New Year’s Resolutions for Prospective Homebuyers

The New Year is the time for goal-setting and resolution-making. Some people decide that they are ready to be homeowners and buy their first home this year. If you are one of them, then you need to take action now.

Here are 4 New Year’s resolutions prospective homebuyers should make.

Save money

If you are planning to buy a house this year, then you should have saved enough money right now for your down payment.

Buying a house is a big financial decision. Just because you have saved enough money for the down payment, it doesn’t mean that you’re ready to buy a house. Remember, there are several fees that come with home buying. This includes home inspection fee, closing fee, home insurance fee, appraisal fee, moving fee etc. Make sure that you include these fees into your budget.

Check your credit

We know you’re excited to start house hunting. But there are a lot of things that need to be done before you start looking at houses. Checking your credit report is one of them.

Your credit score can impact several areas in your life, including your ability to buy a house. Lenders will use it as a determining factor whether or not you get approved for a mortgage. Checking your credit report ahead of time will give you an idea what kind of shape your credit score is in.

Get a copy of your credit report and check it for any errors or discrepancies. If you find any errors, do not hesitate to dispute them with the credit bureau.

Improve credit score

Improving your credit score takes time. If you are planning to buy a house in the near future, it is important to take steps as early as now to improve it.

If you have a lot of debt, try paying down your balances and make sure to pay your bills on time. Pay off credit cards with small balances. The smaller your debt to income ratio, the better it is for your credit rating.

Know what you want

Most people would start the buying process by visiting dozens of houses. House hunting can be fun. However, you first need to know what you want before you go out there and start looking at houses.

Sit down with your spouse and discuss what features you want in a house. How big of a house do you need? How many rooms do you need? Do you want a house with an updated kitchen? Do you prefer a house that is near your office? Make a list of features you want and discuss it with your real estate agent.

Best Sources of Down Payment Money to Buy Your First Home

Buying a house is a dream a lot of people share. For many, coming up with a down payment is one of the biggest tests that stands between them and their dreams of becoming a homeowner. The mere utterance of the word strikes dread in the heart of many potential home buyers.

Unless you’re willing to pay in cash, you will need to put down 3.5% or more of the value of the property in cash. We know it’s not easy to save up money for a down payment. To help make the process easier, we listed down some of the best sources of down payment money for first-time homebuyers. Here are some of them.

Personal savings

If you are planning to buy a home, then you need to start planning and saving to avoid financial strain down the road. Start by saving a portion of your salary and cutting down on your spending. The FHA will accept cash saved at home, your savings or checking accounts.

If you haven’t saved enough money for a down payment, then it’s time to examine your spending and tighten your budget. If you usually pay $100 a month on your cable bill and $20 a day on coffee and lunch takeouts, that’s almost $6,000 a year you could be saving. Cut costs by preparing your own meals and streaming movie and TV shows from online sources.

Retirement accounts

As a general rule, the money in your retirement account should stay there until you retire.  Some retirement accounts, however, allow you to make a withdrawal from your individual retirement account or borrow funds from a 401k.

It is fine to borrow money from your 401k if you only need a small down payment and you’re getting an FHA loan. Remember that you’ll be required to pay a penalty of 10% on the amount withdrawn, so we discourage you from tapping into your 401k if you’re planning to withdraw a huge sum of money.

Family gifts

Another way to fund a down payment is through family gifts. Your parents, in-laws or even grandparents may be willing to give you a gift of money to help you fund your home.

Some lenders would approve your home loan, provided that your family or relative won’t ask you to repay the money. To prove this, lenders would require you to provide a gift letter, which includes the amount of the gift, your relationship to the person gifting the money and that the money doesn’t have to be repaid. The best part of receiving money from family and relatives is that you don’t have to pay taxes for up to $13,000 gift money.

 

Tips for Buying a Vacation Home

A lot of people have abandoned their dream of owning a ski, lakefront or beach getaway place when the housing market collapsed a few years ago. Now that the housing market has stabilized, some of you might be once again toying with the idea of buying that vacation house.

Whether you’re looking for an investment property to diversify your portfolio or for vacation enjoyment, you should always think through your plans before taking a leap.

Here are some things to consider when buying a vacation home.

Try it out first

You have found a lovely beach house at great resort community. You had a great time and you are looking forward to go back to that place over and over again. But before you decide to buy a property in that area, we suggest that you stay there for a few weeks to get a feel for what it’s like to live there. Also, visit the place during each season.

Get to know the place from a local perspective. This is a long-term commitment, so you need to make sure you settle on a property that you’ll enjoy for many years to come. Remember, enjoying the destination as a casual visitor is different than having to stay there a few months each year.

Know how often you will really visit

Most people who own a vacation home have the house rented out when they’re not using it. While it’s good that you’re making money out of it, you need to visit the house often to make the purchase worth it.

Make sure that the property you’re interested in is at least a few hours away from your primary residence. You want it to be close enough, so you can access it regularly. Keep distance in mind when looking for a vacation house.

Factor in the extra cost

Nothing ruins a perfect vacation home than knowing that you’re trapped in a financial nightmare. Just like your primary residence, you need to factor in the extra costs like insurance, taxes, utility bills and maintenance cost. Remember, you will still be charged for electricity, gas, water, trash removal and other fees, even if you’re not there. Also, the house will need to be cleaned and maintained regularly, so you will need to find someone to clean and maintain the house when you’re not around.

Questions you need to ask yourself Before Buying a House

For most people, the idea of buying a house is a very attractive proposition. Homeownership affords you the ability to customize your space according to your taste and preferences. Plus, there’s nothing quite the feeling of having the keys in your hand and knowing that the property belongs to you.

Buying a home is a major financial decision. It is a very big decision that should not be taken lightly. That said, it pays to ask yourself a handful of questions before taking the home buying plunge.

Answer the following questions to make sure you are ready to buy your first home.

Am I financially prepared for buying a property?

Buying a house is a long-term commitment that will have a huge impact on your finances and your lifestyle. You want to make sure you are financially prepared before looking at houses. Another thing you may want to consider is your job stability. You may want to hold off buying a house if you feel there is a chance you could lose your job or income in the next few years.

QuestionsYouNeedtoAskYourselfBeforBuyingaHome

How healthy is my credit score?

While it is still possible for you to be approved for a mortgage even with a low credit score, you are likely to pay a higher interest rate as a result. A mortgage is one of the biggest financial obligations you will ever take on, so why add to that burden by paying a high interest rate?

How long will I live in the house?

One of the biggest benefits of owning a house is that you can live in it indefinitely. But if you’re planning to live in that house for a couple of years, it might be a good idea to just rent for the time being. You really shouldn’t be thinking about buying a house if you’re not sure you’ll live in it for at least 5 years. Before buying a house, be honest with yourself about how long will you stay in place.

Should You use Your Retirement Money to Buy a House

Should You use Your Retirement Money to Buy a HouseAt a certain point in your life, you start seeing most of your friends and colleagues having their own home. It may be tempting to join them right away and go out there to start looking at houses, but you also have to consider where the funds will be coming from.

If you’re planning to buy that gorgeous home down the block, then you will need to save 5 to 20% of the sale price. That’s a lot of money and it may take you a long time to save that much. Caught up in the excitement of buying a new house, you might be tempted to break into your 401k so you’ll have enough money for a down payment. You’re probably thinking, “What’s the harm? It’s my money, and I’m just borrowing from myself”. But the truth is that taking a cash 401 (k) withdrawal is a bad idea as it will cost you in the long run.

Generally, you can withdraw the money anytime you want and for any reasons, but be warned. You’ll be slapped with a 10% penalty on the amount you withdraw if you are under 59 ½. On top of that, any money you pull out of the 401 (k) plan will be subject to federal tax. This is because the government wants to discourage you from borrowing from you 401(k) plan before your retire.

Paying the 10% early withdrawal penalty is one of the dumbest things you can do for your personal finances. It’s like throwing your hard-earned money out the window.  Plus, if you quit your job, you’ll be required to repay the loan immediately. That means you’re stuck at your current job as long as you have a loan.

If you can’t afford to pay the down payment, then you shouldn’t be thinking of buying a house in the first place. It is financially prudent to leave the money invested and save it for retirement.

Tips for Buying a House in Summer

HomeBuyingSummerHouses can sell very quickly in hot real estate markets. Because most families want to be settled in their new house before the school year rolls around, spring and summer is often the big season for real estate.

But with the temperatures reaching about 100 degrees, finding your dream house isn’t going to be easy. Don’t let the fear of heatstroke stop you from landing your dream home.

Here are some tips for buying a house in summer.

Plan your route

Location is one of the most important considerations when buying a house. Some of you are probably looking to buy a house in a particular location.

While looking at house can be fun and exciting for homebuyers, it can be quite exhausting if you’re travelling in the heat. That said, we suggest that you have a clear plan as to which homes you want to visit first. Also, map out homes that are close to one another to lessen travel time.

Stay hydrated

During the hottest months of the year, staying hydrated is extremely important. Bring a bottle of water with you while shopping for a new home. House hunting while dehydrated can cloud your judgment and dampen the joy of the experience.

Go house hunting while there is less competition

Most people are away on vacation or pre-occupied with barbeques during the summer. Take advantage of this time. Go out there and look at houses. The last week of July and the first half of August is the best time to go house hunting. During this time, a lot of buyers have already bought a house; while others stop looking.

Summer diamonds in the rough

While the real estate market is usually at its peak in spring and summer, not every seller is able to sell their house as quickly as they expected. Hoping to capitalize on buyers who wanted to be moved in and enjoy the summer in their new house, some sellers choose to raise their prices.

After about 50 to 60 days on the market, some sellers are already panicking. Many of them are thinking of lowering their price.  This time, you are certain that you are getting a good house for the right price.

Simple Ways to Reduce Your Moving Cost

DPG2According to a report by Worldwide ERC, an organization that tracks mobility cost, the average professional household move costs a whopping $12,230. With this amount, we’re guessing that your moving cost is one of your biggest concerns.

While some expenses are unavoidable, there are some steps you can take to reduce your moving cost. Here are some of them.

Purge

A lot of people don’t realize it, but the more household items you have, the more money you’re going to spend. Reducing your load will drastically reduce your moving bill. Give away or sell things you no longer need or use. You can use the amount you raised to buy new items for your new home.

Recruit help to load and unload

It may cost you thousands of dollars to hire professional movers that consist of 3-4 crews to move your belongings. If you’re no willing to shell out that much money, consider asking help from a few friends. A few cases of beer, pizza and a little begging can go a long way.

Collect packing materials

With a little searching, everything you need to pack your stuff can be retrieved for free – with the exception of the tape, of course. Most stores just crush their boxes. Try to drop by your local grocery stores or liquor stores. They’ll be more than willing to give you some of their boxes if you ask.

Pack your own boxes

Hiring a full service moving company will let you rest easy since they’ll take care of every single aspect of the move, but it can also be expensive. If you really want to reduce your moving expenses, consider packing your own boxes. If you do so, you’ll be able to save the amount of money your move would have charged you for packing your stuff.

Common Mortgage Mistakes and How to Avoid Them

Making-Offer-on-HouseGetting a mortgage is a complex and time-consuming process. Considering that a mortgage is the biggest debt many of you will ever carry, you need to be very careful during the loan application process.

A lot of homebuyers fall into the trap of making these mistakes when shopping for a mortgage. Be sure to avoid them at all cost.

Ignoring your credit  

This is one of the biggest mistakes that homebuyers make. Be sure to check your credit before you begin your pursuit of a home. You can get a copy of your credit report from any of the 3 major credit agencies.

By checking it early on, you’ll avoid nasty surprises down the road. Plus, you’ll have the chance to report and resolve errors before applying for a mortgage.

Not shopping around

Don’t be one of the many consumers who obtain mortgage rate from only one bank or lender. Borrowers who do not their homework end up paying more than they should. You should always shop around and find the most favorable terms possible. Do not underestimate the difference of just a fraction of a percent as this can have a dramatic impact on the overall cost of your loan.

Not getting pre-approved

There’s nothing more frustrating than putting in an offer, and then finding out later on that you did not qualify for financing. Good preparation is the key to a good mortgage. Unfortunately, a lot of people fail to realize the importance of taking this step.

It is important for you to understand that being pre-qualified is different from being pre-approved for a mortgage. A mortgage pre-approval gives you an idea on what you can spend on a home. Plus, it gives you added confidence about your ability to purchase a house.

Job hopping

It might be tempting to leave your current job and move to a job with a higher pay, but don’t. Changing jobs in the middle of the mortgage application can complicate the entire process. If possible, ask your prospective employer if you can start after your closing date.

 

Home Buying Misconceptions

While most people would agree that buying a house is a great investment, some people choose to put it off or avoid it altogether.

There are myths and misconceptions that remain prevalent in today’s market. These scare potential buyers away and keep them on the sidelines for much longer than needed.

Over the years, we have discovered some misconceptions held by those who are new to the home buying process. Here are some of them.

You need 20% down payment to buy a home

58% of Americans believe that homebuyers are required to put a large sum of money towards down payment. What they failed to realize is that they can still buy a house even if they only have little to no money down.

According to the National Association for Realtors, the average home buyers paid 6% in 2014. This is due to the fact that most of them used FHA loans, which offers as low as 3-5% down payment.

Renting is less expensive

Some people believe that renting is less expensive since it is the landlord’s responsibility to pay for homeowner’s maintenance, taxes, maintenance and monthly upkeep. While there is some truth to it, buying a home can be more worthwhile if you are to stay in the house for a long period of time.

You need a high credit score to get a mortgage

A lot of potential buyers assume that they won’t be approved for a mortgage just because they have bad credit. While having a good credit is an advantage, thousands of buyers are able to acquire mortgage even if they have a less-than-perfect credit score. In most cases, a credit score of 680 is enough to secure a home loan.

A 30-year fixed rate mortgage is the best option

This is popular among first-time home buyers. Most buyers choose this financing option as it keeps the monthly payment low. Plus, they don’t have to worry about fluctuations in interest rate. However, it isn’t necessarily the best option for everyone.

For this type of mortgage, it would take 30 years to pay it off. Add to that, you will also have to pay interest for 30 long years. If you are a first-time buyer and you do not consider the house as your forever home, this might not be the best option for you.

Common Mistakes When Buying a Condo

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Getting your own place is one of the most exciting things you’ll ever do in your life. But for those who don’t want to be burdened by several responsibilities associated with being a homeowner, investing in a condo unit may be a viable option.

Condo ownership can be an amazing experience. Unfortunately, a lot of buyers make the wrong decision when investing in a condo unit. Be sure to do your homework and educate yourself before putting money down on a condominium.

Here are some of the biggest mistakes buyers make when buying a condo. Go through these mistakes so that you can avoid them while on the hunt for your own condo unit.

Buying one of the first few units

It can be very exciting to know that you were one of the first few buyers. Sadly, there are consequences to this.

Several condo developments built hundreds of units. But the problem is, the number of units built vastly exceeded the demand. Because of that, owners are burdened by the responsibility of paying for HVAC, plumbing, landscaping and maintenance costs that should be handled by hundreds of households.

To avoid this problem, we suggest that you wait until the demand has already been established before getting a unit for yourself.

Having zero clue about rules and regulations

It is important to know whether or not you can abide by the rules and regulations created by the HOA. That said, you need to read and understand the CCRs (Conditions, Covenants and Restrictions) before making a purchase.

Trusting a real estate agent too much

Most buyers will seek the assistance of a real estate agent due to lack of knowledge and experience in buying a property. Sure, agents can guide you through the process but you should never decide just because your agent said so. Remember, the decision is still entirely up to you.