Really?

by plano 16. February 2011 12:29

Home prices have come down 20, 30, 40% or more in the last three years and mortgage rates are lower than they've been in 50 years and you still haven't bought a home.  Really?

Housing affordability is over 180, an all-time high when 100 is considered good and you're still renting.  Really?  Are you waiting for it to get  to 200?  Do you think prices and rates are going to get lower?  Really? 

You know it's costing you more every month to rent than to own.  Tax savings, appreciation and principal reduction lower the monthly cost of housing and yet you'd rather let your landlord benefit...Really?  Have you heard that the average homeowner has 41 times greater net worth than a renter?  Do you think it's a coincidence?  Really?

And have you heard that most people want a place of their own; a place to raise their family; to share with their friends; to feel safe and secure.  So, you'd rather go home after working hard all day to your landlord's home.  You'd prefer to invite some friends over to your landlord's home for dinner next weekend.  Really?

You haven't checked out whether you can actually take advantage of the best buyer's market ever.  You haven't invested thirty minutes to find out the facts as they apply to you and your situation.  Really?  You're basing a decision on national news, chat rooms and Facebook.  Really?

Every market is different.  Every buyer is unique.  If you want a home; if you have a down payment; if you have good credit, you owe it to yourself and your family to explore the possibilities...but with a real estate professional; someone who can really show you the reasons and really give you options.

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Annual Homeowner’s Advisory

by plano 9. February 2011 14:02

An annual physical is an important proactive approach to personal health and an annual homeowner advisory can be just as beneficial for you and your finances.

Regardless of whether you're moving, knowing the values of homes similar to yours that have sold recently allows you to keep your hand on the pulse of the market.  It should be interesting to know how many homes in the area have sold, their time on the market and how much current inventory is available.

Even though mortgage rates are starting to creep up, it may be the last opportunity to refinance your home to lower your monthly housing costs.  I can provide a simple analysis showing your monthly savings and how long it will take to recapture the cost of refinancing.

A powerful strategy might be to continue making the higher payment from your current mortgage on the newly refinanced mortgage in order to pay the principal down faster.  It will build equity faster and shorten the term of your fixed rate mortgage.

Maybe you'd like to know how much extra you'll need to pay on your mortgage each month to get it paid off by a certain date.  I can quickly calculate that amount and send it to you.

Don't forget to call whenever you need a recommendation of a painter, plumber or other workmen.  We're constantly evaluating service providers based on work done on the homes we're selling.

Contact me if you want information on any of the following:

  • List of properties sold and available near subject
  • Refinancing analysis to lower your cost of housing
  • Estimate to pay off the home within a specific period of time
  • Repairmen and contractor recommendations
  • Information on rental property opportunities

These services are being offered so you'll consider me your real estate professional, and think of me when you buy, sell or hear of someone who does.

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Gift Card Expired

by plano 8. February 2011 03:16

I was going through a drawer looking for a card when I found an airline ticket credit voucher for $100 that had expired.  What a waste!  That got me to thinking of all of the gift cards that were given this year and will get tucked away and forgotten that may end up expiring too.

That led me to another thought which was the extended tax credit for members of the military, Intelligence and Foreign Service who have served outside of the U.S. for at least 90 days between January 1, 2009 and May 1, 2010.  This gift card comes from Uncle Sam and could be worth $6,500 to $8,000.

Qualifying buyers have until April 30, 2011 to get a completed sales contract and then, must close it by June 30, 2011.  The bonus that comes with this gift card is that the recapture of the tax credit doesn't apply if the qualified service member receives government orders to move prior to the three year residency period completion.  For additional information, go to IRS.gov.

There's more to finding the "Right" home than driving around looking at houses.  A Residential Finance Consultant can help you make better decisions to help you understand the tax advantages, financing alternatives and investment aspects of homeownership.

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Daddy…You’re the Best!

by plano 8. February 2011 03:14

A young couple was looking at a home for the third time and had invited their parents to see it.  The dad had quickly asumed his self-appointed role as tire kicker and was talking about how expensive mortgage rates were compared to what a certificate of deposit was paying.

The next thing you know, he has the kids cornered and says to them "I have a CD coming due and if you'll pay me what I'll be earning, I'll loan you the money to buy the home.  You'll save quite a bit even from the low mortgage rates being offered."  The young couple shouts "Daddy...you're the best!"  Dad goes on to say "and this way, you won't have to worry about all those fees the mortgage company charges."

A third party lender would always record the lien to protect the mortgage but Dad may not because of the relationship with the children.  He might not even ask them to sign a note.  This could affect the interest deduction for the buyers.

Even though the young couple will be making payments on the loan, the mortgage must be a recorded lien to be a qualified interest deduction.  This situation definitely warrants professional tax advice and can be easily remedied by having the title company draw a note and mortgage and filing it with the county tax office.

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The Difference a Day Makes

by plano 8. February 2011 03:11

A man was selling a property which was currently rented but had previously been his home for over two years.  After discovering it had been rented for the last 2.5 years, it was asked if he had planned on taking the principal residences capital gain exclusion.  He said he hoped it would be possible.

When asked if he was aware of the requirement that he must have owned and used the home for two out of the last five years (730 days), he said he knew about it but wasn't sure what it meant.  "In this case, it means the home needs to be ready to sell, priced correctly, sold and closed within six months."

The motivation for the seller was simple...minimizing or eliminating the unnecessary payment of taxes.  If his gain in the home had been $200,000, not qualifying for the exclusion would cost him $30,000 in long term capital gains tax.  It's a big difference and timing is important.

Selling a home for the most money is one thing; protecting your best interests is another.  I help people understand the tax advantages, financing alternatives and investment aspects of homeownership.

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Homeownership Worth the Sacrifice

by plano 8. February 2011 03:09

A place you can call your own, to raise your family, share with your friends and feel safe and secure.  These are all strong motivations for securing the American Dream of owning your home.

The motivation is so powerful that buyers are willing to sacrifice to make their dream come true.  According to the 2010 NAR Home Buyers and Sellers Survey, 41% of first-time buyers cut spending on luxury or non-essential items.  They also cut spending on entertainment, clothes and even cancelled vacation plans.

The value of getting their own home was more important than the immediate gratification of things that were considered less important.  Consulting with a real estate professional and a recognized lender can outline a proven plan for the first-time buyer to follow.  45 minutes can provide valuable information to get the facts about the market and the best way to make your dream come true.

Sacrifices made to Purchase Home by First-Time Buyers

 

 

Cut spending on luxury items or non-essential items

41%

Cut spending on entertainment

23%

Cut spending on clothes

26%

Cancelled vacation plans

15%

Earned extra income through second job

9%

Sold a vehicle or decided not to purchase a vehicle

6%

Other

5%

Did not need to make any sacrifices

45%

NAR 2010 Profile of Home Buyers and Sellers – Exhibit 5-6

 

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Not as Flush as You Think

by plano 7. February 2011 12:53

Not as Flush as You Think

You've got $500,000 in liquid assets for your retirement and you're still 15 years away.  All your bills are paid;  have a small mortgage on your home; cars are paid for and great credit.  You're planning on sailing into retirement...or maybe not.

If you want to retire with $100,000 income in today's dollars and expect to live for 25 years after retirement, you'll need to have a net worth of $2,267,130 at retirement age not counting what Social Security may provide.  Your $500,000 will grow to $813,720 in 15 years which will leave you almost $1.5 million short.  You'll need to save $76,442 each year for the next 15 years.

Is this surprising?  Did you even imagine that you were that far away from where you need to be?  It might be a staggering amount to save each year but there is another way...investing.  Probably not in a 5 year certificate of deposit that earns 2.25% or a volatile stock market that seems to go up or down without logic.

Real estate over the long term has proven to be a solid, predictable investment.  With the price corrections in the last three years combined with today's low interest rates make housing very affordable.  Rents are going up in many markets and owning rental property is very attractive.

Step one is to buy your own home and then, start aquiring good rental properties.  A successful strategy includes average price range or lower, in average condition, in predominantly owner-occupied neighborhoods.  Rental homes are more more attractive than alternative investments because they provide high loan-to-value mortgages at fixed rates for 30 years on appreciating assets with tax advantages and reasonable control.

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The Best Family Gift

by plano 7. February 2011 12:47

The Best Family Gift

 

A home is a place of your own where you can raise your family, share with friends and feel safe and secure. Other benefits for homeowners include better physical health, higher lifetime income, higher student test scores, and lower teen delinquency.

 

Reduced prices and low interest rates have placed housing affordability at its highest but rates have started inching up in the past few weeks which will directly result in higher payments.

Credit, debt ratios and income are the limiting factors that could be keeping you from taking advantage of these opportunities. Isn't it time you found out where you stand to buy a home?

The benefits of talking with a qualified mortgage officer and pre-approval are without question. It saves time, money and removes the uncertainty of not knowing. The direct benefits include:

  • Amount the buyer can borrow - as interest rates rise, the amount decreases
  • Looking at "Right" homes - price, size, amenities, location
  • Find the best loan - interest rate is tied to credit score; do you qualify for the best rate?
  • Uncover credit issues early - time to cure possible problems; 90% of credit reports have errors
  • Bargaining power - helps negotiate price, terms and timing
  • Close quicker - verifications have been made; takes less time to close

Call me for a recommendation and a list of what you need to share with a loan officer. It may be the best gift you give your family.

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Equity is Forced Savings

by plano 7. February 2011 12:40

Equity is simply the difference in an owner's unpaid balance and the value of their home.  Amortization and appreciation contribute to the equity over time.  The equity is usually realized when the home is sold but it can also be accessed by a home equity loan or a cash out refinance.

Most people think that it takes years to significantly pay down a mortgage and they're partially correct.  A five percent interest rate on a mortgage takes approximately 20 years to pay down half of the original amount borrowed.

A mortgage is like a forced savings account because each payment is first applied to the interest due on the borrowed money but another part pays down the principal.  On a $188,175, 5%, 30 year mortgage, the first payment of $1,010.16 includes $226.10 principal reduction.  In the first year, the owner would have increased the equity in their home $2,776.24.

 

In the example below, the buyers paid $195,000 for a home that is estimated to appreciate only 1% per year for 7 years.  With a 3.5% down payment, the equity in the home at the end of 7 years would be $41,921.  55% of the equity would come from amortization; 29% would come from appreciation and 16% from the down payment.

 

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Everything Except the Down Payment

by plano 7. February 2011 12:32

 

It's one thing to have the down payment and not qualify because of credit scores but in today's tough financial environment, it may be even more frustrating to have good credit, income and job stability without the down payment.

The 2010 NAR National Housing Pulse Survey states that 79% of respondents identified the down payment and closing costs as obstacles to homeownership.  73% express a lack of confidence in getting approved based on a concern that banks have made it too hard to qualify for a home loan.

Most buyers depend on the savings or the proceeds from the sale of a previous primary residence for the down payment.  The savvy agent can recommend some other legitimate sources such as a gift from a relative or friend that doesn't have to be repaid.

Another frequently overlooked source of down payments could be the buyer's IRA.  If neither buyer has owned a home within two years, each may withdraw $10,000 from their own IRA to be used to buy a home.  The money must be applied within 120 days from the withdrawal.  The 10% penalty normally associated with early distributions is avoided but it will be subject to income tax since it was exempt the year it was deposited into the IRA.

Full disclosure of the source of the down payment needs to be made to the lender.

Sources of Down Payment First-Time and Repeat Buyers

All Buyers

First-Time

Repeat

Savings

66%

74%

57%

Proceeds from sale of primary residence

23%

1%

42%

Gift from a relative or friend

18%

27%

8%

Sale of stocks or bonds

7%

6%

8%

401k/pension fund including a loan

7%

8%

6%

Loan from a relative or friend

6%

9%

3%

Inheritance

4%

4%

3%

Individual Retirement Account

3%

3%

3%

Equity from primary residence buyer continues to own

2%

*

3%

Loan or financial assistance from source other than employer

2%

3%

1%

Loan from financial institution other than a mortgage

1%

2%

1%

Proceeds from sale of real estate other than primary residence

2%

*

2%

Loan or financial assistance through employer

1%

1%

*

Other

4%

5%

3%

 

National Association  of REALTORS® Profile of Home Buyers and Sellers 2010


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