Save Money On Taxes With These Mortgage Deductions

Soon Uncle Sam is going to be knocking on your door with his hand out. While April 15^th is perhaps our least favorite day of the year, there are things you can do to save on your taxes. For example, you can save a bundle on your taxes by using mortgage interest deductions.

I would never recommend buying real estate because of the tax deductions that you will receive; but since you already have this property, let’s make sure it works for you. One way your house can save thousands of dollars every year is to make sure you are taking all of the allowable IRS deductions.

What is the Mortgage Interest Deduction?

This IRS tax deduction allows you to claim all of the annual interest payments you have made on your mortgage. This can substantially lower your tax bill. It is sort of the IRS’ way of rewarding you helping the economy by buying a home instead of renting.

Your largest mortgage interest deduction is going to be right at the start of your mortgage – now how nice is that? Since you pay more interest than principle in the beginning of your mortgage, your tax deduction will also be larger.

For example, say you financed $250,000 last year when you bought your house. The 30 year mortgage carried an interest rate of 4.5 percent. Your payment is $1,267 per month. During the year of 2016, you will have paid $11,167 in interest. Now wouldn’t you say that is a nice IRS deduction? But as time passes and you start paying less interest and more principle, your deduction is going to diminish. For example, 10 years later, your deduction is only going to be $8,881.

How to Deduct Your Mortgage Interest?

First, if you want to use the mortgage interest tax deduction, then you will have to itemize your deductions instead of taking the standard deduction. What is nice is that most of the online or tax software programs will allow you to test out both scenarios to see which total deduction is higher.

What Other Home Expenses can I Deduct?

Your mortgage interest is, by far, the largest single deduction you will make. But while you are itemizing all your deductions, you might as well include all of the other deductions allowed from owning a home.

On your itemized deduction sheet, you can also claim your property taxes and mortgage insurance. There are also deductions such as installing a home office or renovation work – but just make sure you consult with your CPA first to get all the details.

You need a place to live. You have to pay the interest on your mortgage. You might as well make that money pay you something back. Itemizing your tax deductions, so that you can include all your mortgage interest and other allowable living expenses, is an ideal way to do that.

How Your Pets Could Be Stopping You From Selling Your House

We love our pets. They are part of our family. If your house has been on the market for a long time, have you ever thought that maybe Fido and Fluffy are keeping you from selling your house? We realize that not everyone is a pet lover, but pet loving buyers may not be finding your home all that appealing as well. Let’s explore a few reasons how your pets could be sabotaging your home sale.

Pet Paraphernalia

Just as you wouldn’t expect a buyer to dodge your kids toys, so it should be with your pet’s favorite chew toy or bed. Just the sight of a litter box, no matter how clean, could turn off your buyer.

The Solution: We recommend that right before a showing, walk around and gather all your pet stuff and hide it under the bed. That would go for dishes, toys, leashes, beds and blankets.

Fur, Fur Everywhere

When a pet lives inside with us, you just have to get used to finding hair on the sofa and dust bunnies under the bed – but your buyer may find that gross. It is a funny thing, but a buyer wants to feel like they are buying a pristine new home. They do not want to deal with the reality that someone lives there – especially your long-haired Persian.

The Solution: Vacuuming often blows more fur around than it will suck up. Try a damp cloth or sponge or a lint roller to get the hair off your furniture. Mopping is another effective way to track down those fly a ways. Try to get in the habit of daily brushing your pet, outside please.

Clean those Stains

Puppies and kittens can leave a mark in your house long after they are potty trained. Make sure you get all the stains out of the carpets. Check in closets and behind furniture for evidence. If you need to call a professional, it will be worth it, trust me.

The Solution: Clean all your carpets before listing your house. Hire a professional if need be. Use a baking soda solution on pet smells.

Fix the Scratches

A buyer will not want to deal with scratches in the hardwood floor. Nor will they want to replace the trim that your cat used as her scratching post. These are tell-tale signs of owning a pet and it leads the buyer to wonder what else has been damaged that he or she cannot see.

This also goes for your furniture. Yes, I know the buyer isn’t buying your stuff, but it could be just the thing that gives them a negative impression about the whole house.

The Solution: It is worth the effort to resurface your hardwood floors. You will most likely recoup the price and your home will sell faster. The same goes with replacing or repairing any damage caused by your pet. Try felt-tip markers or Old English furniture polish on scratches. Use wood putty on the big ones.

Buyers are funny creatures. The simplest of things (like dog fur on your sofa) could leave a negative feeling about your house. Do everything that you can to make a showing a positive one – even if that means making the place look like you don’t even own a pet.

The Full Story About Low and No Down-payment Home Loans

Article submitted by: Wendy Thompson, Bank Of England Mortgage

A no down payment mortgage allows first-time home buyers and repeat home buyers to purchase property with no monies required at closing. Other options, including the FHA Home Loan, the HomeReady™ mortgage and the Conventional 97 loan offer low down payment options with a little as 3% down. Mortgage insurance premiums typically accompany low and no down payment mortgages, but not always.

Is A No Down Payment Mortgage Right For You?

It’s a terrific time to buy a home.

Sales are rising, supply is dropping, and prices have increased in many cities and neighborhoods. Compared to next year, today’s market may look like a bargain.

Rates for 30-year loans, 15-year loans, and 5-year ARMs are cheap, which has lowered the monthly cost of owning a home.

The Down Payment Hurdle

However, it’s not the monthly payment that scares off new buyers these days — it’s the prospect of having to put 20% down.

Buyers are earning good incomes, but few have much saved in the bank.

The good news is that there are a bevy of mortgage programs requiring little or no money down and they’re available to the general public — no hoops required.

Want to buy a home with little or nothing down? You can.

Home Buyers Don’t Need to Put 20% Down

In today’s U.S. housing market, home buyers don’t need to make a 20 percent down payment. Many believe that they do, however.

It’s a common misconception that “20 Percent Down” is required to buy a home. And, while that may have true at some point in history, it hasn’t been so since the advent of the FHA loan, which occurred in 1934.

The likely reason why buyers believe a 20% down payment is required is because, with one specific mortgage type — the conventional mortgage — putting twenty percent down means private mortgage insurance (PMI) is not required.

PMI Is Not Evil

Paying PMI is neither good nor bad, but consumers seem to abhor it.

The purpose of private mortgage insurance is to protect the lender in the event of foreclosure — that’s all it’s for. However, because it costs money, private mortgage insurance gets a bad rap.

It shouldn’t.

Because of private mortgage insurance, home buyers can get mortgage-approved with less than 20 percent to put down and, eventually, private mortgage insurance can get removed.

At the rate at which today’s homes are increasing in value, a buyer putting 3% down would pay PMI for fewer than four years.

That’s not long at all. Yet, many buyers — especially first-timers — will put off a purchase because they want to save a larger down-payment.

Meanwhile, home values are climbing.

For today’s home buyers, making a down payment should be consideration, but it shouldn’t be the only consideration.

This is because home affordability is not about the size of your down payment — it’s about whether you can manage the monthly payments and still have cash left over for “life”.

A large down payment will lower your borrowed amount and, therefore, will give you a smaller monthly payment to make each month. However, if you’ve depleted your life savings in order to make that large down payment, you’ve put yourself at risk.

Don’t Deplete Your Entire Savings

When the majority of your money is tied up in a home, financial experts refer to it as being “house-poor”.

When you’re house-poor, you have plenty of money “on-paper”, but little of it available for the everyday emergencies of life.

And, as every homeowner will tell you, emergencies happen.

Roofs collapse, water heaters break, you become ill and cannot work. Insurance can help you with these issues sometimes, but not always.

That’s why you being house-poor can be so dangerous.

Many people believe it’s financially-conservative to put 20% down on a home. If that 20 percent is everything you have, though, putting twenty percent down is the opposite of being financially-conservative.

The true financially-conservative option is to make a small down payment.

Being house-poor is no way to live.

No Down Payment: VA Loans (100% Financing)

The VA loan is a no-money-down program available to members of the U.S. military and surviving spouses.

Guaranteed by the U.S. Department of Veteran Affairs, VA loans are similar to FHA loans in that the agency guarantees repayment to lenders making loans which means VA mortgage guidelines.

VA loan qualification are straight-forward.

VA loan qualifications are available to active duty and honorably discharged service personnel are eligible for the VA program. In addition, home buyers who have spent at least 6 years in the Reserves or National Guard are eligible, as are spouses of service members killed in the line of duty.

Some key benefits of the VA loan are :

You may use intermittent occupancy
Bankruptcy and other derogatory credit do not immediately disqualify you
No mortgage insurance is required

VA loans also allow for loan sizes of up to $636,150 in high-cost areas. This can be helpful in areas such as San Francisco, California; and Honolulu, Hawaii which are home to U.S. military bases.

No Down Payment: USDA Loans (100% Financing)

No Money Down options exist for non-military borrowers, too. The U.S. Department of Agriculture offers a 100% mortgage. The program is formally known as a Section 502 mortgage, but, more commonly, it’s called a Rural Housing Loan.

The good news about the USDA Rural Housing Loan is that it’s not just a “rural loan” — it’s available to buyers in suburban neighborhoods, too. The USDA’s goal is to reach “low-to-moderate income homebuyers”, wherever they may be.

Many borrowers using the USDA Single Family Housing Guaranteed Loan Program make a good living and reside in neighborhoods which don’t meet the traditional definition of rural.

Some key benefits of the USDA loan are :

You may include eligible home repairs and improvements in your loan size
There is maximum home purchase price
Guarantee fee added to loan balance at closing; mortgage insurance collected monthly

Another key benefit is that USDA mortgage rates are often lower than rates for comparable, low- or no-down payment mortgages. Financing a home via the USDA can be the lowest cost means of homeownership.

Low Down Payment: FHA Loans (3.5% Down)

The FHA mortgage is somewhat of a misnomer because the FHA doesn’t actually make loans. Rather, the FHA is an insurer of loans.

The FHA publishes a series of standards for the loans it will insure. When a bank underwrites and funds a loan which meets these specific guidelines, the FHA agrees to insure that loan against loss.

FHA mortgage guidelines are famous for their liberal approach to credit scores and down payments. The FHA will typically insure a home loan for borrowers with low credit scores so long as there’s a reasonable explanation for the low FICO.

The FHA allows a down payment of just 3.5 percent in all U.S. markets, with the exception of a few FHA approved condos.

Other benefits of an FHA loan are :

Your down payment may consist entirely from “gift funds”
Your credit score requirement is 500
Mortgage insurance premiums are paid upfront at closing, and monthly thereafter

Furthermore, the FHA supports homeowners who have experienced recent short sales, foreclosures or bankruptcies through the agency’s Back to Work program.

The FHA insures loan sizes up to $636,150 in designated “high-cost” areas nationwide. High-cost areas include Orange County, California; the Washington D.C. metro area; and, New York City’s 5 boroughs.

Low Down Payment: The HomeReady™ Mortgage (3% Down)

The HomeReady™ mortgage is special among today’s low- and no-downpayment mortgages.

Backed by Fannie Mae and available from nearly every U.S. lender, the HomeReady™ mortgage offers below market mortgage rates, reduced mortgage insurance costs, and the most innovative underwriting idea on more than a decade.

Via HomeReady™, the income of everybody living in the home can be used to get mortgage-qualified and approved.

For example, if you are a homeowner living with your parents, and your parents earn an income, you can use their income to help you qualify.

Similarly, if you have children who work and contribute to household expenses, those incomes can be used for qualification purposes, too.

Furthermore, via HomeReady™, you can use boarder income to help qualify; and, you can use income from a non-zoned rental unit, too — even if you’re paid in cash.

HomeReady™ home loans were designed to help multi-generational households get approved for mortgage financing. However, the program can be used by anyone in a qualifying area; or who meets household income requirements.

Read this complete HomeReady™ Q&A for more on the program.

Low Down Payment: Conventional Loan 97 (3% Down)

Editor’s Note : The Conventional 97 program was originally discontinued in December 2013. It was later reinstated by the Federal Home Finance Agency in late-2014. This section has been updated to reflect the new product’s guidelines.

The Conventional 97 program is available from Fannie Mae and Freddie Mac. It’s a 3 percent downpayment program and, for many home buyers, it’s a less-expensive option as compared to an FHA loan.

Furthermore, the Conventional 97 mortgage allows for its entire three percent downpayment to come from gifted funds, so long as the gifter is related by blood or marriage; or via legal guardianship or domestic partnership; or is a fiance/fiancee.

The Conventional 97 basic qualification standards are :

Loan size may not exceed $424,100, even if the home is in a high-cost market.
The subject property must be a single-unit dwelling. No multi-unit homes are allowed.
The mortgage must be a fixed rate mortgage. No ARMs via the Conventional 97.

The Conventional 97 program does not enforce a specific minimum credit score beyond those for a typical conventional home loan. The program can be used to refinance a home loan, too.

Low Down Payment: The “Piggyback Loan” (10% Down)

The “piggyback loan” program is typically reserved for buyers with above-average credit scores. It’s actually two loans, meant to give home buyers added flexibility and lower overall payments.

The beauty of the 80/10/10 is its structure.

With an 80/10/10 loan, buyers bring a ten percent down payment to closing. This leaves ninety percent of the home sale price for the mortgage. But, instead of giving one mortgage for the 90%, the buyer splits the loan into parts.

The first part of the 80/10/10 is the “80”.

The “80” represents the first mortgage and is a loan for 80% of the home’s purchase price. This loan is typically a conventional loan via Fannie Mae or Freddie Mac; and it’s offered at current market mortgage rates.

The first “10” represents the second mortgage and is a loan for 10% of the home’s purchase price. This loan is typically a home equity loan (HELOAN) or home equity line of credit (HELOC).

Home equity loans are fixed-rate loans. Home equity line of credits are adjustable-rate loans. Buyers can choose from either option. HELOCs are more common because of the flexibility they offer over the long-term.

And that leaves the last “10”, which represents the buyer’s down payment amount — ten percent of the purchase price. This amount is paid as cash at closing.

80/10/10 loans are sometimes called piggyback mortgages because a second loan “piggybacks” on the first one to increase the total amount borrowed.

80/10/10 loans are meant to give buyers access to the best pricing available, so lenders may sometimes recommend an alternate structure. For example, for buyers of condos, a 75/15/10 is advised because condo mortgages get better rates with LTVs of 75% or less.

As another example, interest rates on HELOCs are sometimes better at larger loan sizes. Your lender may recommend that you increase the size of your HELOC, then, to lower your overall loan costs. The choice of your loan’s structure, though, remains yours.

You can’t be forced into borrowing more money on your second mortgage than makes you comfortable.

Mortgage Down Payment FAQ

How can I buy a house with no money down?

In order to buy a house with no money down, you’ll just need to apply for no-money-down mortgage. If you don’t which mortgage loan is your best zero money down option, that’s okay. A mortgage lender can help steer you in the right direction. There are multiple 100 percent mortgages available for today’s home buyers.

Can cash gifts be used as a down payment?

Yes, cash gifts can be used for a down payment on a home. However, when you’re receiving a cash gift, you’ll want to make sure you follow a few procedures.

For example, make sure the gift is made using a personal check, a cashier’s check, or a wire; and keep paper records of the gift, including photocopies of the checks and of your deposit to the bank. Also, make sure that your deposit matches the amount of the gift exactly.

Your lender will also want to verify that the gift is actually a gift and not a loan-in-disguise. Cash gifts do not require repayment.

What are the FHA down payment assistance programs?

FHA down payment assistance programs are available to home buyers and 87% of U.S. single-family homes potentially qualify. Programs will vary by state, so be sure to ask your mortgage lender for which programs you may be eligible. The average home buyer using down payment assistance receives $11,565.

Are there any home buyer grants?

Home buyer grants are available to U.S. home buyers and all are eligible to apply, which are also known as down payment assistance (DPA) programs. DPA programs are widely-available but seldom used — 87% of single-family homes potentially qualify, but less than 10% of buyers think to apply. Your mortgage lender can help you determine which DPAs are best for you.

What are the FHA loan requirements?

The FHA loan requirements are; 1.) You must have a credit score of at least 500; 2.) Income which can be verified using W-2 statements and paystubs, or federal tax returns; 3.) No history of bankruptcy, foreclosure, or short sale within the last 12 months. 4.) You must not be delinquent on your federal taxes, your federal student loans, or any other federal debt.

What are the benefits to putting more money down?

Just as there are benefits to low and 0 money down mortgages, there are benefits to putting more money down on a purchase. For example, when you put more money down on a home, the amount you need to mortgage is less, which reduces your monthly mortgage payment. Additionally, if your mortgage requires mortgage insurance, with more money down, your mortgage insurance will “cancel” in fewer years.

If I make a low down payment, do I pay mortgage insurance?

When you make a low down payment, you’re more likely to pay mortgage insurance (MI), but not necessarily. For example, the VA Home Loan Guaranty program doesn’t require mortgage insurance, so if you use a VA loan, making a low downpayment won’t matter. Conversely, FHA and USDA loans always require mortgage insurance so even with large down payments, you’ll have a monthly MI charge.

The only loan for which your down payment affects your mortgage insurance is the conventional mortgage. The smaller your down payment, the higher your monthly PMI. However, once your home has twenty percent equity, you’ll eligible to have your PMI removed.

If I make a low down payment, what are my lender fees?

The size of your down payment doesn’t relate to your lender fees. No matter how large or how small your down payment, your lender fees should remain equal. This is because mortgage lenders are prohibited from charging higher fees based on the size of your down payment . It should be noted, however, that different loan types may require different services (e.g.; home inspection, roof inspection, home appraisal), and this may affect your total loan closing costs.

What is the minimum down payment for a mortgage?

The minimum down payment for a mortgage are:

VA loan: 0% down payment
USDA loan: 0% down payment
Conventional 97 mortgage: 3% down payment
HomeReady™ mortgage: 3% down payment
FHA loan: 3.5% down payment

In addition to the above programs, down payment assistance programs are often available and provide, on average, more than $11,000 to today’s buyers of homes.

How can I fund a down payment?

A down payment can be funded multiple ways, and your lender will often be flexible. Some of the more common ways to fund a down payment is to use your savings or checking account; or, for repeat buyers, the proceeds from the sale of your existing home.

However, there are other ways to fund a down payment, too. For example, home buyers can receive a cash gift for their down payment or can borrow from their 401k or IRA (although that’s not always wise).

Down payment assistance programs can fund a down payment, too. Typically, down payment assistance programs grants money to home buyers with the stipulation that they live in the home for a certain number of years — often 5 years or fewer.

Regardless of from where you fund your down payment, though, make sure to keep a paper trail. Without a clear account of the source of your down payment, a mortgage lender may not allow its use.

How much home can I afford?

The answer to the question of “How much home can I afford?” is a personal one, and one which should not be left to your mortgage lender.

The best way to answer the question of how much can you afford for a home is to start with your monthly budget and determine what you can comfortably pay for a home each month. Then, using your desired payment as the starting point, use a mortgage calculator to work backwards in order to find your maximum home purchase price.

Note that today’s mortgage rates will affect your mortgage calculations so be sure to use current mortgage rates when you’re doing your calculations. When mortgage rates change, so does home affordability.

Zero Down Mortgage Loans

Zero down mortgages are 100% financed loan types offered by the U.S. Department of Agriculture (USDA loan or “Rural Housing Loans”) and the Department of Veteran Affairs (VA loan). Additionally there are several low down payment options like the FHA loan (3.5% down), the conventional 97% (3% down) and the HomeReady mortgage (3% down).

Note: Find out which low down-payment mortgage loans you qualify for – Quickly, with no pressure: Click here

See How Home Appraisals Impact Your Purchase – It’s A Big Deal…

You have spent months searching for the perfect home and now you have found it. You haggled with the seller and you finally agreed on a price. While you are getting your home inspection completed, your lender has hired a real estate appraiser to appraise your purchase. It looks as if everything is finally going your way – but then you get the phone call.

The lender calls to say that the appraised value is less than your purchase price. Oh isn’t that just great! The lender informs you that he cannot write the loan unless you come up with the difference. But you have everything you own into this deal already. What happened? And what is more, what can you do about it?

How the Appraisal Process Works

An appraiser is not out to ruin your deals. He wants you to close on this as much as the other guy. But he has been hired as a neutral third party to make sure that the market value of the property is equal to or greater than your purchase price. You do not want to overpay for the house, no matter how much you love it, and your lender doesn’t want you to over pay either.

After inspecting the property, a real estate appraiser will head back to his office and determine the value of the property. He will look at the value of the land and the construction value of all of the improvements, less the depreciation. This is called the Cost Approach.

Then he will go find at least three recent sales that are in as close proximity, size and construction quality as possible. If there are any differences between these comps and the subject property, he will make monetary adjustments to each of the comps. For example, let’s say the house you are buying has 2,300 square feet but the comparable has 2,600. The appraiser will multiply the additional 300 square feet by the market value and then subtract it from the sales price of the comparable. From these adjusted figures, he determines a value to your property.

Why is the Appraisal Less than the Purchase Price?

If the appraisal comes in for more, we are all ecstatic and praise the merits of the appraiser. But, if he says the property is worth a little less than the purchase price, we freak out and claim that the appraiser is an idiot. Well, it is not that simple.

The reality is that the appraiser thinks of homes in a range of value rather than one concrete number. For example, say your offer on the 2,300 square foot 3 bedroom/2bath is $198,000. If 100 hundred people made an offer on that property would all of the offers be $198,000? No but I bet that 80% of them would fall between 5% either side of the purchase price say $188,100 to $207,900. In reality, that property is worth between $188,100 and $207,900. Any offer in that range would be reasonable.

That makes sense, right? But the problem here is that the lender wants one number to work off of. What is more, lenders also have their own guidelines on what makes an appraisal acceptable for underwriting. The appraiser is balancing between all of these factors. If he lacks perfect comps and his adjustments are too high or too many, the lender may not accept his appraisal at all – even if he meets the sales price. Which is still a problem for you.

What Can You Do with a Low Appraisal?

The first thing is to ask yourself if the appraiser is correct, do you want to still purchase the home at your purchase price? Should you negotiate a lower price? Speak to your real estate agent about it.

The next step would be to have your lender contact the appraiser and see if there is some “wiggle-room.” Could he perhaps use a different comp? Could an adjustment be altered just a smidge to push up the value? Is the purchase price within the appraiser’s range of value? Often a little tweak is all that is needed.

If those fall through, then the choice is to either pay more out of pocket to close the loan or to start shopping for another home. That choice is entirely up to you, but regardless of your decision, aren’t you glad you know the true worth of the property?

Questions regarding the home loan process? Get quick answers here: Click Here

Home Buyers: Are Foreclosures REALLY a Cheaper Investment?

Would you like to see a list of all the latest foreclosures, and home deals in your area? Click Here Now!

“Buy this house for pennies on the dollar.” Sign me up! Or should you run the other way? Are foreclosures really a cheaper investment? Will you save money buying a fixer-upper? Does a discounted sales price mean you will pay less? Let’s look at some of the hidden costs of buying cheap real estate.

Banks are not Required to Disclose the Condition

Because the lender and their employees have not lived in the house, they are not required to disclose anything about the property. You are on your own to figure out the actual condition.

Foreclosures are sold in “As Is” Condition

Banks do not want to mess around with repairs. All they are interested in doing is getting their money out of this failed transaction. They want the property off their books with the least amount of expense. So, do not expect that you can put any type of repairs as a condition to your purchase agreement. It is absolutely critical that you get a home inspection on a foreclosure purchase.

Some Auction Foreclosures are sold “Sight Unseen”

As if buying a property “As Is” wasn’t bad enough, some auctions do not even allow the bidders to inspect the home. If they do allow inspections, it could be an hour before the auction with every bidder poking around at the same time.

Hidden Repair Costs

Even if you have had a home inspection, non-visual items are usually not covered. While there will be surprises in any home when a major renovation is in process, foreclosed homes tend to suffer from more deferred maintenance and hence hide more surprises. Finding out that the subfloor is full of termites can quickly escalate the cost of a kitchen remodel.

Not So Hidden Repair Costs

Some homeowners become very vengeful and destructive during the eviction process. Some have been known to pour concrete in the toilets, remove all saleable items including the wiring, and destroy the walls – just to name a few destructive ideas. Abandoned houses often attract squatters and vermin which can be expense to remove. Traditional purchases usually do not have this additional risk factor.

Financing Problems

If you will need a mortgage to buy your foreclosure, be prepared to face some financing problems. First, the purchase price will need to meet minimum lending guidelines. If the property is in really rough condition, you may have trouble with the appraisal and getting the financing approved. Residential mortgages must meet certain occupancy standards. Most major lenders, however, do offer mortgages that can wrap in renovation costs into the loan.

Paying Off Liens

Many foreclosure auctions do not guarantee that all liens have been removed. That means that though the first mortgage may be the one getting paid off, any secondary lines of credit, contractor liens or home owner association dues could transfer with the title. Do your research so you know what the true purchase price will actually cost you.

Benefits of Buying a Foreclosure

So, yes there are quite a few hidden costs and considerations when it comes to investing in a foreclosure home, but there can be a lot of awesome benefits. Consider a few of them.

You are going to have repairs and maintenance issues even if you buy a traditional home. That is just a part of home ownership and it cannot be avoided.
Depending on your area, there can be plenty of properties to choose from.
It is a great opportunity to make a high return on your investment.
Foreclosures give buyers to opportunity to get in a good neighborhood for less.
You can renovate the property and make it look like how you want.

Investing in foreclosures and other distressed real estate can reap some very good financial benefits, but you must go into the transaction with your eyes open and your wallet ready.

Would you like to see a list of all the latest foreclosures, and home deals in your area? Click Here Now!

Tennessee Home Sellers: The FULL TRUTH about Guaranteed Home Sale Programs

Have you ever seen the advertisements “If we don’t sell your home, we will buy it” or “If we can’t sell your home in 60 days – we’ll sell it for free” and wondered if it was really that good? Well, I am here to tell you the full truth about these guaranteed home sale programs – they are a gimmick and a lie.

What is a Guaranteed Home Sale Program?

A guaranteed home sale program is a little scheme that some seemingly kind, but unethical, real estate agents have come up with to “help” a distressed homeowner. The deal is that after a certain amount of time, if your home doesn’t sell, they promise to buy it.

Think About This…

Is it realistic to believe that an agent will buy everyhouse that he cannot sell within 60 days? Where on earth is he going to find that kind of money?
Do you really expect that the agent will pay full market value for the home? Or rather could you expect him to low-ball the price and then turn around and sell it for more?
If he has an interest in buying your home, will he reallyput 100% of his effort in selling it to another buyer?

Check out the Fine Print

While on the surface, it may seem like a failsafe program for the seller. It is the fine print, however, that can create a major problem. It can unfairly take advantage of the seller. Check some of the most common conditions.

You must agree to buy one of the agent’s other listings. Does that sound fair? Instead of having hundreds of homes to choose from, this agent effectively limited your freedom to choose. What if those homes are over-priced, in less desirable neighborhoods or just don’t suit your needs? Then what?
You have to agree on a sales price. The sales price will be at least 10% below market value. While that doesn’t sound all that bad, do not forget that on top of that you will have to still pay the commission which will be another 6 to 7 percent of the sales price. If the market value of your home is $220,000 and the commission is at 7 percent, then you will need to agree to sell your home to the agent for $182,600. Is this really in your best financial interests?
You have to agree to frequent price reductions.In order to sell the home, the agent is going to need to keep slashing the price to get it to close before the end of their contract term. Check and see what is the average price reduction and marketing time in your area and you will find these agents are about twice as aggressive with slashing your property value.
You have to agree to stage and make whatever improvements the agent demands.If the seller refuses, the guarantee is void.

Once a seller sees all the fine print, very few actually agree to the offer. But even if you decided not to accept their guarantee but still traditionally listed with them, would you want to work with an agent that is willing to be that heartless?

Here is the Truth about “Home Sold Guaranteed” Programs

While there is nothing illegal about offering to buy your home if it does not sell. In my opinion it is unethical, deceptive and misleading. Consider some of these reasons:

Being forced to buy one of the agent’s other listings guarantees that he makes a double commission at your expense.
Setting a below market purchase price prior to marketing the property doesn’t encourage the agent to aggressively market your home.
I believe there is a conflict of interest if your selling agent agrees to be your buyer.
Guaranteeing a sale of your home within 90 days is not a guarantee that you will get a fair value for your home. Guess what? Any realtor can guarantee the sale of any home within 90 days if they price it low enough.

What if You Need to Quickly Sell Your Home

Rather than choosing the shady used car salesmen of the real estate world, I would suggest that you go and find a local agent that has been in the business full-time for at least 5 years and has some great reviews.

They will complete a Comparative Market Analysis (CMA) to find out what your home is really worth. Then they will find out how long it should take to sell it at market value. If that is too long for you, then they will consider some other options to get you the highest price in the quickest amount of time. They will create quality full-color marketing materials and aggressively market your property both on and off line.

You need an agent you can trust that is working hard in your best interests – not theirs. If that is what you want, then stay away from those offering “guaranteed sales” and choose a trusted and true real estate professional.

Note: Want a frank discussion about realistic (And honest) strategies to sell your home quickly in the Tennessee area? Click here to request a free 15 minute Home Selling Strategy Session!

Tennessee Home Selling: Avoid 5 Big Mistakes that Scare Away Buyers

Are you having trouble selling your house? Perhaps you are sure that the price is just right. You know that your agent is marketing the hell out of it and you are even getting quite a few showings. But how come you are not getting any offers? It could be that you are inadvertently scaring away your buyers. Now we don’t want that to happen. So let’s take a look at 5 mistakes that sellers make that scare away buyers.

Seller Mistake #1: Being at the house during the inspection.

Buyers don’t want to be reminded that this is your house. They find it awkward if the seller greats them at an inspection. Worse yet, if you follow them around explaining this or that feature or how you did this upgrade, it is going to make them nervous. You want your home to generate in the buyer a sense of peace, tranquility and safety. If they leave feeling bothered, stalked or spied on they will equate that feeling with the house and it will factor in on their decision.

Solution: At a showing, leave before the buyers come. Go to Starbucks or run an errand for an hour.

Seller Mistake #2: Evidence That You Live There

I know it sounds ridiculous – you do live there. But a buyer wants to pretend that you don’t. They want it to be their home, not your house. That means that before each showing you have to make it look like you moved out. Put away all the clutter, clothes, dishes, family photos and knick-knacks.

Make all of your closets half-full – it gives the buyer a sense of lots of storage space. Kitchens should have no more than 3 items on the counter. Bookshelves should be one-third books, one-third vases or decoration and one-third should be empty. In fact, why not make your life a little easier and just permanently pack them away the day after you list the house. It will make moving a little easier. Right before a showing walk around with a laundry basket and grab all the kid clutter, throw blankets, spurious socks and mail and then shove it under the bed. If after you’re finished you feel like the house is “naked,” then you’ve accomplished your mission.

Solution: Remove all personal items, loud decorations and clutter.

Seller Mistake #3: Dirt, Mold and “Ewww what is that?”

If your buyer is going to think twice about removing their shoes – there’s a problem. Nothing will turn off a buyer quicker than seeing other people’s filth. We know that you picked up the house and mopped the kitchen floor, but you need to do more.

Before listing your home, you need to do the deepest spring cleaning you have ever done. We are talking cleaning every crack and crevice with an old toothbrush; whitening all the grout, getting the grease off the cabinets; making that stove looks like the day you bought it; and getting a professional to clean the carpets.

That extra effort will pay off in a quick offer and an offer for more. Just tell yourself that you are getting paid $1,000 to deep clean your house – and who knows – the buyer might even pay more.

Solution: Don’t just surface clean, get every speck of dirt out of the house – and keep it out.

Seller Mistake #4: Odors, Stink and “What’s that smell?”

Cooking odors can linger in a house for days. Some real estate agents advise their sellers not to fry any sort of food – especially fish – while their house is on the market. If you own a pet, you need to remove all evidence that they share your house. Put the litterbox temporarily under the porch. Pack up all of Fido’s toys, beds, dishes and the like. (By the way, make sure you take Fido and Garfield with you when you go.) If you smoke, have all the curtains and upholstery cleaned and consider smoking outside – just for now.

Whatever you do, don’t try to cover up a stinky trash can or an accident on the carpet with a floral air freshener. All that says is, “I’m trying to hide something.” It is much better that your buyer smells Lysol, Pine-Sol or a light sent of bleach than a fake cover up.

Solution: Empty the trash, remove evidence of pets and skip the air fresheners.

Seller Mistake #5: Tarnished, Dingy and “How old is that?”

Your buyers have been obsessively watching HGTV, so they know what is modern and what is not. Your old tarnished doorknobs, shaky ceiling fan and ancient microwave could be sending your buyers looking elsewhere. Would you be willing to spend $1,000 to make say, $2,500 or even $5,000? Then update your old cabinet knobs, door handles, lights, fixtures and faucets. Talk to your real estate agent about the impact putting in new energy efficient appliances would have on the sales price of your home.

Solution: Update all the hardware and fixtures to make your house look more modern.

Yes, these take effort and perhaps it goes against your grain, but this is about impressing the seller and getting them to pay you more, or heck it is about getting an offer in the first place. Dirt, smells and walking into someone else’s mess is a sure way to keep you from selling your home. Don’t make these mistakes.

Note: I specialize in the M id-South Tennessee, and surrounding areas! Please click here to get your questions answered!

Do you work full or part-time as an agent?

A full-time agent is more focused and will be in a better position to give you more time and attention. They will also have accumulated much more experience.

How long have you been an agent and what extra education have you received?

Just having a license doesn’t cut it these days. To stay on top of this rapidly changing market, agents need additional accreditation. Additionally, look for someone who has preferably been in the business for more than 5 years.

Could you please supply me with some names and phone numbers of a few past clients?

First-hand evidence is the best review you can get of a prospective agent. Make sure you give them a call and ask them how the transaction went. Ask the client if they would list again with that agent.

How many homes have you sold in this area within the past year?

Don’t be satisfied with a number pulled out of thin air. Ask them to show a list home homes, days on the market, original list price, list price at the time of the offer and the sales price. Now compare this with the average for all agents in the area.

What parts of the transaction will you handle and what will you delegate to others?

Delegating is not a bad thing, but you will want to know how much you can expect from them. This question generally leads into a discussion of how they will be marketing your property.

What price do you think I could sell my house for, and why?

Their confidence and ability to present market data to justify their sales price will give you an idea of how much they know about the area. Their answer should come in the form of a Comparative Market Analysis (CMA) that will show you some of the most recent comps. If they are checking Zillow or Trulia to get their data, then it is time to find someone else.

What is your marketing plan for my house?

This should be a combination of online and offline marketing. Do not put a lot of weight on having lots of open houses – this is a trend that is slowly dying off. Instead, ask them how many pictures they will be taking and if it will be shot by a professional. Each agent will have a different type of marketing style, find out what is their philosophy on what is the best marketing. When you get home, go check out their listings and pay particular attention to the photos and listing information. Your property will probably be marketed the same way.

Do you suggest I stage my house? If so, how should it be done?

Professionally staged homes sell quicker and for more. Some agents stage their own homes. At the least they should be able to recommend some companies that can help. Ask them for their suggestions on what you could do to improve the salability of your home.

How will you communicate with me?

What do you prefer? Emails, phone calls, or text messages. Now what method do they prefer? Hopefully you are on the same wave length. Other than the medium, you should find out how often you can expect to hear from your agent.

Would you represent both the buyer and the seller in this transaction?

While representing both sides is legal, I do not recommend it. There is the potential to create a conflict of interest at some point. It is hard to get you the highest price if the buyer is begging for a cheaper offer. If they say they would consider it, then have them walk you through how they would handle it and if they have done it in the past and how it turned out.

During the interview process, you are going to get a feeling about this agent. While I don’t recommend going with your gut, you should be able to create a good rapport. A very skilled and experienced agent can be a frustrating person to work with if you communicate on completely different platforms and think completely opposite from each other. It is okay to “connect” with your agent. But do not let that be your only deciding factor, make sure they know their stuff and that others have had a good experience with them.

Have questions about the home buying or selling process? Here’s how to reach me: Kaizen Realty – Karen Love

Discover the Hidden Costs of Home Ownership

Are you buying your first home? If so, then congratulations! You have saved for the down payment. You have made it through the loan approval process. You survived the closing and now you have your keys and are ready to move in. But are you prepared for the real costs of home ownership? There are quite a few hidden costs of owning a home that new buyers forget to factor into their budget. Here are a few of the big ones.

Mortgage Insurance

It can be a real challenge for a first-time homeowner to scrounge up 20 percent for a down payment. Often they opt for a FHA loan that only requires a minimum of 3.5% down. While this may look like it will save you money, it can cost hundreds each month. Mortgage insurance, which is paid on loans with equity less than 20 percent, will annually cost 0.05 to 1.5 percent of the original loan value. Let’s say the loan is for $150,000 and you went with FHA who charges a PMI of 1.5%. You will need to pay $187.50 extra, in addition to your mortgage payment, each and every month from here on out. Ouch!

Homeowner’s Insurance and Property Taxes

You need property insurance and you have to pay real estate taxes. Most likely your mortgage company is going to require that you make escrow payments each month. What is more, they will want to make sure you will have enough in the account to cover the bill when it comes due, plus a little extra. That means that you may end up paying slightly more than 1/12^th of the annual costs. Your annual property taxes are most likely going to be 1 to 2 percent of your home’s value. Don’t forget to add that into your monthly budget.

Repairs and Maintenance

Renting was so easy. When the faucet leaked, you called the landlord. When a breaker burnt out, you called the landlord. When the furnace died, you called the landlord. Well, now you get to call the repairman and you get to pay the bill. Even if you do the repairs yourself, buying this and that for the house can add up to hundreds of dollars each and every month.

It is a good idea to set up a budget amount each month and to not exceed it. If a repair or renovation project will exceed the monthly budget, you might want to save for it rather than grabbing the credit card.

Lawn Maintenance

While you may have been content with keeping the grass cut at the last house you rented, now that you own a house, landscaping seems so much more fun. Be prepared for the upfront investment and the frequent maintenance as well as buying all the equipment to go with it.

Speaking of equipment, if you live where there is snow, you will have to decide if you want to pay for snow removal or handle it yourself. Depending on the length of your driveway, removing the snow could create the need for a plow truck or a fancy snow blower. ‘Cha-Ching!’

Filling the House

Now we are not just talking about decorating (be prepared to spend hundreds on window treatments, by the way), but things like a new fridge, stove, microwave, washer or dryer. How about furnishings? Will your old Goodwill sofa fill the new larger-than-life living room?

If you have not been responsible for outfitting a house, the little items that are necessary to live can quickly add up. We are talking about items like silverware, glasses, spices and seasonings, cooking staples, towels, pots and pans and cleaning supplies, just to name a few.

Owning a home creates a sense of security and personal pride, but it typically will cost more each month than what you were paying in rent. (Though in the long-term, the increasing value more than makes up for this!) While you can prepare for some of the initial moving costs, creating and sticking to a budget will help make sure you do not get in over your head and it will help you to enjoy your new home even more.

The Insurance Policies You Need to Protect Your New Home

A home is by far the largest monetary investment that most of us will ever make. More than just a collection of wood, brick, nails and screws, our homes are our refuge, our safe-haven, and we want to protect that don’t we? Property insurance is one way to protect that investment. The sheer number of different types of insurance policies can become overwhelming in a hurry. Let’s break it down to what you absolutely need and what you can pass by.

Title Insurance

There are some states that do not require buyers to have title insurance and if you pay cash, some other states do not consider them mandatory. Regardless of the law, you need title insurance.

Title insurance specifically protects the property owner against fractures in the chain of title, title defects, undiscovered liens and other matters regarding legal ownership. For example, let’s say Grampa Joe wills his house to his three daughters. The daughters don’t want the house and decide to sell it to you, but only two sign off on the house. No one catches it until you decide to sell that house 15 years later. Now the title cannot transfer until you track down the missing daughter and get her signature. Title insurance handles it all for you and covers the cost.

Here is another example, say you bought a short sale but they missed a contractor’s lien at closing. Well, without title insurance the contractor can come after you as the legal owner. Now doesn’t that sound like fun?

Homeowner’s Insurance

If you have a mortgage, then this is an absolute requirement. But, if you paid cash or paid off the mortgage, you may be tempted to stop paying homeowner’s insurance on that old 1950’s house. Don’t. You need homeowners insurance. Think of the risks: electrical fires, lightning strikes, flooding, hail damage, vandals, burst pipes while on vacation – the list is endless. While coughing up $700 a year might hurt, it will hurt a lot less than losing the whole value of your home.

Flood Insurance

If you live in a hurricane or flood-prone areas, then flood insurance is important. A common mistake is that homeowners opt for wind damage riders on their homeowner’s policy and think they are covered in the event of a hurricane. If the hurricane brings a storm surge and 3 feet of water ends up in your house, a wind policy will not cover your damage.

Private Mortgage Insurance (PMI)

PMI covers your lender’s investment in your mortgage in the event you default on your loan. Because you caused the risk, the lender has decided to make you pay for it. If you put at least 20% down on your purchase, however, you do not have to pay the mortgage insurance. How much will you save? A lot.

Private mortgage insurance will cost you between 0.5% and 1.5% of your original loan amount annually. That means that if you have a $200,000 loan, you could be paying up to $3,000 a year or an extra $250 a month – especially if you went the popular FHA route. Ouch. Why not wait a little longer and save up that 20%, your monthly budget will thank you.

Insurance is a risk reduction policy. While it may hurt the budget to pay for these policies, if a disaster strikes either legally or physically, having title insurance and a good homeowner’s insurance policy will save you thousands in the end.

Have more questions about the home buying process? Talk to one of the Tennessee areas foremost Mortgage Professionals here: Click here