Buyer

Forget A Cash Offer: Here Are 5 Creative Ways To Help You Win A Bidding War

Ugh, bidding wars. They can be nasty, nerve-wracking, and even heart-breaking. Nowadays, most real estate markets present buyers with huge challenges, due to high demand coupled with low housing inventory. Oftentimes, bidding wars become the rule, especially in a seller’s market.

Buyers who run into competing offers need to up their ante if they want to win the home they love. If you don’t have enough cash to go above the asking price or give an all-cash offer, remember that hope is not lost. There are many ways to get creative when giving your offer. You just have to analyze which strategies you can apply to find the right approach, in order to get the upper hand.

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Here are five ways you can compete in a bidding war and land your dream home without giving an all-cash offer:

1. Craft a thoughtful offer letter.

One simple but surefire way to pull on the heartstrings of the seller is to write a personal offer letter. Remember that sellers are attached to their homes—which are often filled with memories of their children and family growing up and countless holiday celebrations. By writing a thoughtful offer letter, you can create an emotional connection to the owners.

Get ahead of the other buyers by putting a little heart and soul into it. Be genuine in expressing why you want the house and how the community is an ideal place for your family. One trick is to include photos of your family and pets. It can help the seller visualize the people they’ll be passing their precious nest to. However, be extra careful about the things you say in your letter because there are some things to avoid. For example, it’s a terrible idea to include your plans to tear down part of the home and renovate it to your liking. You can consult your realtor and get help from a trusted friend or relative if you need help crafting your message.


2. Provide a sweet gesture.

Want a good way to sweeten the deal and get the home you want? Make a nice gesture that the seller would surely love. No, it isn’t cheating. Rather, it’s acknowledging the fact that selling a home is just as stressful as buying one, so you want to help the seller get through it.

During home showings, take a hint from the homeowner’s decor and displays to get an idea of what they love. Then use it to your advantage. If they’re an avid sports fan, then tickets to a game they like may help. Or, if you know they love sweets or baked goods, and you are an amazing baker yourself, why not whip up a batch of cookies or pies for them? Either way, these gestures can help you establish rapport with the sellers, which in turn, can make a big difference in whether they will accept your offer to purchase the home.


3. Waive the mortgage contingency.

An alternative to giving an all-cash offer is waiving the mortgage contingency. The mortgage or financing contingency means the deal is contingent on your loan being approved by the lender. Waiving it is a good strategy if you’re confident enough and know that securing a mortgage won’t be a problem. It will assure the seller that the deal won’t fall apart and you’ll be approved for a loan.  While it cannot completely outweigh an all-cash offer, it can be just as effective. The last thing the seller wants is a potential buyer walking away from the deal with a heartbreaking “Sorry” because they failed to secure a mortgage.

Be confident that you’ll secure a loan by getting a fully-underwritten loan pre-approval from a lender. Also, avoid making big mortgage mistakes like opening a new credit line, increasing your debt, or changing job in the middle of the transaction.


4. Keep the inspection time frame short.

Waiving the home inspection can be a big risk especially when your biggest financial investment is at stake. So assuage the seller of a potential hurdle by keeping the home inspection time frame short— a week, if possible. That way, the seller doesn’t have to wait anxiously for an extended period before the inspection can go through.

Likewise, make sure that the contingency time periods you’ve stated in your initial offer remain the same in the “purchase and sale agreement,” which includes your detailed offer.


5. Determine the seller’s target closing date and give it to them.

The best way to complement the strategies mentioned above is to make your offer solid and submit it in a reasonable time frame. Remember that sellers have a deadline for accepting offers and want to meet their desired closing date. For some, their target close date can be a critical factor in their decision-making process. Conforming to the homeowner’s preferred deadline can help your offer stand out and land your dream home.

8 Home Buyer Practices That Your Agent Wants you to Change

In the process of finding a new home, your real estate agent should become your new best friend. For a few weeks or longer, you will probably talk to them more than anyone else you know!

So how do you make sure you’re doing your part to build a good relationship with your agent?

We’ve listed eight things that you should avoid doing if you want to keep your agent happy throughout the home buying process. Remember that your agent has your best interest in mind, so modifying these behaviors is ultimately about making your home buying journey a success!

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What to avoid:

1. Not Doing Your Own Research

So you finally have a budget and want to buy a house. Great! Now what? You call a real estate agent. Should that be the end of your work? Definitely not!

Yes, agents know all about houses, but don’t depend on your agent to guess on the specifics of what you’re looking for. Do you want a bungalow, or maybe a duplex? What areas are you interested in? Are you particular about having a nice view? These are things you should know for yourself--and don’t forget to inform your agent!

Make sure you know what you want before calling an agent. That said, if you need help determining what you’re looking for, ask your realtor what factors you should be considering and they will be happy to guide you. That’s where their expertise can really help!

2. Calling the Listing Agent On Your Own

This is what you have a realtor for, so why would you do more work than you have to? That is their job: to do the calling for you.

Most importantly, your agent knows how to position your inquiry and negotiate on your behalf. Keeping some distance between you and the listing agent is essential to a successful transaction.  

3. Depending On Listing Syndication Websites More Than Your Agent

The Internet is a wonderful place, with lots of information available at your fingertips. True as this is, a computer will not be as reliable as a trusted agent. There is no harm in poking around various home search sites, but when you want more information on a property it’s best to call your agent. Licensed agents have information available to them that the public can’t access. Who wouldn’t want the inside scoop?

4. Waiting Too Long

When you find the perfect house, make your offer. There is nothing worse than dragging your feet and missing out on the home of your dreams. Yes, this is a big decision. But if you’ve done your research ahead of time and know what you want in a home, when you find that house, it’s time to pull the trigger.  Being decisive will help you get what you want.

5. Lowballing

“This offer may be ridiculous, but could you check if they’d take it?” Buying real estate should involve a negotiation, within reason. You want to make an offer that will start a conversation, not one that will result in a definitive “no”, or worse, no response at all. So if you really like the home, why would you risk making an offer that will go ignored? If you have built a strong relationship with your agent, you should be comfortable asking them for their feedback on your offer, and listen to their advice.

6. Asking your Agent to Show Properties Without Being Pre-Approved

Your agent knows that this is the most important first-step in the home buying process. Yes it’s tempting to put this off until you’ve found your dream home, but waiting that long can lead to missed opportunities. If you’re scrambling to get pre-approval when you’re ready to make an offer, you may miss out on the house. Worse, you could fall in love with a home only to find out later that you don’t qualify to buy it. Save yourself the heartache of losing out on the home of your dreams and make sure you get pre-approved before you start looking!

7. Negotiating on Visible Problems After the Inspection

Problems that you notice about the home when you first view it--peeling paint, cracked tiles--should be factored into your initial offer on the home. The point of the inspection is to call your attention to problems that aren’t visible to the average person. When you come back to the seller to negotiate after the inspection, limiting your requests to those items only discovered through the inspection will help keep your deal on track. Asking for a credit on peeling paint at that point may cause unnecessary tension between you and the seller or worse, cause the deal to fall apart.

8. Looking at Homes Outside of Your Price Point

Insisting on looking at homes outside your price point is really just a gateway to disappointment. Most of the time, when people look at something they cannot afford, they then think they have found the perfect house. But if it’s outside your budget it’s outside your budget, and there is not much you can do about that.

It is best to simply not look at homes that you cannot afford, or risk more heartache and a more difficult home buying experience overall.  

Before You Buy A Fixer-Upper, Answer These Questions First!

Just like buying a move-in ready home, a fixer-upper has its fair share of advantages and disadvantages. Buying a fixer-upper can be a great way to own a home you really love once you put some work into it, but it can also quickly swallow up your savings if you aren’t prepared. Just remember to do a reality check before plunging into this bargain.

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To figure out if you can and are ready to own a fixer-upper, here are seven questions to help determine whether the fixer-upper you’re eyeing is right for you.

1. Is the home’s location worth it?

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Before you get infatuated with a fixer-upper house and all its potential, first learn about the neighborhood. Experts recommend buying “the worst house on the best block.” Why? Because there’s no denying that homes located in a sought-after neighborhood will positively influence the price of the “ugly duckling” that you are interested in. Well, once it has been renovated, anyway.

Most buyers choose fixer-upper homes because they loved the area first and saw the potential of a thriving neighborhood. Unlike other home buyers, they can see past the external imperfections of the house, such as peeling paint or an unkempt yard, and realize that it is in an area with sustainable growth. So to choose wisely, do your research and love the neighborhood first. Is it close to public transit for easy commutes? Are there any parks and local attractions nearby? Is it in a good school district? If you answer “yes” to one or more of these questions, it might be worth it to get your hands dirty for that bargain.

 

2. What kinds of problems need to be fixed?

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Problems in houses can be divided into two categories: structural and cosmetic. Real estate agents warn against buying a house with structural damage, especially if there are major flaws in the foundation, septic/sewage system, roofing, siding, or other issues that affect the way a house works. You should think twice if the house has termite damage, water damage, needs serious upgrades to the electrical systems, or if there is a mold manifestation.

If you find problems like these after a home inspection, experts say it’s probably best to walk away. These flaws can actually make the house dangerous to live in. They are very expensive to fix and they have to be taken care of by a licensed contractor. Likewise, environmental problems such as termite damage or radon can be mitigated, but treatments may not always be successful.

On the contrary, they say the perfect fixer-uppers are the ones that only need cosmetic upgrades. Many home buyers would scoff at these houses and simply walk away. They don’t know that problems like cracked tiles, peeling paint, smelly odors, and unkempt lawns are only skin-deep and just make the house aesthetically and architecturally unappealing.

Cosmetic changes are generally less costly and can even add value to the home, especially for projects like kitchen and bathroom renovation, wallpaper removal, floor refinishing, and new lighting installation. Experts refer to fixer-uppers like these as “ugly homes”—they only need some freshening up before they’re transformed into a home that anyone would want. The best advantage to purchasing this type of fixer-upper: you can choose your preferred colors, furnishings, and fixtures to make the home perfectly suited to your own taste.

 

3. Does it have a desirable configuration and layout?

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After identifying how big the problems are, determine whether the home’s layout and interior specifications are desirable—both to you and future buyers. If the house has a bad layout, just as with structural damage, it can be expensive or impractical to demolish walls and build new ones.

If it’s located in a neighborhood where most of the homes only have two bedrooms, having an extra bedroom can give your home a huge advantage. A kitchen with more than one entrance is more likable, while the concept of an open floor plan is gaining popularity, especially among many millennial buyers. Those features can help make the home appealing to a large pool of potential buyers and thus can be more profitable when it’s time for you to sell.

 

4. Can your budget handle the total costs?

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There are three major things you need to include in your budget before doing any repairs: renovation costs (also include labor costs), supplies, and permits. Even before hiring a home inspector or a licensed structural engineer to evaluate the home, create a reference sheet or estimates for the costs of major repairs such as a new roof, HVAC, windows, or foundation. This way, you’ll be able to tell whether fixing the home will really fall within your budget.

For cosmetic upgrades and repairs you are planning to DIY, determine the materials you’ll need and how much they cost. You can get a rough estimate by checking home improvements stores and websites, such as Home Depot or Lowe’s.

You also need to factor in the cost of securing permits from your town or local municipality. Permits come with corresponding fees and can be pricey depending on the town. On the other hand, moving forward with your home renovations without securing the proper permits can have many negative consequences. Check first with local officials and see which of the repair jobs require a permit, and how much they cost.

 

5. Can you deal with the disruption?

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Do you have the time? Or, are you willing to devote a lot of time to this project? Compared to buying a move-in ready home, you have to commit a huge amount of your time to do all the work to make a fixer-upper your ideal home. For instance, the required licenses and permits may sometimes take a lot longer than expected. You also have to prepare for every aspect of the project to take longer than initially anticipated and build in as much extra time as possible in case things get delayed. Don’t forget to assess your patience and emotional energy as well. Each repair project may come with unexpected issues and delays that will really test your patience and endurance.

 

6. Aside from hiring professionals and/or contractors, can you also DIY?

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Before thinking of buying a fixer-upper, you need to consider your skills and willingness to tackle such a home. There are projects that you have to leave to the professionals and contractors—say, anything related to electricity, wiring, and plumbing. But there are minor cosmetic upgrades you can also learn and do on your own to help you save substantially on labor costs. If you’re skilled enough as a DIYer, you may put on a fresh coat of paint, change the lighting fixtures, lay the tile, fix the toilet, or tear down wallpaper all by yourself.  

A fixer-upper works best for those who would happily spend their time replacing cabinets and refinishing floors, and would want to get their hands dirty to make their home more habitable and profitable. Experts also call this concept “sweat equity.” By doing some part of the work yourself, you’re improving your home’s value and even adding greater value to your home. Likewise, the more you can do on your own (just as long as it’s still safe enough for an amateur), the less you need to spend on labor cost and instead allocate a part of your budget in buying high-quality materials.

 

7. Can you tap into any home improvement loans or programs?

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Financing a fixer-upper can be extremely difficult. But if you’re really interested in buying and restoring a house, do your research and see if you can qualify for any home improvement loans. Your most popular choices are the FHA 203(k) loan, the Fannie Mae HomeStyle loan, and the Section 504 Home Repair program. Just remember that all loans have their own strict standards and eligibility requirements.

For example, a 203(k) loan is backed by the Federal Housing Administration, which means you can put as little as a 3.5% down. Lenders can also accept lower interest rates than what a typical home renovation loan would require. Moreover, it is also open to borrowers who have a less-than-stellar credit rating and can cover big-ticket issues such as structural damage and plumbing replacement.

Before getting a renovation loan, make sure you’ve explored all your options and understand the pros and cons of each program. Also, keep in mind that you generally need to be pre-approved with these loans before you can make an offer on a house.


The work that it takes to renovate a fixer-upper should not be underestimated. A project like this can eat away at your time, effort, money, patience, and even your sanity.  And once you close on a fixer-upper, there is no turning back. The only way forward is to put in the necessary effort to transform it. For the right buyer, though, turning an “ugly duckling” into a beautiful swan—a beautiful home—is a challenge well worth the effort and can mean living in your dream home...making a significant profit when you sell.

An Easy Guide to the Different Types of Mortgage Lenders (Before Choosing the Right One for You)

We’ve helped you understand the roles of different real estate experts in previous posts. After securing everything needed for your dream home with your agent’s help, you’ll be needing a mortgage lender who will provide the mortgage loan that will be used to purchase the property.

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Mortgage lenders set their mortgage interest rates and other loan terms according to different factors. Likewise, borrowers need to meet certain criteria in terms of creditworthiness and financial resources in order to qualify for a mortgage. Generally, there are three main types of mortgage lenders: retail banks, credit unions, and mortgage banks.

Just like with real estate agents, choosing the right lender can also save you time, money, and lessen your worries while you’re in a complicated real estate transaction. You need to fully understand your options so you can feel more comfortable sharing your financial and personal profile with your lender and subsequently, get the best loan product that fits your needs.

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Retail Banks

These companies range from the biggest institutions, such as Bank of America, down to smaller local banks. They do their own underwriting and approve and close loans for consumers. Smaller retail banks can also offer lower fees and less-stringent credit requirements. They are often more flexible on loan approvals because they can choose whether to keep the loans on their books or sell the loans to investment firms like Fannie Mae and Freddie Mac, who then bundle the loans into mortgage bonds. They also usually offer lower mortgage rates if you use them for additional services like a checking account.

If you get your mortgage from one of these organizations, you’ll be assigned a loan officer, who will receive a commission or bonus for writing your loan. He or she will remain your primary point of contact for all future inquiries.

Credit Unions

They are not-for-profit, and customer or member-owned cooperatives that have been boosting their presence in the mortgage lending market since 2015. Because of their not-for-profit tax status, they’re not indebted to shareholders like banks and typically offer more personal service and lower fees because instead of keeping the profit, they pass on the savings to their members.

By getting a loan at a credit union, there’s a greater chance that you’ll stick with the same servicer. That means you can save money from late fees that could arise due to confusion over where you need to send your payments. Credit unions also appeal more to borrowers with less-than-perfect credit or potential borrowers who don’t fit in the traditional profile.

Cons: They can be less convenient because they usually have fewer branches (or a brick and mortar office), as well as ATMs.

If you get your mortgage from a credit union, you’ll also be assigned a loan officer who will handle your mortgage transaction.

Mortgage Banks and/or Mortgage Bankers

Many mortgage lenders in the US are mortgage bankers. They can be an individual, a company, or an institution that originates mortgages. They may use their own funds or borrow funds from warehouse lenders at short-term rates to cover the mortgages. Once the mortgage is provided to the home buyer, a mortgage banker may choose to retain the mortgage in their portfolio, or sell it to investors (such as Fannie Mae and Freddie Mac) and repay the short-term note.

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Understanding the different kinds of lenders and terms you may encounter

Aside from getting the best loan product with reasonable terms, you need to know what kind of lender you’ll be dealing with. It can be quite confusing to figure out all the different kinds of lenders that deal in home loans and refinancing, but familiarizing yourself with the terms and their roles can be a big help. Just remember that many lenders are involved in more than one type of lending, and their roles can overlap among various categories. Here we introduce you to their different roles and goals.


Mortgage Brokers

While a mortgage broker does not actually make the loans, he or she works with multiple lenders to find the one that will offer you the best rate and terms. He or she simply acts as a middleman or an agent who may represent the mortgage loan products of many lenders. You can count on a broker to match you with the loan product that best fits your needs at the best price.

They usually obtain loans for consumers through retail or mortgage banks and wholesale lenders. The loan is also funded and serviced by the retail or mortgage bank that the broker takes your loan to.

Once you get approved on your loan, you will deal directly with the loan originator or their mortgage service provider. The broker may then add his or her own fee.

Here are some of the advantages of using a mortgage broker:

  • They can rate shop for you across many banks, thus saving you time shopping for a loan.

  • You may get a more favorable mortgage rate.

  • A mortgage broker can best lead you to national or regional lenders that are most likely to accept your application based on your financial and personal information.


Wholesale Lenders

Wholesale lenders pertain to those banks and/or institutions that do not deal directly with consumers but offer their loans through third parties such as other banks, mortgage brokers, credit unions, etc. In this kind of lending, the wholesale lender is the one that is actually making the loan and whose name typically appears on mortgage documents. The third party is only acting as an agent in return for a fee. Many large banks have both wholesale and retail operations, such as Bank of America and Wells Fargo.


Retail Lenders

They are lenders who issue mortgages directly to homeowners, either by lending their own money or acting as an agent. They provide financing on the retail level with retail rates. Similar to wholesale lending, retail lending may simply be one function offered by a larger financial institution that also provides a range of other financial services.


Direct Lenders

If you encounter the term “direct lender,” no need to be confused. Direct lenders are those who originate their own loans through their own funds or borrowed funds. Direct lenders can be banks, mortgage banks, or portfolio lenders (which will be discussed below). Their employees will review your application and make the decision to lend you money. They can be classified as retail lenders as well because they do not involve any third parties or middlemen in making loans to borrowers.


Portfolio Lenders

Portfolio lenders are those who use their own money when making home loans, which they maintain on their own books or “portfolio.” Most portfolio lenders tend to be direct lenders as well, so they don’t have to satisfy the demands of outside investors. Because of this, they can set their own terms for the loans they provide.

If you’re a “niche” borrower, a portfolio lender can be a good choice for you. These “niche” borrowers who don’t fit the typical lender profile may seek the service of portfolio lenders, especially if they want to get a jumbo loan, if they have a flawed credit, or they are looking at a unique property. Their rates are sometimes quite low so they tend to be very careful about who they lend to.


Hard-money Lenders

A hard-money lender can be your last resort if you can’t qualify through any other lenders or a portfolio lender. Usually, they are private individuals with money to lend, though they may be set up as business operations. Don’t be surprised if they have higher interest rates and down payments. Borrowers typically use hard-money lenders to fund short-term loans that are expected to be repaid quickly, such as for investment property. They are not usually used to fund a home purchase.


Bottom Line

Understanding the loan process and not being afraid to ask questions can be your two most powerful weapons while you’re in the process of choosing a mortgage lender. If you need a second opinion, ask your real estate agent because they’ve likely had plenty of experience working with reputable local or regional lenders that may cater to your needs.

Should You Sell or Buy A Home in Winter? Here’s Why the Colder Climate Might Work in Your Favor

During the spring and summer months, bidding wars are rampant, there’s fierce competition, and a large pool of buyers are looking to move before the school year begins.

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But in winter, especially in colder climates when everything is covered in snow, sellers and buyers alike can also take advantage of the season to score a good deal on real estate. Experts say that the idea that homes are very tough to sell or buy in the winter might be a myth. When temperatures drop, the market could be full of eager sellers and serious buyers who are both looking to score a cold, sweet deal.

Advantages for Sellers

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You have less competition

Since there are fewer homes on the market, you have less competition from other sellers. The low inventory creates increased competition among buyers, which generally result in higher sale prices. This is why winter can also be an ideal time to sell your home.

You will show your home to a pool of serious buyers

When you put your home in the market during the winter months, there’s a greater chance you’ll attract a pool of real buyers looking to purchase and not those window shoppers who are just curious about the house. These serious buyers want to take advantage of the less competitive market and don’t want to wait until spring to get their hands on their ideal home.

You can highlight that your home is winter-ready

Aside from cozy fireplaces, hot tubs, and steaming mugs of hot chocolate with freshly baked cookies that await buyers when they tour your home, you can feature your house’s winter-readiness when you sell in the colder months. Show off the design and features that will make their life easier during winter, like an easy-to-shovel driveway, new roof and furnace, south-facing windows, and well-insulated pipes, among other things. These features, however simple, will show that your home can handle the harsh elements.

Many buyers are looking to relocate

People often look to relocate at the start of the year, especially those with new job opportunities, or young parents who want to start the new year somewhere in a more spacious family home. These buyers are serious about the sale and want to secure the property before Christmas or New Year. They are more likely to sign on the dotted line once they find the home they are looking for, which could potentially mean a swift sale with fewer contingencies.


Advantages for Buyers

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Take advantage of this season to score a bargain

Because more buyers are likely to house hunt during warmer weather, home prices are generally lower in the winter. You can then take advantage of this season and have more buying power since sellers are motivated to sell their home and move before the year ends.

However, don’t assume that you can automatically score a sweet deal. What you can do is use the seller’s motivation to negotiate a bargain. This is particularly in markets where there’s generally less interest and the seller already feels some pressure. They might be more willing to accept an already good offer rather than waste time waiting for a better one. Work closely with your real estate agent to give a good offer and secure a quick settlement.

You can use your end-of-year financial bonus to enter the housing market

The end of the year also means many employees or workers will get their performance reviews, which could mean receiving financial bonuses and large payouts. If you’re a first-time home buyer, you can use this opportunity to enter the housing market and invest that money in purchasing your ideal home, especially if your credit is already in good standing. Buyers can also use the incentives to upgrade their living situations.

 

Before starting your house-hunting this season, just remember to avoid too much holiday debt while shopping for gifts for your loved ones. Any new debt can change your debt-to-income ratio and affect your mortgage pre-approval. Keep in mind that buying a home can be your biggest investment, so take note of your priorities especially this holiday season.

Getting A Mortgage After Retirement

It may seem like a nearly impossible task to get a mortgage after retirement, but there are ways you can do it even if you are not employed. If you’re planning to apply for a mortgage, here are 5 common questions you might ask that we’ve answered for you:

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1. What will lenders consider as my income?

  • Income from a regular or part-time job

  • A brokerage account or retirement savings

  • Transfer payments like Social Security and your pension

  • Invested assets

  • Household income (income from non-borrowing household members)

2. How will lenders calculate my income?

If you are not employed, there are two methods that lenders will use to calculate your income. Take note that if you receive transfer payments, those will be included in the computation for your income in both of these methods.

  • Asset depletion method: If you have a lot of invested assets, the lender will calculate their current aggregate value and will subtract the amount for the down payment and closing costs. 70% of what remains will then be divided by 360, which is the number of months’ payment on a 30-year mortgage.

  • Drawdown from retirement method: If you’re at least 59 ½ years old, you can use documents or receipts that verify your recent withdrawals from retirement accounts.

3. What are the factors that can affect the approval of my mortgage application?

Aside from the above, some of your other financial details will also be subject to the lender's scrutiny.

  • Credit score: The typical requirement of lenders for a credit score is usually 780; a score that's higher than that can increase your chances of getting approved. And if you ever fall short on other factors, such as debt to income ratio, a good credit score just might save your application. Also, if your score is higher than that, you could also get a better interest rate.

  • Debt to income ratio: Your debt is comprised of car payments, credit card minimum payments and your total projected house payment which includes interest, principal, property taxes and insurance. Other things like alimony and child support are also included in it. The debt to income ratio is expressed as a percentage, and is computed by dividing your total monthly debt by your gross monthly income. The safe percentage among lenders is generally considered to be 43% or lower, but maximum DTI still varies per lender. The ideal is 36%, and with no more than 28% going into paying the mortgage.

  • House expense ratio: Your housing expense ratio is the sum of your housing payments such as the potential mortgage principal and interest payments, property taxes, mortgage insurance, hazard insurance, and association fees. It’s computed by dividing the sum of those by your pre-tax income. Just like the DTI, it is expressed as a percentage and is ideally not to exceed 36% of your income.

  • Post-closing liquidity: Your lender would also want to see your available liquid assets after closing, and they usually require that you have assets that could cover at least 6 months’ worth of housing expenses. This is calculated by adding up all of your verified financial assets and then subtracting the closing costs and equity for the loan.

4. How much is the usual down payment?

The amount of down payment you would have to give is dependent on the method used for determining your income.

5. What are my other options aside from getting the usual loans in the market?

  • VA loans: If you’re a veteran or a military spouse, VA loans offer 0 down payment and low interest rates.

  • Reverse mortgage: Also known as the Home Equity Conversion Mortgage (HECM) for purchase program, it is a kind of loan that can delay repaying the mortgage (principal or interest) until the house is sold or until the death of the borrower.


Here are some tips for when you’re getting a mortgage after retirement:

1. Getting a mortgage for your primary residence will result in a lower interest rate,
while a mortgage on a home that will be used for vacation or investment
purposes will have higher interest rates.

2. If you can, make extra mortgage payments. If you can afford to pay more than what the lender calculated, you can arrange to have the monthly payment increased. This can shorten the time you would have to pay for the mortgage and could decrease your monthly payments over time, and decrease the amount of interest you need to pay on the
mortgage overall.

3. If you plan to take out a hefty amount of cash for the down payment from an IRA or another tax-deferred retirement plan, take note that you might also be placed in a higher tax bracket.

4. Know about the consequences to inflation hits or a great increase in your property taxes. You also have to consider having a financial contingency plan should there ever be medical emergencies, or a price increase in your health insurance. Take these into account and get an estimate if you can still cover these events on top of your mortgage.

Top Things You Should Do Before Buying A Rural Home

If you’re planning to move away from the city and live a more simple life in the country, take note that it does not come without its unique set of challenges. Here are a few tips to help you when you decide to buy a rural home.

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1. Specify your needs and wants.

Before you plan to buy a home in a rural area, it’s best for you to check with yourself what your reasons for buying are. What are you going to make out of this property? Are you using it as a vacation home or a primary residence? Are you going to use the land for agricultural purposes? Do you need your lot to be arable? One way to do this is to make a list of what you need and want your living conditions to be. Include your non-negotiable conditions and nice-to-haves. What you put into this list will help you narrow down the rural areas and properties that would suit you, and would also be of useful information to your real estate agent.

 

2. Familiarize yourself with the area.

Unless you’ve lived in this area before and decided to move back, the ideal action when you’re moving to an unfamiliar location is to rent in the area first. However, time and other resources can sometimes make that impossible—leaving you with the option to simply do your research on the area. If the agent you hired happens to be from there, you can ask them to give you information but make sure to still do YOUR homework. Here are some items to cover:

  • Climate and weather

  • Prevalence of natural disasters

  • Accessibility to hospitals, fire station, police station, veterinary clinic

  • Proximity to the town proper or urban center

  • Food resources native to the area

  • Local customs of the people

 

3. Consider the costs of maintaining the property.

The cost of maintaining the property depends largely on the size of the house and the land. The more acres you have, the more you'd have to spend. You're also going to need bigger tools in place of the ones you have, or you may need ones you may not have while living in the city such as a 4-wheeler truck or a tractor. And remember that the costs are not just limited to the monetary one; you also have to include the cost of your labor in cleaning waste, mowing the lawn, etc. Under certain circumstances, you may also need to consider if you could afford an extra hand in the maintenance. Take all of these into account and deliberate if you could afford and sustain all those expenses for the next 5 years and more.

 

4. Review utilities.

Utilities in a rural area will differ greatly from those used in suburban areas. An important thing to note is that rural utilities are not tied to commercial systems. Check for each of these utilities and if anything happens to not be within your preference, negotiate with the seller (and the community) how it could be made to suit your needs.

  • Septic systems - rural areas depend on septic systems for waste disposal. If the house you’re planning to buy is hooked to a septic system, it lowers your taxes because municipalities would only bill those who are connected to a public sewer system. The catch from this is that you may have to replace the system should it break down, and that would be costly. A way to address this is to include a contingency on the septic system requirement of inspections and a septic pump on your contract with the seller.

  • Power supply - power lines in rural areas tend to be flaky due to weather disturbances

  • Well water systems - some rural homes could only utilize well water systems instead of  a public water source. The advantage to this is that you could cut down on your water bill as water from this is free, and you would only have to pay for electricity that keeps it running. But the downside to this is that it comes from groundwater, and would require tests and routine maintenance in order to make sure that the water is safe for use.

  • Heating systems - Homes in suburban areas are heated by natural gas, while those in rural areas use either oil or propane. If the house uses oil, the BTU is higher than with gas, and it usually costs less than a gas-fired furnace. But take note that it’s more costly to purchase oil instead of natural gas, and it requires more routine maintenance. Alternatively, if the house uses propane, the average life expectancy is higher than with a gas fired furnace. The drawback to it is minimal compared to the others in that its tank is a sight for eyesore. But that could easily be remedied if you opt to have the tank buried.

 

5. Clarify what’s included in the sale.

Specify in the contract what feature, building, and structure of the home you think are included in the sale because it could be taken down or away by the seller. At the minimum, and if applicable, the sale should include these:

  • Existing farm or hunting leases that give (or restrict) other people legal access to be on, farm, graze, hunt on, or camp on your property

  • Fencing and fence posts

  • Benches

  • Bridges

  • Feeders

  • Livestock panels

  • Sheds, which could either be movable or portable

  • Miscellaneous equipment such as shovels, plows, tractor, etc.

 

6. Acquaint yourself with local resources.

Ask assistance from local offices regarding issues that you need help on such as property maintenance, ecosystem conservation, etc. Here is a list that could help you with your specific needs:

  • County USDA Farm Service Agency (FSA) office - After purchasing the property, you have to take the deed to the FSA office to register it and be informed and consequently transfer any Conservation Reserve Program (CRP) or base acre payments to you. They educate rural homeowners through a variety of programs on matters regarding conservation such as erosion control, wildlife habitat, pond construction, and the likes.

  • Southern States - It’s an established farm co-operative that may help you with guiding you through your concerns regarding agriculture -- what the best feeds are, what fertilizers to use, etc. Check if Southern States has a cooperative in your location, or find another supplier if they are not within your vicinity.

  • Local rural lender - Primarily, they can give you contacts to local lawyers and other service providers such as farming managers and dozer operators. They are also equipped with vital local knowledge that may help you with your concerns.

 

7. Know your boundary lines.

The step to guarantee how many acres of land you’re buying (and will be taxed on) is to visit the county’s assessor office. They could present you information on the property with a description of its metes and bounds. Check if there is a difference from the original listing and ask the assessor to explain.

 

8. Check the title insurance.

Inspecting the title insurance lets you know of the issues associated with the property that may not have been disclosed such as the property being recorded as a toxic dump site. There are also other issues that could be attached to it such as unknown or unresolved liens. The county’s recorder can pull up this document for you as it is available to the public.

8 Of The Most Unexpected Things US Homeowners Found In Their Properties

The process of selling, buying, and moving into a new home can be very complicated and overwhelming. But on the lighter side, it is also a journey full of fun and exciting discoveries. Part of a homeowner’s discovery and realization is finding their ideal neighborhood, their dream backyard, their perfect kitchen, and a wall full of snakes... Wait, what?!

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Yes, you’ve read it right. As bizarre as it sounds, homeowners from around the world have discovered many strange and unexpected things on their properties. Some may have lived in their home for a couple of months before encountering weird things, while others already owned their home for years before finding things that are impossible to anticipate. Here we reveal some of the strangest discoveries that happened in our own backyard. Well, you may consider them to be a fun and interesting part of real estate—just don’t forget the hard-earned lessons you can pick up along the way.

1. Some serious cash

Well, the first word you can think of is: lucky, isn’t it?

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Artist Josh Ferrin discovered the treasure stashed away in the attic of his home in Bountiful, Utah. When he brought up the discovery—a total of $45,000 in cash and coins—to his family, there was some disagreement on whether they should keep it or return it to its original owners. To teach his two boys the value of honesty, Ferrin returned the money to the previous homeowners despite the thoughts of car and house payments in his head. He says it was a “teachable moment” for his kids that he would never get back again. How cool and sincere was that?

 

2. World War II love letters

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In this digital day and age, sending and receiving handwritten love letters is a practice that can really make your heart melt.

When Zac and Shannon Carter bought a renovated 1970s house in Pensacola, Florida in 2016, the home inspector informed them he discovered a stack of old letters in the original cabinetry. It wasn’t until the Carters moved in that they realized the letters, postmarked from 1948 to 1949, contained a blossoming love story between a World War II veteran and his sweetheart.

They couldn’t help but read the vintage letters and understood that the letters belonged to the original homeowner, veteran William Middleton. Middleton wrote them while he was in school in Georgia after serving in WWII and sent them to a woman named Doreen in Canada. The Carters later learned that the two eventually got married and had children, so they passed on the letters to them to let them read their parents’ wonderful blossoming story.

 

3. An old cemetery

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While the first two discoveries were pleasant surprises, not all homeowners were fortunate enough to encounter such things. This one is quite a good setting for any ghost or haunted story.

Of all the things homeowner Helen Weisensel can find in her century-old home in Jefferson County in Wisconsin, nothing can be as disturbing as unearthing a child’s skull in the basement while they were doing much-needed repairs on its foundation.

They soon found out that her home was built atop an old, long-forgotten cemetery. Archaeologists and local historians even estimated it to be among the earliest burial ground in the county, and more human remains were uncovered.

Subsequently, Weisensel’s nightmare started. She was flooded with pertinent inquiries from her neighbors asking her if she’d experienced weird things happening in her home. And since her remodeling project involved her trying to fix her house and do some serious foundation work, it all became impossible the moment her home was discovered to be an official historic burial ground.

 

4. Mammoth bones

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Unearthing something of a prehistoric significance is already a delight of its own. Well, more so if you made the discovery in your own backyard. When Iowa man John and his two sons went blackberry-picking near a creek on their property in Oskaloosa in 2010, one of his sons noticed what he believed to be a ball in the creek.

That piqued John’s curiosity and interest in archaeology when he realized that the “ball” was no toy—it was actually a 4-foot-long femur of a mammoth dating back as far as 100,000 years ago. That started a historic archaeological event as John’s backyard has become an excavation site, with the University of Iowa’s Museum of Natural History leading the search.

Besides the mammoth’s femur, they had found its feet bones and thoracic ribs. Experts say while it is not unusual to find mammoth fossils in Iowa, it’s a rare find to discover so many bones belonging to the same animal in the same place.

 

5. A wall full of snakes

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Here we have Ben and Amber Sessions, who found what seemed to be their picture-perfect five-bedroom rural home in Rexburg, Idaho. It seemed like a real deal since it was listed for just over $100,000.

Until they found a snake in their yard, which is no big deal since they help keep mice away. But soon after moving, they found dozens more every day. Ben even found over 40 snakes in his yard in a single day. Soon, they also spent sleepless nights listening to what seemed like slithering noises on the walls.

When Ben removed a panel of siding it revealed dozens of snakes living in their crawlspace. Their new dream home was in fact what’s known by locals as “The Snake House.” It was sitting atop an enormous snake hibernaculum, a kind of den where the snakes gather in large numbers to hibernate in winter. What’s more troubling is that they also found out that their tap water (which has a curious taste and smell) was infested with snake musk and feces, a good way for anyone to catch salmonella and other diseases. The Sessions also referred to their home as the “Satan’s Lair.”

The home also had a distraught history of owners leaving in haste after finding out the snaky problem. It turned out that the only way to neutralize the issue of a snake den beneath the home was to raise the entire house off its current foundation and lay down a new concrete foundation beneath it. But that job would cost a massive amount, even more than $100,000 at that time. So in 2009, the Sessionses also ended up abandoning their home and had to file for bankruptcy.

According to real estate experts, the Sessions’ story is a valuable lesson for all home buyers to give importance to due diligence when searching for your dream home.

 

6. A hidden room full of toxic black mold

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Back in 2005, young couple Jason and Kerri Brown with their 2-year-old daughter found a sweet deal in a form of a five-bedroom, two-bath house that was in foreclosure for $75,000 in the cozy town of Greenville, South Carolina.

As they started renovations on the fixer-upper, they removed bookcases in a bedroom when it revealed a passageway that led to a hidden room—a secret corridor!

Well, it can be an exciting discovery for any new homeowner especially if it looks like a passageway towards a hidden world like Narnia. However, it turned out the secret room has a serious mold problem and that the house is contaminated with toxic black mold. What seemed to be a pleasant surprise turned into a nightmare for the young couple.

Inside the room, the first thing they found was a chilling note from the previous owner saying: “You Found It! Hello. If you're reading this, then you found the secret room. I owned this house for a short while and it was discovered to have a serious mold problem. One that actually made my children very sick to the point that we had to move out." It was from George Leventis, who’d lived there for a while. After discovering the problem, since he has little money and was unwilling to take the matter to court, he stopped paying the mortgage and moved out. But not without leaving the note to serve as some warning.

The Browns have taken it very seriously and hired an environmental engineer to do further testing. The house’s toxicity levels turned out to be so high they have to permanently cancel their move-in plans and took the serious matter to court.

 

7. A live artillery shell

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There’s the story about our love letters dating back in WWII. Then there’s this real bomb scare for a family who lived in Goshen, Indiana. Wally and Linda DeForests found a live mortar round in their basement as a kind of a housewarming gift after moving into their home in 2010.

Linda initially discovered the approximately foot-long military-grade weapon sitting in a cubby space while she was hanging things on the wall. She even told her husband she found a “torpedo.”

The DeForests have had help identifying what it was from their consulted family friend and army veteran Joshua Blackenship, who kindly explained that it was either a round for a mortar or a lightweight anti-tank weapon.

The family contacted the Elkhart Police Department’s Explosive Ordnance Disposal Unit to come and take it away. Some police officers discerned the old mortar round may have been from the Korean or Vietnam War. Well, it’s a quite a unique way for the DeForests to be introduced in their new neighborhood and be welcomed in their new home.

 

8. Faberge figurine

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Since we started with finding some hard cash, let’s cap off this story with another amazing find. It’s a common thing for many homeowners to display porcelain figurines in their homes, but do you have any idea how much does one figurine cost? A particular figurine was found stashed in an attic in upstate New York of descendants of a gallery owner who bought it in 1934. The tiny statute was unlike no other because it was one of only 50 in existence and was crafted by renowned Russian jeweler Faberge. It was studded in precious jewels and diamond and was sold at an auction for a whopping $5.2 million! Dated to 1912, the particular figurine depicts a personal bodyguard to royalty and was given by Russian Czar Nicholas II to his wife.

 

Bottom Line

Let’s incorporate the lesson we mentioned in the Snake House story: remember the importance of due diligence. Home buyers should “do their homework” before buying what they’d like to be their dream home. While it can be a time-consuming process, you can ensure that you’ll get the most out of your biggest investment. Many unwanted surprises can be avoided by asking the right questions, hiring an experienced local real estate agent, and giving importance to a home inspection. Following many of those established pieces of real estate advice can help lead you to your ideal property and avoid ending up in a house full of snakes (Yikes!)

The Things You’ll Love and Hate About Living in an HOA Community

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Love: Offers a range of amenities and recreational areas

You can have access to a range of amenities being offered by the HOA, such as swimming pools, gym or workout stations, and tennis court. There are also recreational areas for residents, like walking trails, jogging paths, playing fields, and community center.

Hate: Restrictive rules and covenants

While they differ from community to community, each HOA has its own declaration of “covenants, conditions, and restrictions” or CC&Rs. These are the rules that residents have to follow while living in the community. The goals of these rules are not to meddle but to maintain the attractiveness of the neighborhood and the value of the properties. However, some homeowners may find the covenants to be too restrictive or unreasonable since it prevents them from enjoying the freedom they want to have over their home.

Love: Less work and maintenance

Living in an HOA community could mean less work for you as a homeowner. HOAs handle services such as exterior home repairs, lawn care, snow removal, and pest control. They are also responsible for the upkeep of common areas, buildings, and shared amenities.

Hate: You can’t paint, decorate, or renovate your home in the way you like it

Those CC&Rs mean the modifications you can do to your home is limited. Before you can push through with painting your home in your chosen colors, installing a play area or swing set, decorating for the holidays, or adding a new room, you may need to first seek approval from the HOA. If you don’t like someone telling you what to do with your beloved home, an HOA may not be right for you.

Love: The community’s uniform look helps keep home values

The appearance of homes within an HOA must meet the association’s standards, which helps maintain the neighborhood aesthetic and higher home prices. Those desirable amenities can also help increase your home’s value.

Hate: All those associated and mandatory fees

HOAs charge a monthly, quarterly, or annual fee that primarily goes to the maintenance and handling of the common areas and buildings. The fees vary depending on the neighborhood’s location and the amenities being offered.

Love: Handles disputes between neighbors

Rather than getting into a nasty confrontation with your neighbors about their unkempt lawn, noisy dogs or loud parties, you can ask the HOA to handle the dispute on your behalf. The HOA can send them a notice or a warning for any activity that well violates the rules and regulations.

Hate: The threat of foreclosure after missed payments

While laws vary by state, an HOA can move to foreclose on your property if you fail to pay the monthly dues or have delinquent assessments by placing a lien on your property. So make sure your budget can handle those fees so you won’t fall behind on payments and risk losing your home.

Love: The community newsletters

The regular news, tips, and reminders can keep homeowners updated and equipped with valuable information.

7 Reasons Why Buyers and Sellers Shouldn’t Ditch The Home Inspection

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The biggest mistake that both home buyers and sellers could make is skipping or waiving the home inspection due to various reasons, like during a bidding war. And while a home inspection contingency clause is almost always included in a purchase contract, some buyers agree to waive the vital inspections to win their dream home in a competitive market.

Often, sellers skip it to save time and money, not knowing it may leave them little to no time to address any important concerns before they put their home on the market. However, it’s a common ingredient for regret and unexpected costly repairs that could’ve been avoided.

Here are seven valuable reasons why both buyers and sellers shouldn’t skip the home inspection:

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Remember that there’s always more to a home than what meets the eye. It may look beautiful and something that exists in a storybook, but the truth is it’s almost impossible to know all about its details and issues. There are ugly homes with problems that are only “skin-deep,” while there are great-looking homes that have bigger problems like termite infestation and mold. These issues can be missed even after multiple showings. Even new construction homes can have issues unknown to buyers that only a home inspection can uncover.

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Even after years of living in your beloved home, a home inspection can reveal unexpected flaws that you didn’t even know existed. When did that hole in the kitchen ceiling become so big? Was my dog responsible for all those scratches on the walls? Hidden problems in the foundation, roof, or wiring you didn’t even notice as the homeowner could lead to larger issues.

 
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A home inspection ensures that there won’t be any unwanted surprises in the form of serious safety issues. Through a thorough investigation, both parties can make safety their number one priority. If serious safety issues were found, the seller can promise to make the necessary repairs to guarantee that the home is safe and habitable.

 
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The results of a home inspection can be a great tool for transparency and future planning, especially in estimating future expenses. Buyers can use the detailed findings to plan for future upgrades, calculate for repairs, and carefully prepare their budget once they become homeowners. Meanwhile, sellers can use it to plan for renovations and deal with them as soon as possible. That way, they can continue with the home sale with fewer contingencies and minimal setbacks.

 
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Having a home inspection performed can give you the power to make negotiations with the seller to offer a lower price for the home. Depending on the information gathered, you can include words in your purchase contract requesting the seller to make the repairs. Or if they are unwilling to do so, you can ask them to estimate the costs and take that amount off the final purchase price.

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You can use the home inspection report as a leverage when negotiating for a better selling price. By knowing the true condition of your property, you can deal with any problems on your own terms and fix them beforehand. You won’t have to deal with any of the buyer’s request to lower the price or arrange for repairs, which could cost you a huge amount of money or even the sale itself.

 
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While a home inspection can cost a good sum of money, it’s a significant investment that will save you from any costly repairs down the road. Things like safety hazards, pest problems, or water leakage in the basement can end up costing you a lot more money once you already own the home. And all those issues and defects could have been revealed by a home inspector if you only allowed an inspection to push through.

 
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The home inspection phase can be a huge pitfall for both parties in a real estate transaction. Sometimes a transaction doesn’t move forward because the buyer and seller couldn’t agree on the repairs requested from the inspection. A buyer may not feel entirely comfortable with the findings while the seller may refuse to accept more requests. Having a home inspection ahead of time can help expedite the process for both the buyer and seller.

Worst case scenario: a buyer can get cold feet and will not proceed anymore with the transaction if they’re not satisfied with the negotiations after the inspection.

 
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The inspection eliminates all the possible “doubts” and “what ifs” of both parties. Buyers will feel certain and satisfied with their purchase, eliminating buyer’s remorse and giving them a peace of mind. Sellers can also feel confident once the real estate transaction was completed because they can avoid the threat of any legal action due to improper disclosure. A home inspection is a great way to make both the buyer and seller feel positive that they have reached a fair deal in the transaction.