the amount of money a seller takes away from selling a home, after taking into account the agent commissions and closing costs.

 

O: Open House is an event where a house or property is open for viewing to potential buyers for a scheduled period of time. Many open houses occur on weekends, especially on Sundays.

 

P: A pre-approval is an evaluation of a potential borrower by a lender that determines whether the borrower qualifies for a loan. During the process, a lender will evaluate the income and expenses of the borrower, including taking a thorough look at the borrower’s credit report and score. Getting a mortgage pre-approval is the first step serious first-time home buyers should do before they even go house-hunting. It will provide buyers a crucial guideline of what loan they can get, how much they can afford and how much the bank will lend them.

 

Q: A quitclaim deed is a legal document that transfers ownership of a home from one party to another, but does not give any guarantee as to what is being transferred. It simply transfers whatever interest the homeowner has in the property to his/her recipient. For an instance, a quitclaim deed can be used by a divorcing couple if the husband needs to transfer their jointly-owned property entirely to his wife.

 

R: A real estate agent is an individual who is licensed to negotiate and arrange real estate sales; including showing property, listing property, filling in contracts, listing agreements, and purchase contracts. Real estate agents are generally licensed to operate under the supervision of a real estate broker. In the NAR 2017 Profile of Home Buyers and Sellers, at least 89 percent of home sellers worked with a realtor to sell their home, while 87 percent of buyers purchased their home through a real estate agent. Especially for first-time home buyers, hiring a great real estate agent can help you save time and resources on your journey to purchasing your dream home.

 

S: A short sale happens when an owner is selling their home for less than the mortgage they owe on it. The lenders may agree to take a “short” on the mortgage to release it for sale. A short sale is typically seen as the last step before a foreclosure. It often happens after a low appraisal or a decline in property values.

 

T: Title is the right to ownership of a specific real estate property. Once the transaction closes, the buyer will receive a final title policy recording their names as the new legal owners, along with the amount of title insurance. The most common methods of holding title in real estate are the joint tenancy, tenancy in common, and sole ownership.

 

U: Upfront Costs refers to all the costs a buyer pays once his/her offer on a home has been accepted, including earnest money, the inspection fee, and the appraisal fee.

 

V: The Veterans Affairs (VA) home loans are unique mortgage options for current and former members of the military, offered by the U.S. Department of Veterans Affairs. Veterans, active-duty service personnel, select Reservists or National Guard members, as well as spouses of military members who died while on active duty, are among those who can qualify for this loan. The VA provides a home loan guaranty benefit and other housing-related programs to help them become homeowners.

 

W: Walkthrough refers to the final inspection of a home before closing. Buyers should complete a final walkthrough with their real estate agent to make sure any agreement to make repairs on the property have been fulfilled before the closing papers are signed.

 

X: Xeriscaping is a creative and sustainable landscaping that conserves water and is based on sound horticultural practices. The process was originally developed for drought-affected areas and is best for areas with water restrictions. In xeriscaping, the need for maintenance is minimal and water requirements are low. The practice relies on using local plants accustomed to the climate and getting the most out of everything you plant. Homeowners can lessen the impact on their local environment by creating this type of sustainable landscape. A good xeriscape can also raise property values more than extensive landscaping.

 

Y: A yield spread premium (YSP) is the compensation a lender pays a mortgage broker to sell a loan with a higher interest rate. The YSP is listed on the loan estimate and Closing Disclosure.


Z: A zero-lot-line property is a building that comes to the very edge of the property line on at least one side. Units may be attached to one another in a zero-lot-line housing development, leaving no room for a yard. Many townhouse developments are built on zero-lot-lines.

Selling Your Home? Here’s How You Can Upgrade Your Kitchen On A Budget

The kitchen is one of the most important areas in a house. If a potential buyer is someone who spends a lot of time in the kitchen, the condition of this area can make or break a sale. In fact, even if the buyer is not much of a cook, the kitchen is still a major consideration since this is where friends and family tend to gather--especially if it opens directly into the dining area.

You may be thinking, "But I don't have money to spare for a major kitchen renovation!" This is a common sentiment among sellers, and for good reason! Kitchen renovations are known to be costly--with some reaching over $80,000. But then, you don't really have to do a comprehensive overhaul to make your kitchen look good as new. With a few tips and tricks, you can transform the look and feel of your kitchen for under $5000 (total)! If you feel that this is still a huge sum of money, just think of it as an investment. Many potential buyers are willing to pay good money for a kitchen that stands out in terms of cleanliness, design, and function. Besides, your alternative is to keep it as it is, and if the current condition of your kitchen is a dismal one, this may drag down the value of your entire house.

Below are a few things to consider if you really want to upgrade your kitchen without breaking the bank. Refer to the image and corresponding number!

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1. If you're on a tight budget, make sure to come up with an actual amount and stick to it. Only replace kitchen parts that absolutely need to be replaced. If they're not faulty or extremely old, you can simply resurface, repaint, or clean them.

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2. When renovating your kitchen for resale, resist the urge to incorporate too much of your unique tastes. An overly personalized design leaves no room for the imagination, which may turn off potential buyers who don’t share your taste. Remember that your goal is to sell, so choose kitchen materials and colors that would appeal to a wide range of people. If you decide to repaint the walls and cabinets, do so with a neutral color palette in mind. For kitchen items, stick to minimalist designs with a modern feel.

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3. Start with your kitchen’s main workstations. Replacing countertops with new granite slabs can be too expensive, so opt instead for granite tiles. You can cut down the cost even further by simply re-grouting your existing countertop tiles. Just remember to bleach off any stains, and make sure that all surfaces are completely dried up and squeaky clean during the viewing!

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4. The sink is one of the first things people notice in a kitchen, so keep yours clean and polished at all times. It also goes without saying that your faucet must be in tiptop shape, without the ugly white buildup that usually form on kitchen fixtures. If you don’t see the need to replace your old faucet, a tried-and-tested trick to make it look brand new is to wipe off the buildup with lemon juice or secure a plastic filled with vinegar around it using a rubber band. Be careful though, as vinegar may damage iron or nickel fixtures.

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5. Replacing old knobs and pulls for your cabinets is also a cheap way to upgrade the entire look and feel of your kitchen. Again, choose simple designs that have a general appeal! If you tend to be a little adventurous when it comes to styling your home, ask a few friends (whom you trust to have good taste) to go shopping with you.

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6. If you have wooden cabinets, consider stripping the finish and restaining the painting instead of resurfacing each one. This would cost you much less, but will have the same dazzling effect.

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7. While the look of your kitchen is the first thing that people see, you must also take note of how it feels to be in it. Some questions to ask:

a. Is it adequately lit? Use the windows to bring in enough sunlight, or compensate with artificial lighting if you’re a bit short on natural light.

b. Is it well-ventilated? Range hoods are great for improving air circulation, but can also be a bit costly, so put up a window fan instead!

c. Is there enough space to move around? While you can’t increase the area of your kitchen, you can get rid of unnecessary clutter to make the room feel bigger.

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8. Beautiful flooring may be the most expensive thing you’ll need to work on in your kitchen, but it’s always worth it when you do it right. New hardwood flooring can get most potential buyers drooling, but it’s a difficult one to achieve if you’re on a budget. The good thing is there are a lot of less expensive alternatives you can use, such as cork flooring or vinyl and porcelain tiles. Explore your options and go for the one that is within your budget.

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9. Keep all appliances sparkly clean and free from odor. No one is going to remember your new granite countertop if your refrigerator still contains leftover food and is covered in tacky stickers and magnets. When staging your kitchen, it is important to clear out your cooking appliances and make them look their best. You should do this even if the items aren’t included in the sale. As long as they’re still in your kitchen, they must be in their best condition for viewing.

Top 5 Things Home Buyers Forget To Check During Home Viewing

The viewing is usually the most exciting part of looking for and purchasing a home. It is the biggest purchase anyone ever makes, and home sellers usually go above and beyond when staging their homes. Because of this, home buyers find it so easy to fall in love with a home that looks great at first sight. But if you really want to make sure that you’re buying a home you won’t hate after all the staging is gone, you need to be aware of the things that aren’t easily assessed with a single look.

Here are the top 5 things home viewers miss when they view a house for the first time. Read up to make sure you don’t make the same mistakes!

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1. Storage Units

Storage spaces are extremely valuable assets, and yet they are often overlooked. It's easy to be blown away by a home's massive living room, kitchen, or master's bedroom, but if storage spaces are scarce, your newly bought home may end up looking like a cluttered mess once you move in. Make sure there's enough built-in spaces for you to stow away your vacuum cleaner, chinaware collection, and beloved linens.

Ask about hidden storage areas in every room, and make sure that they are well-maintained. Just because storage areas are only used to store things doesn't mean that they're allowed to be in poor condition.

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2. Where the house is facing

You may be wondering why it is important to know whether a house is facing north or south. The answer may not bother you during cooler months, but if the sun hits your house in all the wrong places during hotter days--summers in your home can be unbearably warm.

To avoid this, ask the listing agent or the owner about the sources of sunlight into the house. You don't want a house that gets scorchingly hot in the summer, but you also don't want all the walls blocking the sunshine and making the house extremely dark during gloomy days.

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3. Dampness & Humidity

Dampness is not always be easy to spot in a home, which is why home buyers often miss this very important detail. Dampness in bedrooms and other rooms can pose serious health risks, so be sure to survey the house carefully and ask the agent if there have been any flash floods in the area in recent memory. Also watch out for musty smells, rusting and discolorations, as well as mold and mildew forming on walls. A newly painted room may also be a sign of a damp cover-up, so be wary of that.

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4. Roof issues

The roof is a challenging area to check, but don't risk skipping this during the viewing. Ask about the materials used for the room, as well as how often they've been maintained over the years. If you can, have a look yourself. However, if you can't have safe access to the roof, check the attic and see if the interiors of the roof structure bear any signs of leaks. If so, this is an indication of a poorly-maintained roof (possibly with missing shingles!)

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5. Soundproofing

If you turn off all the noise from inside the house, can you still hear what’s going on outside? If you’re a light sleeper, or someone who often works from home, loud noises from your neighbor’s houses or the street outside can be intolerable. When viewing a home, move past what you see and bring your attention to what you hear as well. Listen closely and make sure that the house is adequately soundproofed. If possible, try visiting the house during the day and night and check if you like what you hear, or in this case--what you don’t.

20 Smart and Simple Ways You Can Start Saving For A Down Payment On A Home

You may think that buying a house still isn’t in your realm of possibility. In fact, you may even feel a wave of panic just thinking about where to get the money for your down payment.

For many young people, saving up to buy a house is the least of their priorities, especially when you’re still in debt from student loans (and even from simply trying to get by until your next paycheck).

However, there are a few, small steps you can make for you to get a little bit closer to that goal. Depending on your lifestyle, there are different ways you can make small changes in the way you spend your money. Once you feel that you’ve already had a jumpstart in saving up for a house, you’ll see that you’re actively seeking more ways to set aside money for your first home.

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Set a goal amount and break it down into less intimidating steps. It can be daunting to look at a five digit number that you have to produce for a down payment on a home. The key is to set realistic short-term goals that will eventually add up. Set aside a small amount from every paycheck, and label these savings specifically as “down payment money.”

Choose a bank with the most returns. If you’re not yet ready to invest your money in stocks, you can start by being smart about where you keep it. If the money you have right now is sitting in the bank, pick one with no ATM fees, high interest on savings accounts, and other perks that you can take advantage of.

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Switch to hobbies that don’t consume electricity. If you’re fond of watching television (or keeping it turned on while you do something else), try pulling the plug (literally) on this bad habit. Instead of watching shows on TV, try exploring different electricity-free ways of entertaining yourself such as reading, playing outdoor sports, or taking long naps! Turning the TV off also means that you don’t get lured by ads into buying things you don’t need!

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Schedule trips to the ATM. Withdraw a set amount of cash per week and stick to it. Divide the money into a fixed budget for each of your weekly expenses such as food, rent, leisure, etc.

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Pay your future self first. Consider your savings as the amount you bill to your future self. With this in mind, make sure to pay yourself FIRST before anything else. You can ask your company’s HR department to deposit a specific percentage of your paycheck to your savings account each month.

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Wait 30 days before making a purchase. Sometimes, the urge to buy something you don’t really need wears off after a few weeks. If you’re eyeing a pair of expensive shoes, don’t buy it just because you have cash at hand. See if you can live without it for another 30 days, and you’ll see that most of the time, you can.

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Make your own coffee. The average American spends $1,100 a year on coffee. You can bring this amount down to less than half if you brew your coffee fresh at home every morning!

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Stay healthy. This is a no-brainer. A healthy body means fewer trips to the doctor, and less hospital bills. Make exercise a habit (or an electricity-free hobby, like what we talked about earlier!), and eat your vegetables!

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Get in on some food hacks. Speaking of vegetables, a cheaper but equally healthy alternative to fresh veggies are frozen ones. If you’re on a budget, those cheap, frozen broccoli are still a better option than a $3 burger. Look for easy-to-prepare meals you can store and reheat throughout the week, and by the end of the week you’ll be surprised with how much money you’ve saved by not eating out!

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Invest. Investments don’t have to be huge. Some banks even allow you to start investing in the stock market via mutual funds with only $50 per month.

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Do-It-Yourself. If there’s something you want to buy, do a quick search online to figure out if you can make it yourself. So many people take on DIY projects because it’s fun and can save you a lot of money!

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Cancel your gym membership. No, this doesn’t mean that you shouldn’t be prioritizing fitness. There are a lot of ways you can exercise without relying on gym equipment, such as running outside and taking advantage of online workouts which you can do at home.

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Kick the cigarette habit. Like hitting two birds with one stone, ditching the stick will save you up to $2000 a year, AND keep you healthier in the long run. It’s hard to quit, but doesn’t that extra $2000 a year sound amazing?

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Spend moderately at restaurants. If you do have to eat out, one easy way to not splurge too much is to stick to water. The cost of alcoholic beverages and other flavored drinks are marked up by up to 3 or 5 times at most restaurants, so it’s better to just skip them. Desserts are also quite expensive at fine places, so just buy the ice cream at the supermarket and have dessert at home if you can!

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Find generic alternatives. Ask your doctor if you can switch your brand-name drugs to generic prescriptions drugs. If yes, you may save a couple hundred dollars on your annual medicine consumption.

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Say NO to email ads. Clean up your email by unsubscribing from marketing emails of your favorite brands. Online shopping is too convenient, which is why people often overspend without thinking twice. The only way to get rid of temptation is to look away!

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Swap your stuff instead of buying. Look for things at home that you no longer use and swap them for things you actually need! Deals like this are great for replacing furniture, used books, CDs, and other things that are just stowed away to collect dust in your home.

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Don’t spend your tax refunds! If you’re expecting a tax refund, bonus, or any large sum of money this year, give that cash some purpose by sending it straight to your down payment fund. It’s not everyday that you get this kind of money, be wise about where to put it!

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Record your expenses. Keeping track of your spending habits is a great way make sure that your finances are under control. If you know where your money goes every month, it’s easier for you to make the necessary adjustments that can save you a lot of money.

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Treat yourself! Depriving yourself too much will only take a toll on your spending plans. You want to save as much money as you can, but don’t do it to the point of unhappiness! You deserve to get yourself that delicious piece of steak every now and then.

See? Saving money doesn’t have to be hard and intimidating. You can still live a comfortable life now while saving up for your future home.

Follow this guide for a year or two and you may be surprised with how much money you’ve managed to set aside for a down payment on a home. Start today!

What Is An Interest-Only Loan And Who Is It For?

Are you considering buying a house with an interest-only loan? We rounded up the 5 most common questions about this type of loan and came up with the best answers from the experts.

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What is an interest-only loan?

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The interest-only period typically runs for 5 years (10 years max), after which the loan converts to the normal principal and interest repayments. However, borrowers are also given the option to pay the balloon (principal owed) as a bulk payment.

During the interest-only period, monthly payments are significantly lower than if you were approved for a traditional amortizing loan.

How are interest-only mortgage payments different from those of a traditional loan?

To understand how an interest-only loan works, keep these definitions in mind:

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Payments for conventional mortgages combine the cost of the principal and the interest for every payment, while payments for interest-only loans include exactly what the loan says: interest ONLY.

Monthly payments on interest-only loans are relatively low since the principal is excluded during the loan term. Borrowers will then have to start paying the principal interest once the interest-only term expires, which is usually after 5 to 10 years. This means that higher monthly payments will still occur after the interest-only period.

How do you calculate the payment on an interest only loan?

The calculation of payments for interest-only loans is pretty straightforward. The loan balance is simply calculated by the interest rate.

For example:

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It is important to note, though, that the payment rises and falls with the LIBOR rate (London Interbank Offering Rate), which is the benchmark most lenders (including banks and financial institutions) use to determine interest rates for short-term loans. If LIBOR rises, the interest payment increases.

You must also make sure that you fully understand the terms of your agreement, as this varies among lending institutions. The key is to be aware that interest rates are usually variable, and will adjust regularly according to the terms of your mortgage.

Who are interest-only loans for?

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In fact, you should consider an interest-only loan only under certain circumstances, such as the following:

  • Your source of income tends to be sporadic (i.e. commission-based, dependent on periodic bonuses, etc.).

  • You’re an investor who receives dividends in quarterly or semiannual payments, or a high net worth individual who wants to maintain liquid assets for higher yielding investments.

  • You’re a young professional who is confident that your income will considerably increase by the time the loan reverts to a conventional mortgage with higher payments.

  • You’re a short-term homeowner planning to refinance or sell your home before the interest-only term expires, who prefers to have cash on hand rather than build equity.

These are just some situations in which interest-only mortgages can be a good idea. Still, borrowers must fully understand the risks involved in taking this kind of loan. Investors, for example, should make sure that they really invest the difference they save from low mortgage payments. Young professionals must be realistic about their future income, since optimism doesn’t always translate into money. There is also the risk of a market collapse, in which case first-time homebuyers cannot expect low interest rates.

Interest-only loans may not be ideal if you are a standard home buyer who wants to pay less on your monthly repayments. You’ll only end up paying more in interest over the years, since low monthly repayments on the principal will translate to higher loan interests over time.

How can I qualify for an interest-only loan?

The mortgage industry has started implementing stricter qualifying processes with tougher requirements. But if you have done your research and are sure that an interest-only mortgage is the best option for you, consider taking the time to consult with a professional or ask your agent to walk you through the process.

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Interest-only mortgages also require “good” credit, which means that you need to have a score of 680 or higher. This also goes without saying, but you have to make sure to find a home which you are 100% sure you can afford for the foreseeable future!