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9 golden rules of mortgage shopping

If you’re thinking of buying a residential or commercial property, read this before plunging in. These mortgage-buying tips will save you money and heartache.

By Marilyn Lewis, Money Talk News

With interest rates still low and the recession receding in the distance, plenty of people are window shopping the real estate listings and wondering, “Is now the time to finally buy a home?”

If you’re among them, or if you are thinking of refinancing your mortgage, don’t plunge in until you’ve watched Money Talks News financial expert Stacy Johnson explain the golden rules of mortgage shopping. After that, read on for more information that will save you money and heartache.

1. Check your credit
Your first move – long before you start home shopping – is to find out where you stand with mortgage lenders and how to improve your position.

Check your credit reports for problems or errors. It takes time to fix any errors, so get going as much as a year before applying for a mortgage.

A cleaned-up credit report can raise your FICO score. With a score above 760 (FICO scores range from 300 to 850), you’ll enjoy the best mortgage offers and interest rates. The lower your rate, the cheaper your house payments will be.

To see how much money a stronger credit score could save you, plug your numbers into this calculator at myFICO.com. You’ll also see the score ranges — 660-679, for example.

Suppose someone with a score between 760 and 850 gets a 30-year mortgage for $300,000 at 4 percent. The monthly payment will be $1,440 a month.

Homebuyers with lower scores can’t get that great rate. With a score in the 620-639 range, you might pay about 5.6 percent. That’s a $1,729 monthly payment — $289 more.

2. Meet with lenders
Now you’re ready to meet with a mortgage lender or broker – or several — to ask their advice on how to boost your credit score. These early chats also prepare you for mortgage shopping, letting you see and compare lenders’ styles, knowledge and helpfulness.

ASK ME…. what documents you’ll need to submit when you apply. New federal mortgage rules make it harder to get a mortgage. You’ll be judged on eight points:

  • Income and assets.
  • Employment.
  • Child support or alimony obligations.
  • Credit history.
  • Monthly payments on debts.
  • What you can afford to pay monthly on a mortgage.
  • Other mortgage costs, like home and mortgage insurance and property taxes.
  • Your remaining income.

For the best rates, all of your monthly payments must be less than 43 percent of your pretax monthly income.

3. Pull your credit score
Your FICO score is different from your credit report. You’ll need to know your score to see your progress improving it.

It’s hard to get a free FICO score. You’ll see ads for so-called free credit scores, but these aren’t the scores lenders see. They might do, though, if you only need a benchmark to watch how your efforts are improving it.

FICO charges $20 for your score, and it may not be exactly the same score that lenders see. Money Talks News founder Stacy Johnson suggests one way around the cost: Sign up for a free trial of FICO’s ScoreWatch to get your free score, and then cancel.

4. Beef up your score
There’s plenty you can do to quickly raise a low credit score.

Making an effort to raise your score matters, especially if your score is near the top or bottom of a credit score range.

For example, with a score of 745, you’re near the top of the 700-759 range. With effort, you might gain enough points to move into the highest category, 760-850, giving you access to lower interest rates.

Or suppose your score is 766. Credit scores bounce around all the time; you don’t want yours dropping below 760, which puts you in the less desirable 700-759 category. Try to boost your score at least into the safe middle of the 760-850 range.

Building a Better Credit Report” from the Federal Trade Commission can help.

5. First the mortgage, then the house
You’re probably itching to start shopping for a home. That’s fun, but keep your head on straight. Shop for the mortgage first. Looking for a home often gets emotions and fantasies all fired up, tempting shoppers to spend more than they can afford.

Don’t let emotions hijack your home purchase, causing you to overpay or stretch beyond your means.

Window shopping? Fine. But stay sober. Mortgage shopping first lets you know what you can afford, including all the other big expenses of homeownership — taxes, insurance, homeowner fees, bank fees, repairs, appliances, maintenance and improvements.

  • Estimate mortgage payments (use calculators located below)

6. Get pre-approved,  NOT pre-qualified
Here’s the difference, as the National Association of Realtors explains it:

Pre-qualifying is just a quick credit check based on the information an individual provides. A pre-approval, however, means a mortgage professional has checked the employment history, verified funds, studied an individual’s credit record and so forth. Getting pre-approved rather than pre-qualified saves a lot of heartache.

By pre-approving your loan, the bank commits to lending you up to a specific amount. That can impress sellers. And it helps when you’re competing with other buyers for a home.

The bad news: Fewer banks are pre-approving mortgages lately.  But that doesn’t mean you shouldn’t try and shop around.  (Call/email/text me!!!)

7. Now shop
Now that you know what you can afford to pay for a home, you can finally start shopping. Here are sources for guidance on shopping:

8. Hold off applying for credit
Applying for new credit is a tricky thing. It can help improve your credit score – in the long term. But if you open a new credit card or take out another loan too near the time of your mortgage application, your credit score could dip and affect your interest rate.

However, applying for mortgages won’t have much impact. MyFICO says:

Looking for new credit can equate with higher risk, but most credit scores are not affected by multiple inquiries from auto, mortgage or student loan lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on the credit score.

Also, obtaining your own credit score or reports won’t hurt, says personal finance expert Liz Weston:

A credit check could hurt you if you asked a friend at a bank or car dealership to pull your credit reports. Such transactions probably would be coded as “hard” inquiries, or as applications for credit, which could ding your scores.

BUT, checking your own credit is otherwise a non-event.

9. Wait to make big purchases
Buying furniture, appliances, a car or any substantial purchase outside your regular monthly expenses could kill your mortgage loan. Before your loan closes, a lender makes a final credit check. New debts could change your eligibility. Says The New York Times:

“We tell our clients about this upfront, and keep reminding them through the entire process not to go buy a new bed or a refrigerator,” said Michael Daversa, the president and founder of Atlantic Residential Mortgage, which is based in Westport, Conn. “What you’re supposed to do is keep everything status quo.”

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How to get the best deal buying a new house

By Amy Hoak, MarketWatch

Home buyers, prepare for sticker shock.

Prices of homes are expected to tick up again this year, and mortgage rates are due to creep up, too. And that’s on top of the increases already experienced over the past year.

A median-priced, three-bedroom home bought in the fourth quarter of 2013 costs a homeowner 21% more a month, compared with one bought a year before, according to an analysis by RealtyTrac, a housing data provider. That monthly cost includes mortgage, insurance, taxes and maintenance, and subtracts the estimated income-tax benefit.

“There’s no doubt about how affordability has been affected here in the past year or so,” said Loren Haley, a Redfin agent in Silicon Valley. “Prices have been driven up so quickly and intensely; there are a lot more buyers in the market than there is inventory.”

Every real-estate market is different.

Despite a more competitive market, it’s important that buyers keep a sense of perspective. And if your goal is to move into a new home this year, there are things you can do to position yourself to get the best deal possible — even if bargains are becoming rarer.

“It’s not fair to say it’s a huge shock … we’re still well above normal levels of affordability,” said Mark Fleming, chief economist for CoreLogic, a provider of consumer, financial and property information.

The National Association of Realtors’s national Housing Affordability Index dropped to 175.8 in 2013, from 196.5 in 2012. But, for comparison’s sake, the index reading was 107.6 in 2006, around the peak of the housing bubble. The higher the number, the more affordable the market. The index is based on the relationship between median home prices, median family incomes and the average mortgage interest rate.

While prices are expected to rise, early indications suggest that the increases won’t be quite as steep as last year. And although mortgage rates are expected to increase, their rise so far has been somewhat gradual. The 30-year fixed-rate mortgage averaged 4.3% in February; it averaged 3.53% for February 2013, according to Freddie Mac data.

Fleming also points out that if you own a home already, and plan to sell it to finance a new one, you’ll see even less of an impact on affordability. While the price of the home you’re buying will be more expensive than last year, you’ll be able to sell your home for more, too.

Most importantly, remember that every market is different. Yes, inventory shortages are widespread, but shopping in the red-hot Silicon Valley market is different than shopping in Chicago. And while finding a home may be a challenge where inventory is tight, the more attractive of a buyer you are, the more negotiation chips you have with a seller.

Heed the following six pieces of advice while home shopping this year.

1. Sooner is better

Of course, you should make sure that you focus on a home that fits your needs, with access to the school districts or other amenities you desire, Fleming said. But once you’ve done that, decided how much you can afford and found the place you want to buy, make a move — and quickly.

“Sooner is better than later because interest rates will probably rise this year and house prices will rise some more,” he said. So start soon. “If you’re thinking about doing it this year, do it early.”

2. Hire an expert

Many people hire the first real-estate agent they meet with. That’s a huge mistake, said Charlie Young, chief executive of ERA Real Estate. Interview a few agents who work in the neighborhoods you’re interested in, and make sure they have relevant expertise. For example, if you’re looking for a starter house, don’t choose someone who focuses mainly in luxury homes. These agents are utilizing a Real Estate Agent Marketing Service to inform buyers and sellers of their expertise and to get the leads they specialize in.

Ask buyer’s agents what the list-to-sales price ratio (the difference between what the home is listed for and what it eventually sells for) is in the neighborhood — and what their personal list-to-sales price ratio is, Young said. That will give you a sense of the agent’s negotiating skills. Then, ask them about the neighborhood, what the near facilities are, companies, schools, and repair services like plumbing services, furnace repair (just go to the site go to url to know more), or AC services (available at Abraham AC and Heating Services, Inc`s website). You can visit sites like https://friendsandfamilyhvac.com/furnace-repair-in-corona-ca/ to get an idea.

Strong knowledge of the market is key. “In this kind of market, where inventory is low, the ability for a Realtor to help you find homes that may come on the market is going to be important,” said Steve Berkowitz, chief executive of Move, Inc., which operates the website Realtor.com. The earlier you know about a property, the more time you have to consider it and prepare a competitive bid.

3. Know the market

A good real estate agent will also be able to tell you if a list price is misleading, Haley said. For example, if it’s listed for $500,000 but is in a neighborhood where homes are getting five to 10 offers and it’s more likely that the home will sell for $600,000, your agent should be able to tell you that up front.

And they can tell you how tight the inventory is where you want to live, including how long homes typically last on the market. That’s the best indicator of how fast you’ll need to make a decision — and how hard it will be to find a home to meet your needs.

4. Know your finances

Understand what you can afford. That’s different than what a mortgage broker says that you can qualify for, Young said.

It’s important to think about how large of a mortgage bill you’d feel comfortable paying each month, he said. When bidding wars get intense, it can be tempting to blow your budget, but you may regret the decision later.

Some buyers also might consider adjustable-rate mortgages to finance their home more affordably, especially those who plan on living in the home for a shorter period, say, five to 10 years, Young said. If you go this route, just make sure you can deal with the interest-rate resets scheduled after the introductory period. Otherwise, if your plans change, you could be in for an entirely different kind of sticker shock.

5. Be an attractive buyer

Get preapproved for a mortgage before shopping, Young said. Sellers will take you more seriously, an important point when they’re getting multiple offers.

For sellers, the best offer isn’t always synonymous with the highest bid. In general, the fewer contingencies you have on the contract, the better, Haley said. “When we’re looking at five or 10 different offers, having the highest price is great, but we’re also looking for the highest certainty of closing,” she said.

A contingency that you need to have a contract on your current home before completing the transaction, for example, could put you at a disadvantage when you’re competing with a buyer who doesn’t make that stipulation. But tread lightly when giving up conditions: A home inspection contingency, for example, could save you from buying a home fraught with problems found during an inspector’s exam.

6. Consider other neighborhoods

For many prospective buyers, increasing home prices and mortgage rates won’t restrict them from buying this year. But they might need to make some compromises.

Aside from buying a smaller or less desirable home, you might also consider buying in a different location. The next town over may be more affordable than the area you originally were considering, Young said. Compare real estate taxes from city to city as well; there could be a big difference between the taxes you will pay for one house versus another across the street.

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Rent vs Own Comparison

for rent home image

Rent Advantages

  • May be cheaper than a mortgage payment
  • Fewer (if any) maintenance costs
  • No down payment required (less deposit)
  • No real estate taxes (renters insurance optional)
  • Less stress (who cares, it’s not yours!)
  • Freedom to move or downsize when necessary
  • No risk of home price depreciation
  • Some utility bills may be included
  • “Free” amenities such as pool, gym, security
  • Money can be used for other, more profitable investments
  • Can’t be foreclosed on

Rent Disadvantages

  • Rental payment may exceed monthly cost of mortgage
  • No ownership or wealth creation
  • Payments never stop when renting
  • Rent will rise over time
  • Must deal with a landlord or management company
  • No tax benefits
  • Rules, regulations, and limitations
  • More temporary, less stability
  • Always at the mercy of the property owner
  • Pets may not be allowed 

for sale home image3

Ownership Advantages

  • You can build home equity and wealth
  • Status- Status-Status
  • Sizable tax deductions possible
  • Your space, your rules (pets welcome)
  • Ability to remodel, expand, tear down
  • You get a pest control deal with bigfootpestcontrol.com
  • Pride of ownership (social status, accomplishment)
  • Potentially better for children, family structure
  • Mortgage can improve your credit history/score
  • Ability to borrow against your home (HELOC or cash-out)
  • No more monthly payments once mortgage paid off
  • Fixed payments (if you choose a fixed mortgage)
  • Mortgages are the cheapest loans available
  • No landlord
  • Can exclude capital gains when you sell (partially)
  • Inflation hedge
  • Can rent out to others
  • Can sell and use proceeds for bigger/better home
  • Retirement nest egg
  • It’s the American Dream!

Ownership Disadvantages

  • Home prices may lose value
  • Could overpay for your property
  • Obtaining a mortgage (and finding a home) is a hassle
  • Not everyone qualifies for a mortgage
  • You must pay taxes and homeowners insurance
  • Total housing payment can be more expensive
  • Mortgage payment can rise (if an ARM)
  • Sizable down payment necessary
  • Maintenance costs can be excessive
  • Pricey HOA dues (if applicable)
  • You’re “stuck” in a home (long-term commitment)
  • Increased liability and responsibility
  • Transactional costs of buying and selling
  • Ownership is stressful!
  • Taxes and insurance generally rise
  • Your home can be damaged or destroyed (and not fully insured)
  • Can be foreclosed on and lose your home
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10 Tips For Homebuyers & Sellers in 2014

By Steve McLinden of Bankrate.com

Goodness, is it 2006 again? At the dawn of 2014, it feels like it.

Homeowners enjoyed double-digit price growth in the first half of 2013, greatly exceeding experts’ predictions of a year ago and even settling into pre-recession values in many markets. Though there was some softening in the second half, sellers remain in their element and are turning the screws on anxious buyers who fear further price spikes and escalating interest rates.

New-construction home sales are up, previously underwater properties are in positive equity again and investors are turning their attention to “secondary markets” to find value. Economists expect house prices to rise another 4 percent to 5 percent in 2014, meaning remaining bargains will get even more sparse.

With that in mind, here are 10 tips befitting the up-market of 2014.

1. Sellers: Jump-start the process

tip1pic You may be an avowed procrastinator, but if you want to sell a house this year, start planning now. The process, say sellers, always takes longer than expected. So get your home inspected now; there may be unseen major repairs to address. Declutter, clean closets and shelves, store extraneous possessions and furnishings and other stuff that might keep sellers from picturing themselves in your space. Attend an open house or two to get an idea of how to stage yours. And move along: Owners still waiting for the market to peak should beware that this real estate cycle may be shorter-lived than last.

2. Buyers: Be credit-ready

tip2picThere’s a lot of competition out there for homes, so tarry not. Get your credit report and start repairing any blips. If your scores are below 620 or so, a conventional loan will be a challenge. But if they’re under 740, you still might not get the best rates. Many buyers get a prequalification letter from the lender, but you can one-up them with a preapproval, which comes after a more thorough evaluation of your finances. A preapproval letter shows the seller that you’re good to go and can close quickly.

3. Sellers: Vet your real estate agent, then follow the agent’s advice

tip3picSellers lose time and money by hiring poorly. Interview several potential agents. The role of the estate agent is crucial, so if you are selling then research them very thoroughly and get the absolute best one that you can. We recently sold some property in Bristol and used who are easily the best estate agents Bristol has available and they got us a great price and very quickly too, so just shows how that research pays off. You’ll want a full-timer who is Web savvy and uses mobile technology, because at least 4 in 5 buyers view their homes first online. Your agent should be a proven performer in your submarket and be willing to walk you through the financial aspects of your deal. The more the agent knows about schools, commutes and other local details, the better. Once vetted, accept your agent’s advice on pricing, marketing and negotiation.

4. Buyers: Adjust your negotiating expectations.

tip4picLowball offers are off the table in this environment and could eliminate you from consideration. Respond to counteroffers quickly to keep other buyers from entering the picture; you don’t want to encourage a bidding war. If one breaks out, be prepared to get fewer concessions and pay more money. And have a few other homes in mind so you can be willing to walk away if the price soars.

5. Sellers: It’s your market (finally) so make the most of it.

tip5picAt long last, it’s a seller’s market! While you’re interviewing agents, be wary of those offering too-good-to-be-true price opinions because they may be trying to “buy” your listing. And don’t jump at that first (seemingly) generous offer, especially if sellers are getting multiple offers. If you’re getting your price and then some, give something back to the buyer in good faith, such as an early move-in date or some personal property you’re not attached to. Never let the buyers’ agents know what you’re willing to do, though. Make them ask.

6. Buyers: Find life after foreclosure.

tip6picHave a foreclosure in recent years? Join the crowd. Though you might think you have to wait seven years to get another conventional mortgage, Fannie Mae, Freddie Mac and the Federal Housing Administration say they actually require just a three-year waiting period if the foreclosure was caused by extenuating circumstances. There are plenty of nonconforming lenders — often called “shadow bankers” — out there if you can endure a big down payment (around 20 percent) and above-market interest rates. Or consider a lease-purchase or lease-option where you pay the homeowner a monthly premium above your rent for the right to buy at a set price later.

7. Sellers: Hesitate to renovate.

tip7picWe hear that newly renovated homes are easier sells, and that’s true. So is it time to remodel that outmoded kitchen by adding new appliances such as this meat grinder for bones? Not if you plan to sell soon. According to remodeling surveys, the average renovation project returns only about two-thirds on investment. For example, a major bathroom remodel costing $15,000 yields about $10,000 in resale value. The same goes for a major kitchen remodel. In most cases, it would be cheaper to issue credits to buyers or drop your price a few grand.

Lighter jobs like new doors are more practical and return about 85 percent. But feel free to spend a bit on paint (basic colors), curb appeal and fence replacement to enhance exteriors. A little work on your driveways and sidewalks with the help of paving northampton contractors can really increase curb appeal and value to your property.

8. Buyers: Ask and you won’t receive (an unpleasant surprise).

tip8picYou’d be dismayed at the things sellers aren’t obliged to disclose in most states, including on-premises felonies, suicide, murder or a neighboring sex offender. Don’t be afraid to thoroughly question the selling party in writing before signing the contract. Some questions: Is there a cell tower, water tower, natural gas well, oil well or other non-residential construction scheduled to be built in this neighborhood (then define “neighborhood”)? Is there commercial zoning on nearby vacant land? Is the yard prone to flooding? Are train whistles or other regular loud noises audible there? Did known criminal activity occur in the house? Have there been reported hauntings? Are there loud neighbors, dogs or other noise pollution? Are there registered sex offenders or other known criminals living nearby? If the selling party refuses to answer any of these questions, that’s a bright red flag.

9. Sellers: Tailor your local game.

tip9picFolks who base their selling decisions on trends on cable news are often left wondering, “Why can’t I sell at this price?” The truth is, all markets are different and all real estate is local, and prices can vary greatly even in adjacent subdivisions. Home prices are dictated largely by demand, land availability, foreclosures and employment. Most local real estate offices will provide market stats and at least a few recent comp sales in hopes of earning your business. Additional trend data can be found online or in local newspapers and business journals. A polite call or email to a local real estate appraiser might net more info or links to local statistics.

10. Sellers and buyers: Heed changing trends.

tip10picPay attention to trends and react accordingly. Thinking of laying carpet? Agent surveys in the past few years show homes with hardwood floors or faux wood laminate floors are far faster sells. You still want to be in suburbia? Millennials don’t. Numerous cities — such as Austin, Texas; Portland, Ore.; and Minneapolis — have watched this more environmentally conscious generation flock to “mixed-use” urban districts served by trendy cafes, nightclubs, bike paths, civic events and mass transit. For now, they’re not buying condos, which haven’t recovered like the single-family market. They’re renting — but watching the condo market ever so carefully.

Here are other links to tips that might interest you…..

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