September 2023

Daily News And Advice
Today's Feature Stories

Safety Tips for Showing Your Home

Showing your home is an integral part of the overall process to ultimately sell it. While that may worry some homeowners, the following are some general safety tips when you show your home.

Avoid An Open House

If you’re a seller, you might want to talk to your agent and tell them you don’t want to have any open houses. A lot of real estate agents don’t think they’re beneficial anyway. During an open house, you’re taking a more significant risk than you are if you have scheduled private showings.

During an open house, it’s not only more likely that someone could target your valuables or look around to come back to your home later, but you also have more exposure to people who might be sick.

Have Your Agent Meet with Prospective Buyers First

If you’re feeling nervous and unsure about showings, talk to your agent about potentially meeting with prospective buyers outside of your home in a neutral setting before having an in-home showing. From the perspective of your real estate agent, it might add more work to their job, but at the end of the day, safety is critical.

When you do have showings, you want to make sure, regardless of whether or not your real estate agent met with them beforehand that they’re qualified buyers. You certainly don’t want people coming because they’re window-shopping or they’re just curious or being nosy.

You only want people who are serious about buying a home.

To find qualified buyers, there are various ways to screen them. For example, you or your agent can screen them using only appointments and asking buyers to do a virtual tour before an in-person showing.

Your agent can request a pre-qualification letter before setting a showing date.

Sanitize After Showings

It’s a good rule of thumb to sanitize your home after showings to keep all the bugs and germs away. You should wipe surfaces with a disinfecting wipe and do a quick clean.

Put Certain Items Away

There are some items you don’t want to have on display during showings. Your valuables and heirlooms are more obvious, but there are less obvious things to put away. Prescription pain medications are one example. Your mail and bills are other things to put away in preparation for a home showing.

Use Smart Home Technology

Finally, you might consider using smart home security while your home is on the market because this is when it’s especially vulnerable to various threats. Plus, if you add some safety and security features, it can make your home more appealing to buyers. At a minimum, using a smart lockbox is a good idea because it gives you control over who comes into your home no matter where you are.


8 Hidden Costs of Home Ownership

If you’re a first-time homebuyer, you’re probably already overwhelmed. You might think that a monthly payment along with your down payment is the bulk of the financial responsibilities you’re taking on.

The mortgage is just the tip of the iceberg, however. There are plenty of other costs of homeownership you need to factor in before you buy something.

You need to fully understand all of these costs so that you’re not buying something ultimately more than you can afford.

1. Closing Costs

Closing is the final step in getting a mortgage, and it’s something many homebuyers underestimate as far as how much it will cost. When you close, your loan is approved, the inspection is done, and you’re about to get the keys to your new home.

When you complete your purchase, you have a closing meeting to sign all the paperwork, and you also have to pay for several costs.

These costs include mortgage interest payments, taxes and insurance escrow payments, legal fees, lender application fees, recording fees, and title insurance.

Closing costs can average between 3-4%, but the costs vary from state to state.

2. Property Taxes

When you own a home, you pay property taxes. The bank doesn’t determine these. Instead, the city or town where you live does.

The property tax payment you owe is assessed based on the value of your home. It can be anywhere from $500 to $1,000 a month.

The average effective rate nationwide is around 1.1% of the assessed value of your home.

3. HOA or Condo Fees

These fees don’t apply to every homeowner, but if you purchase a house in a homeowners’ association or condo association, you’ll have to pay a fee monthly or quarterly. The fee covers services for the neighborhood, like garbage collection.

The fees of an HOA can rise, or they might charge an assessment for a large project, so there’s some unpredictability in these costs to be aware of.

4. Insurance

Homeowners insurance is something mortgage companies and banks require before they’ll issue your loan. The premiums are probably already included in your monthly mortgage payment. Usually, the premiums are paid from your escrow account, which is true of property taxes in many cases.

Premiums can rise annually, and most typical homeowners policies don’t cover what are described as acts of God. That means you’ll probably need to get additional coverage for natural disasters.

5. Utilities

The cost of your utilities can be as much as your property taxes. Electricity alone can be $100 a month or more, especially when energy costs are high.

6. Appliances

Most homes will come with appliances, but if you’re purchasing new construction, they won’t. There are also some sellers of used homes that take their appliances with them.

You’ll probably need to buy a washer and dryer at a minimum. Most contracts stipulate that the seller will leave the dishwasher, refrigerator, stove, and potentially the microwave, but this isn’t a given.

7. Lawn Care

If you manage your lawn care, you have to set aside time, and you’re probably also going to have to buy lawn equipment. Inevitably there will be lawn maintenance tasks you can’t do on your own as well. For example, you may have hanging tree limbs or dead trees that need to be removed.

Paying someone for regular lawn care becomes a monthly expense rather than a once-in-a-while experience.

8. Maintenance

Finally, along with everything above, when you own a home, you’re responsible for all the maintenance, which is quite a shift from being a renter.

There are so many systems in a home that can need maintenance, repairs, and even replacing.

You’ll be maintaining the electrical system, the HVAC system, the roof, and the plumbing. If you’re buying an older house, expect the maintenance costs to potentially be significantly more than they would for new construction.


Can You Use Home Equity to Buy Another Property?

When you have equity in your home, you can tap into that and, if you’re strategic, use it as a way to build long-term wealth.

There are a lot of ways you can capture equity to build wealth. For example, you can pay off higher-interest debt or make home improvements that ultimately increase the value of your house. You can start a business or you can even invest in the stock market where returns might be significantly more than the interest you pay on your loan.

Another question people commonly have is whether or not they can use their home’s equity to purchase another property, which we discuss below.

Can You Use a Home Equity Loan to Buy a House?

In short, yes. You can use a home equity loan to buy a house, but that doesn’t mean it’s always the right decision in every situation. Using home equity can be a way to buy a second home or an investment property with caveats.

A home equity loan is a second mortgage, giving you a way to access the equity you’ve built in your home. Home equity refers to the difference between what you owe and what your home is worth.

The Upsides

If you’re thinking about using your home’s equity to buy another house, there’s a distinction you need to first make. Are you buying a second home or an investment?

If you’re planning to buy an investment property, using a home equity loan can give you more liquidity and make it less expensive. Benefits of using equity to buy an investment property include:

• You can put more toward your down payment. A home equity loan is something you receive as a lump sum payment so that cash can go directly toward a down payment. You’ll be a more competitive buyer, which is essential in the current market, and you’ll get lower interest rates and monthly payments.

• It can be harder to finance a second property because there are more stringent down payment requirements, so a home equity loan can be a more affordable solution and also one that’s more convenient.

• A home equity loan is secured with collateral, which is your current home. As a result, you get the benefit of lower interest rates.

If you’re buying an investment property, using your home equity can be a good wealth-building strategy. If you’re buying a second home, you have to consider that it’s not going to bring in income like an investment. That means that you’re going to be tying your home up in a loan and then taking on another loan, so you need to be in a solid financial position to make this work.

The Downsides

The downsides of using equity to buy an investment property do exist. These include:

• You’re swapping an asset for a debt. You’re taking the part of your home that you own, and then you’re putting it into a loan. Ultimately, no matter the specifics, you will have higher debt, so is that what you want?

• You’re vulnerable to housing market shifts, even more so when you own two properties instead of one. You’re doubling your risk if something happens in the housing market. For example, if the value of either of your properties goes down, you might owe more on your home equity loan and your mortgage, overextending you.

• If you were to default on your loan, you could lose both properties.

• You might end up having three mortgages but only two homes. Most home equity loans are second mortgages, so you have to combine this with the loan you’ll need for your second home, meaning three mortgages.

• Another downside you’ll have to weigh is the fact that interest payments on your home equity loan will probably not be tax-deductible because of 2018 changes in tax codes.

The big takeaway here is that, yes, using home equity to buy a second home is an option and sometimes a very good one. At the same time, there are risks and it’s not always the right decision, so you need to go over the details in your specific situation carefully.


How to Get a Mortgage When You’re Self-Employed

Getting a mortgage can be more challenging when you're self-employed, but it’s not impossible. For W-2 employees, getting a mortgage can mean showing your tax records from your employer to verify your income.

For approving someone who is self-employed, lenders may be concerned that your income isn’t steady enough to make your monthly payments. Some lenders also prefer not to work with self-employed people because there’s more paperwork.

Why Is It More Difficult?

There are disadvantages to applying for a mortgage as a self-employed person. You’re often not seen as an ideal borrower from a lender's perspective.

You’re seen as more creditworthy when you’re an employee because you have a steady, verifiable income. If you pair this with an excellent credit score, even better.

Along with the notion that self-employed people’s income might be less reliable is that you may have a number of business expenses. Deducting these business expenses can help you reduce your taxable income, which is a good thing because you can pay less to the IRS.

At the same time, if you’re applying for a mortgage, you will show a lower annual income.

Another reason you could face challenges is if the lender wants to see a lower loan-to-value ratio from you. You’ll need to have a larger down payment as a self-employed borrower in certain circumstances.

How to Make Yourself More Appealing

If you’re planning to buy a home, there are things you can do to make yourself a more attractive candidate as far as a lender is concerned.

Debt-to-Income Ratio

If you’re self-employed, the odds of getting approved for a mortgage and getting comparatively favorable terms can go up when you optimize your debt-to-income ratio or DTI.

This means you reduce your debt, increase your income, or both.

To optimize this ratio, you want to keep your home shopping on the lower end of what you can theoretically afford.

Be Ready to Show Documentation

You should get your documents ready in advance of shopping for a home, and you should be ready to fully document your income. You’ll probably need bank statements, tax returns, balance sheets, and profit and loss statements.

A lender might also ask for your debts and monthly payments for your businesses and a list of your assets, including your investment and savings accounts.

You may need proof of your business or your status as someone self-employed, including letters from clients or statements from your accountant.

Pay Off Your Consumer Debt

Your consumer debt includes things like your credit card debt. The lower your debt and the fewer the monthly payments you have, the better. If you can take some time to pay off your credit cards or an outstanding car loan, you might be in a better position because you’ll have increased cash flow.

Have Cash Reserves

Along with your down payment, you want an emergency fund that shows that you’ll be able to manage your mortgage payment even if your business takes a hit.

A lender will want to see that you have the cash on hand to cover your property taxes, homeowner's insurance and maintenance and repairs, and your housing payment itself.

Additional Options

If you can’t qualify for a traditional mortgage, let’s say, because of your business expenses, there are other options for mortgages, but they can be more expensive or trickier in certain ways.

A bank statement loan is also known as an alternative document loan. You can apply for a loan with 12-24 months of bank statements rather than your tax returns. The interest rate and down payment will probably be higher since lenders see the risks as greater with this type of financing.

Another option would be a joint mortgage with a co-borrower who works as a W-2 employee. A relative might be able to co-sign for a loan, but they are taking on the responsibility if you default, so not many people would be willing to do this.

Overall, you can get a mortgage if you’re self-employed, but be prepared and know what you’re up against.


Mistakes Buyers Make When Searching for Their First Home, and How to Avoid Them

Many starter-home purchases are driven primarily by price, which is understandable. But, there are so many other considerations involved in finding the right place, like square footage and location, to name just a few of the most consequential.

When looking for your first home, it’s critical to keep the most important considerations in mind so you don’t find yourself going down a real estate rabbit hole. Remember these common buyer mistakes to keep you on track.


6 Things That Happen When You Become a Homeowner

Becoming a homeowner is more than having a set of keys and your name on the deed. You may have a rush of emotions the day you take possession and recognize you now have your place in the world—literally. And that’s just the beginning. Here are a few more things you can expect.

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You learn what pride of ownership means

You may take pride in your car and your clothes and other minor possessions, but nothing compares to the feeling of being a FULL STORY->

One Wants To Sell The House, The Other Does Not: What To Do?

You have just inherited the family home, with your sibling. He wants to sell but you want to keep the property. After all, it has been in the family for a long period of time, and the two of you grew up there.

What can you do? Unfortunately, this is a common problem -- especially among families. Fortunately, there are a number of possible solutions.

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First, are you sure you both own the property? Has it gone through probate? Did your mother FULL STORY->

September Real Estate Roundup

Freddie Mac's results of its Primary Mortgage Market Survey® shows that "Mortgage rates continue to linger above seven percent as the Federal Reserve paused their interest rate hikes. Given these high rates, housing demand is cooling off and now homebuilders are feeling the effect. Builder sentiment declined for the first time in several months and construction levels have dipped to a three-year low, which could have an impact on the already low housing supply."


7 Packing Mistakes You’re Making

Moving is a drag—there’s no way of getting around it. But there are ways to make your move a whole lot easier, and it starts with packing. 

Here are seven moving mistakes you may be making—and how to avoid them. 

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1. You figure you can pack everything in a few days

Begin with a plan—and start packing weeks in advance, especially if you have a lot of stuff. But before you just start piling things into FULL STORY->

Mortgage Rates
Averages as of September 2023:

30 yr. fixed: 7.23%
15 yr. fixed: 6.55%
5/1 yr. adj: 6.5%

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