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How to Survive Transition

How to Survive Transition

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Timing the closing of your new home purchase with the end of your lease agreement or sale of your existing home is tricky, to say the least. Rarely does it work out that you move directly from one home to another on a perfect schedule. During the transition, you need a place to live and stash your stuff. In addition, you need the flexibility to move at a moment’s notice — all while living, working, attending school, or running a business. Here are a few tips that might smooth the transition.

Take Care of Your Mail:

As soon as you know that there will be a break between leaving one home and moving into the other, move as many bills, bank statements and important communications to online bill pay as possible. Don’t risk having your important mail delivered to an empty house. For those items not receivable online, and especially if you receive business mail at home consider changing your address to that of a trusted family member. If that’s not possible, rent a mailbox. Both the US Postal Service and private mailbox providers like the UPS Store offer personal and business mailboxes along with other services. Private mailbox services can sign for deliveries and notify you when you receive packages. If your transition period is short, the USPS will hold your mail for several weeks.

Pack with Transition in Mind:

Usually when you move, you pack up the whole house, then load the moving van like a Jenga game—filling every inch of open space—expecting to unload the whole thing within a day or so at your new home. When you have a transition, however, you need to pack items to store, leaving out the things you’ll need to use during those days, weeks, or even months between one place and another. Of course, you can’t plan for every contingency—weather changes, a child’s school project, an unplanned business trip—but you can mitigate some of the inconvenience by keeping some items accessible. One option is to rent a storage unit, placing furniture and other large items in the back, but keeping dressers or storage boxes with seasonal clothing, school and craft supplies, and travel items within reach of the doorway.

Temporarily Suspend Services:

Take the time to contact service providers such as Internet, cable or satellite, electricity and natural gas, newspaper, and landline phones to see if they offer options for suspending services until you transfer them to your new home. Some offer moving suspensions, while others have vacation holds for a small monthly fee.

Where to Live?

If your transition will last just a few weeks, you might consider accepting the hospitality of family or friends. If you work from home, have children, or just require your own space and privacy, however, there are other options.

  • Residential and extended-stay hotels offer weekly and monthly rental options. Most have kitchens complete with dishes and cookware, apartment-sized refrigerators, access to laundry facilities, and weekly cleaning and linen services. Many also offer full hotel services as well. Many extended-stay hotels accommodate pets.
  • Corporate housing or corporate apartments refer to apartment complexes offering short-term leases. Similar to residential hotels, but typically larger — with as many as three bedrooms — corporate housing caters to business people and families needing more space than a hotel room provides.
  • Families with children might consider a more adventuresome stay at a nearby resort or campground that offers cabinsvacation cottages or lodges. A move in the off-season may make this option both affordable and fun. Be sure to factor in the extra drive time to work or school, but take advantage of nearby sightseeing and holiday amenities for some extra fun during your transition.
  • Borrow or rent an RV. Whether your move is across town, across the state or across the country, consider renting a recreational vehicle. With many RV parks located inside or near city limits, temporarily living in an RV park has many of the same advantages as a hotel. If you are moving some distance and can take vacation time during your transition, a one-way RV rental could be the solution for you. Similar to a one-way moving van rental, you pick up the RV near your current location, and when done, deliver it to a location near your final destination.

As with all your transition needs, your professional real estate agent can provide you with relocation options and ideas to make your move as smooth as possible.


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Real Estate Terminology: Abatement, the First in a Series

Real Estate Terminology: Abatement, the First in a Series

Real Estate TerminologyEvery industry has its own vocabulary, and real estate is no exception. If you are newly in the home-buying market, you may find yourself stumped by the lingo, acronyms, abbreviations and jargon commonly used in real estate sales materials, online listings, contracts and the like. We do not want you to be confused, so in this series of posts, we will define several terms for you in everyday language. Abatement is one real estate term or expression with which to become familiar.

Abatement

In general legal terms, the word abatement means removal or diminishing of something. In residential real estate, the term most refers to property tax in the form of a property tax abatement. Since property taxes are ongoing annual homeowner expenses even after you completely pay off a mortgage, having access to a property tax abatement or real estate abatement is a valuable savings when buying a home. For example, if a city, county, state or other property-tax entity offers a tax abatement, it could reduce the monthly housing costs by up to 3% during the abatement period.

Property tax abatement programs make it easier to qualify for a mortgage by reducing your income/debt to housing cost ratio. In addition, as long as the abatement continues in effect, it adds to the attractiveness of your home when you decide to sell.

Certain abatements are for one-time improvements to an existing property can vary widely depending on the area. They can be as for upgrades or enhancements as different as:

  • Installing a green roof or other environmentally friendly additions
  • Renovation that increase the property value
  • Conversion of non-residential buildings to residential use

Improvements must conform to the abatement requirements, building codes and permitting processes, so if you are planning to purchase a home that you intend to renovate, make sure that we know so that we can advise you on the abatements in effect for the properties that we show you.

In addition to state and local abatements, there are even some federal tax incentives for restoring and preserving homes designated as historic of historical civic value. Other abatements are for qualified newly constructed homes.

Some cities have property tax abatements in effect for years. These most often are set in place to attract buyers to neighborhoods or areas that are under redevelopment, in the process of revitalization, or have lower demand. The specific qualification requirements for abatements differ from area to area, so be sure to talk with us about access to potential abatements when you are house hunting.

Asbestos and Lead-Paint Abatement

Other uses of the word abatement relating to real estate include certain expenses associate with buying older property, or property being repurposed from commercial to residential. For example, when purchasing a home built before 1978, any renovations or improvements to a home might need to conform to lead paint abatement requirements. Another potential abatement cost is asbestos removal. Prior to the 1970s, asbestos was used as insulation in ducts and pipes, as vermiculite attic insulation, in wall and ceiling acoustical tiles, concrete exterior siding, floor tiles and other common home materials contained asbestos. The Environmental Protection Agency regulates asbestos removal, so if you plan to make changes to an older property, we can help you navigate the ins and outs of asbestos abatement and recommend qualified professional asbestos removers. Certain homes may qualify for an asbestos or lead paint removal grant.

Call us …

We can help you determine what the home you are considering buying might qualify for, so be sure to ask us about both tax abatements and asbestos or lead paint abatement grant programs when you call.


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Smart Selling to Today’s Homebuyers

Smart Selling to Today’s Homebuyers

Smart SellingIf you’re considering selling now that the housing market outlook is improving, take a few moments to consider how buyers have changed what they look for in the home buying process. During the past six years, changes in how buyers communicate, share information, research, and decide what they’re looking for, mean that you need to provide them with the information and buying experience they seek. We can guide you in each of these areas because we know the strategies that are working best in your home’s neighborhood.

Today’s younger homebuyers have survived the housing turbulence just as you have. They have watched prices go up and down and up again, foreclosures rise, interest rates drop, rules and requirements from mortgage lenders change, and the availability of information increase. According to USA Today, they are beginning to buy, but they are both smart and cautious. Most of all, they are used to waiting. Research supports the idea that Gen X and Y homebuyers begin investigating as much as a year and a half ahead of when they’re ready to buy. That indicates you won’t find a sense of desperation: instead, you’ll find that they will research, compare and make careful offers. Since we are professionals with inside information on the local market, we can help you navigate the new terrain.

Set the Right Price

A wrong price can derail a home sale, adding days to its time on the market and making it less desirable to savvy buyers. The mistake many sellers make is setting the price too high. Of course, you want to get the most from your home that you can, but if you choose too high a price at first, a potential buyers’ online search criteria might exclude it. Assuming buyers will make a lower offer from which you can negotiate does not take into account the vast amount of data now available to buyers. These days, homebuyers can see what the home originally sold for, what price all the houses in the area most recently sold at, if the home was ever a rental, and a vast amount of information about both the property and the neighborhood.

Conversely, lowballing the price in hopes of a quick sale make turn off many prospective buyers. Their inherent skepticism will make them suspect potential problems that they have neither the time nor inclination to deal with. Since we deal with pricing information all day long, rely on us to help you set the right price to get your home sold.

Pay Attention to Images

Online shoppers make quick decisions based on the images they see. If the photos of your home are blurry, busy, cluttered, or dark, they may pass over them in search of home postings with better, brighter photos. Worse yet is a listing with no photos at all. Gen X and Gen Y homebuyers are skeptical of listings without images. We can guide you in how to prepare your home for a photo shoot. Remember, for many modern buyers, the online images are their version of an open house, so take time to put away personal objects, clean windows to make the inside brighter, and pay attention to curb appeal. When online images don’t satisfy homebuyers, you won’t get them to look further.

Staging Your Home

The information age and reality TV have changed younger buyer’s perceptions of how a home should look. Be sure your home looks it’s best before you put it on the market. According to Money Smarts, savvy online shoppers may use older images via Google Street View or Bing 3D to check out curb appeal, nearby homes or businesses, and to see if the home shows improvements. Check out the street view yourself by searching on your address in Google or Bing and choosing the various views. If the street view is out of date—such as old fencing or exteriors, overgrown landscaping, or empty lots, make sure your description addresses the improvements and changes.

Put yourself behind the buyer’s computer screen. That is, make sure you know that the buyer is seeing before you put your property on the market. Remember that younger buyers’ caution means they arm themselves with information before they make an offer. We can help you address any issues relating to how your home shows up in searches, images, and other online locations, so give us a call and we can get started.


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What’s the Point?

What’s the Point?

Prepaid interest, sometimes called “points”, is generally tax deductible when a person pays them in connection with buying, building or improving their principal residence.  When points are paid on a refinance, they are not a current deduction but have to be taken prorata over the life of the mortgage.DEDUCTIBILITY.png

For instance, if $3,000 in points were paid on refinancing a 30 year mortgage, a deduction of $100 per year is allowed.  When the loan is paid off or replaced by refinancing again or the home is sold and the mortgage paid off from the proceeds, the balance of any un-deducted points may be taken in that tax year.

Your tax professional needs to be made aware of any of these situations so that he or she can accurately reflect the deductions in your return.  Currently, the most common situation is homeowners may be refinancing their home for the second, third or even, fourth time. If there are points that have not been completely deducted, they need to be treated in the year of refinancing.

For more information, see points in IRS Publication 936; there is a section on Refinancing in this publication. For advice considering your specific situation, contact your tax professional.


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Saving for a House: It’s More Than a Down Payment

mortgage-servicers

It’s easy to get caught up in credit scores when considering a home purchase. But as lenders continue to loosen requirements, the need to have money in the bank doesn’t get any less acute.

Getting prescriptive about how much you need in savings to satisfy a mortgage lender is tough business. The answer can depend on a host of factors, from the type of mortgage and size of the loan to the property itself and more.

You’ll most likely need a solid chunk of change upfront to cover a down payment and closing costs. Lenders might also want to see a stockpile of “reserves,” which often translates to a certain number of months’ worth of mortgage payments.

The bottom line is that it’s tough to talk specifics about your bottom line. That’s why it’s important to get a solid understanding of your mortgage options and seek clear guidance from lenders.

Credit scores are critical, but so are income and assets when you’re applying for a home loan. Here are some of the important savings you’ll need to accumulate first.

Down Payment Needs

Down payments are inescapable for the vast majority of non-cash homebuyers. Outside of state or local programs, only government-backed VA and USDA rural development home loans allow qualified borrowers to purchase with no money down.

Conventional and FHA loans typically require minimum down payments of 5% and 3.5%, respectively. On a $200,000 mortgage, that’s $10,000 for conventional and $7,000 down for FHA. But buyers often put even more skin in the game.

Conventional borrowers last month had an average loan-to-value ratio of 80%, according to mortgage software firm Ellie Mae. For FHA loans, it was 95%. That means buyers are putting down an average of 20% for conventional loans and 5% for FHA loans.

Existing homeowners often have an advantage because they’re able to put the proceeds of a home sale toward a new purchase. It can take first-time buyers years to scrape together enough money for a down payment.

That’s partly why home sales among first-time buyers hit their lowest point last month since the National Association of Realtors began tracking the figure in October 2008.

Reserves

Paying the upfront costs of homebuying represents one pool of money. Lenders want to make sure you’ve got plenty left over to keep the monthly payments rolling in long after closing day.

One way they hedge risk is by requiring a certain amount of reserves. Guidelines can vary by lender, loan type and borrower. One month of reserves is usually equal to your monthly mortgage payment, including property taxes and insurance.

Conventional lenders typically seek from two to six months of reserves, but it could be as many as a year’s worth, depending on your risk factors.

Neither FHA nor VA loans have a reserve requirement for single-family homes. But purchasing multi-unit properties under these programs typically requires three to six months’ worth of reserves. Reserve requirements will also vary for jumbo loans.

A healthy amount of reserves can help homebuyers on the edge. Lenders can consider these assets as a positive compensating factor, which can help a spotty loan file overcome credit or debt issues and help the mortgage process move along faster.

Residual Income

Lenders will take a close look at the ratio of your major monthly debts against your gross monthly income. This is known as debt-to-income (DTI) ratio, and different loan programs have different requirements.

Money-wise, it’s not just the income stream some borrowers need to worry about.

Some lenders and loan types may require you to have a certain amount of money left over each month after paying major expenses. The VA loan program has pioneered this requirement, known as residual income. VA borrowers must meet a monthly residual income benchmark that can vary based on where you live and your family size.

For example, a family of five in the Northeast needs at least $1,062 left over each month after paying those major bills (think mortgage, student loan, child care).

The FHA recently adopted the VA’s residual income requirement as a test for borrowers with higher debt-to-income ratios. The change takes effect in late April.

Residual income doesn’t necessarily represent funds you need to earmark for savings. But knowing how to budget and save are key traits of successful homeowners.

While you save for a home loan, it’s important to make sure you’re maintaining or building good credit so you can qualify for the best rate possible. You can pull free credit reports every year from each of the major credit reporting agencies to see your full credit history. Also, the Credit Report Card is a free tool that gives you two of your credit scores and a breakdown of what’s impacting your scores.

More on Mortgages and Homebuying:

Image: iStock


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Moving Tips that Save You Money

Military life is spent on the move.

Service members are typically transient, spending a few years in one location before packing up to head to a new installation. Moving can be an exciting time, but every decision is linked directly to time, effort and, of course, money.

Here are some moving tips that can help maximize your budget and your sanity:

Preparing for Move

  • Hiring a moving company six weeks in advance will allow you time to search a company’s service history as well as costs. This will be plenty of time to be flexible and negotiate if hidden costs pop up or another company has a better offer.
  • Be sure to collect any deposits prior to moving to ensure you get the deposit and do not have to deal with postage or long distance phone calls.
  • Get a floor plan of your future home or take measurements and scale it down to paper. That way, you can try to fit the furniture you have into the plan. If it doesn’t fit, you can get rid of it and avoid moving costs.
  • Be sure to plan your meals to clean out your freezer and pantry. Frozen foods cannot be shipped, so eat those first. Canned foods are heavy.

Pre-Packing Clean Out

  • Clothes weigh a lot and result in shipping costs. Go through your wardrobe and determine what you will and won’t wear. Avoid the “I might still want this” syndrome and save yourself some space and money.
  • Garage sales can generate some useful pocket change. If you have kids, let them help and sell the toys they’ve grown out of with the incentive of some profit. Sell your own “toys” that are collecting dust in the garage or attic, including CDs and other items that can become bulky in numbers. Used movie and CD stores may purchase them as well.
  • For the clothes that don’t make your cut and what’s left over from the garage sale, make donations and keep the receipts. You may just get a tax break.

Packing Procedures

  • Avoid any damaging mishaps by not packing aerosol cans that can explode. Throw away or use up hair spray, shaving creams and household cleaners that would be easy to replace. It’s better than risk ruining the entire shipment.
  • Do not pack flammable items like paint, bleach, lighter fluid, and combustible cleaning fluids. Remember to empty the fuel from lawn mowers, lamps and other yard equipment.

Many of these tips and more can be found from Paul’s Transfer Company, and check out our tips on making your PCS work for you for even more money-saving ideas.


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How’s Your IQ on the QM?

How’s Your IQ on the QM?

Qualifying Guidelines.pngThe Qualified Mortgage Rule came into effect on January 14, 2014 as one of the results to the Dodd Frank Reform Act to protect consumers from predatory lending practices.  This will affect the underwriting standards that the majority of lenders will use to qualify borrowers.

The ability to repay rule states that financial information must be supplied by the borrower and verified by the lender.  The borrower must have sufficient assets or income to pay back the loan which limits the maximum debt-to-income ratio of 43%.  In an effort to present a more accurate picture of the costs to the borrower, teaser rates can no longer hide a mortgage’s true cost.

A maximum of 3% in upfront points and fees can be paid on behalf of the borrower.  There can be no negative amortization, interest-only or balloon payments and the loan term limit cannot exceed 30 years.

While there are more requirements, most deal with good underwriting practices that are followed by reputable lenders such as considering and verifying things that affect the ability to repay the mortgage like income, assets, employment status, simultaneous loans, debt, alimony, child support and credit history.