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Debt-to-Income ratio is a tool that lenders use to qualify buyers for a mortgage and is an important factor in determining loan approval.   It provides an indication of the amount of debt that a potential borrower is obligated to in relation to how much income they have. Total monthly debts are determined by adding the normal and recurring monthly debt payments such as monthly housing costs, car payments, minimum credit card payments, personal loan payments, student loans, child support, alimony, and other things. By dividing the monthly income into the monthly debt, you arrive at a percentage of the monthly income.   Lenders actually look at two different ratios commonly called the front-end and the back-end. The front-end ratio is the proposed total house payment including principal, interest, taxes, insurance, mortgage insurance if required, and homeowner association fees.   Lenders generally don't want these expenses to be more than 28% of the monthly gross inco...

Ideally, each party will pay their own closing costs associated with the purchase and the sale of a home, but they can be negotiable based on lender requirements and market conditions. The fees are usually paid at the settlement and will be itemized on the closing statement.   Buyers should be aware of them before contracting for a home.   If a mortgage is involved, the lender will want to verify that the borrower has ample funds available at closing to pay for them. Buyer's closing costs can range between two to five percent of the sales price.   The real estate agents should be able to give you an estimate of what a buyer can expect.   The most accurate estimate will come from the lender at the time the loan application is made. They may or may not include other fees that will be charged to buyers by the title or escrow company. Buyers are required to be provided a standard Closing Disclosure form at least three business days before the loan closing date. ...

Mortgage assumptions have not been a practical matter for the last 30 years because mortgage rates have been on a steady decline.   Even if the seller had a rate lower than the current rate, the new purchaser must qualify to assume the loan.   In the case of conventional loans, the lender has the right to increase the rate to the current rate which neutralizes the reason for assuming the loan.   This change took place in the early 1980's when lenders added due on sale provisions so lower rates could not be assumed. FHA and VA loans can be assumed at the existing rate with the provision that the purchaser qualifies for the loan.   This could be an advantage if the rate on the loan to be assumed was lower than the current mortgage rate for FHA or VA and the buyer is going to owner-occupy.   Unfortunately, investors are prohibited from assuming FHA and VA loans. Besides the obvious advantage of a lower rate which would have a lower payment, the closing costs ...

Vacation home sales are up 44% year-over-year according to the National Association of REALTORS® based on sales during the July to September period.   Not only are the number of units up, but they are also selling faster than in previous years. On a national basis, 72% of existing vacation homes closed in October were on the market for less than one month. The increased desirability and affordability of vacation homes, according to the National Association of Realtors, seems to be influenced by the pandemic and low mortgage rates.   The ability to work from home seems to be contributing to this increase.   Freddie Mac reports the average commitment rate for a 30-year, conventional, fixed-rate mortgage decreased to 2.83% in October compared to the aver commitment rate for all of 2019 which was 3.94%.   There may also be a safety factor involved with these decisions to purchase vacation or second homes.   Contagious diseases flourish more in highly pop...

A home inspector is another key professional involved in a real estate transaction.   Many times, the sales contract will have a provision that allows the purchaser to have inspections made to discover issues that are not readily apparent or have not been disclosed by the seller. It is important to have a qualified individual perform the inspection.   Regardless of whether a license is required, buyers should ask about the inspector's experience, training, years in business and if they are familiar with the area and type of property involved. Membership in professional associations can indicate an inspector's commitment to education and training.   References from both customers and agents are helpful and may be more meaningful.   You are encouraged to call the references, especially, if you are concerned about any specific areas. Errors and Omission insurance is intended to cover mistakes made during an inspection.   It would be good to find out if the in...

If you are making a particular meal for the first time, it is essential to have a recipe so that it turns out the way it should.   Knowing the ingredients and preparation can guide you through the process. Buying a home is really no different than making a new recipe.   There are certain things that need to be done, many of which should occur in a particular order to save time, money, effort and disappointment.   Your first inclination may be to start searching the Internet for homes and schedule some showings or possibly visit open houses.   Even though this is very gratifying, it shouldn't be done until you have gone through the preliminaries. Buying a home for the first-time implies you haven't been through the process before and even though, you may have a rough idea of what needs to be done, selecting the right agent in the beginning will give you the benefit of years of personal and professional experience that can help you avoid some of the common mistak...

We are all spending more time at home and will probably need to continue to do so for a while longer.   Depending on the makeup of your family, your home is now a home office, a gym, a virtual classroom and considerably more meals have been prepared in your kitchens in the past six months than normal. Some businesses have undergone a metamorphosis that has shown them that maybe they do not need the big commercial spaces for their employees.   They realize that they can be just as productive with their work force offsite which will cut expenses. If this scenario sounds familiar, it may be worth exploring what moving would look like for your situation.   To analyze the options, you will need to know what your home is worth and what the net proceeds will be after selling it. You will need to know what homes are available with the amenities you are looking for together with the prices and mortgage money.   Depending on the interest rate on your current mortgage, th...

Selling a home and buying a lower priced home that meets your current needs can be to your advantage in an "Up" market like the current one with low inventory.   The advantage is that you can maximize the price for the home you're selling and not have to reinvest it all in your replacement. Just to illustrate the point, let's say there is a 10% premium in the sales price of a home currently.   If you're selling a home for $750,000, it would be $75,000.   If you replaced the home with a $500,000 home, the premium would be $50,000 which means you're $25,000 ahead. Let's further assume that your home is debt free so that when you sell it, you have a large cash equity.   Instead of paying cash for the replacement home, get an 80% loan at today's low interest rates and reinvest the proceeds to supplement your retirement. You may be able to get as low as a 2.5% mortgage and earn significantly more on the proceeds in other investments. Home prices are...

Cutting the price will generally bring buyers of anything out of the woodwork that were not serious before.   Some renters could easily lower their monthly cost of housing by half or more by purchasing a home with all the financial benefits that come with it. The most obvious thing in today's market is that the mortgage payment could be less than the rent the tenants are paying.   With mortgage rates hovering around 3%, this is a major factor of the savings. The two other major contributing factors are appreciation and amortization of the mortgage, neither of which benefit tenants continuing to pay rent.   According to the FHFA House Price Index, home prices rose 5.4% from July 2019 to July 2020.   There were 400,000 less homes on the market during the summer of 2020 than the previous summer which is influencing appreciation. With each payment a homeowner makes on their mortgage, a portion is used to reduce the principal amount owed.   This is like a savin...

Banks are concerned about making loans that will be repaid not about making loans that are tax deductible for homeowners.   It is good business for the bank but how is the homeowner supposed to know? Most homeowners and potential homeowners are aware there are tax benefits associated with ownership.   For instance, mortgage interest and property taxes have been deductible expenses from federal income tax since it was enacted in 1913.   The current law provides that homeowners can deduct the interest on Acquisition Debt which is the amount of debt incurred to buy, build or improve a first or second home up to $750,000.   The amount of acquisition debt decreases as payments are made and it cannot be increased unless the additional funds borrowed are used for capital improvements. It is not uncommon for a homeowner to refinance their home for any number of reasons.   It could be to get a lower interest rate that would lower the payments or remove mortgage ins...

The concern today when putting your home on the market should not be whether you'll get a contract; it's whether you are going to recognize the majority your net proceeds without any unnecessary delays. What you realize from the sale of your home has to do with maximizing the sales price while minimizing the sales expenses.   Interestingly, the buyers will be trying to minimize the price they have to pay for your home and possibly, have you pay some of their expenses. Taking a few pictures with a cell phone and putting a sign in the yard may be enough to get a buyer but successfully selling a home in today's market requires expert marketing and expert negotiations.   Marketing begins with the preparation of the property to optimize the first impressions it makes to potential buyers.   A skilled professional can make recommendations that can help the home sell for the most money and in the shortest amount of time.   Cleaning, painting, depersonalizing, removing ...

Just like buyers should be pre-approved before they begin to look at houses, Sellers should have their home pre-approved.   The reasons are similar: appeal to the "right" buyers, discover issues with the home early, improve marketability, increase negotiations position and close quicker. For the seller, there are few things that need to be done before the sign goes in the yard and definitely before prospective buyers see the home.   The first is to understand that once you decide to sell the home that it needs to appeal to the broadest base of buyers and that means depersonalizing your home. Once the home is sold, you will need to pack your things for the new home.   Think of this as starting the process early.   Get moving boxes and make decisions on what you intend to give away or discard in each room and closet.   Identify and pack those items before the home goes on the market. This will be the first wave of making your home more marketable. When your ...

More and more homeowners are employing smart home technology within their homes.  It may start with a video doorbell or lights and progress to other devices.  The smart-home device market is rapidly growing and Forbes research expects it to grow from $55 billion in 2016 to $174 billion in 2025. The popularity of these high-tech features will require a few additional steps to consider when selling a home.  The seller should determine which items will and will not stay with the sale of the home and identify them in the listing agreement. Confusion can arise when a home's marketing mentions its smart-home technology and is unclear if a piece like the hub, which is easily considered personal property but is integral to the working of the system.  Some might consider it an accessory and others a component. A smart home can contain multiple technology devices connected to the Internet that allow them to be controlled or accessed from computers, tablets or most common...

In a recent article, The Wall Street Journal reported that investors have rarely been this flush with cash.   The economic uncertainty due to the pandemic and the volatility of the stock market has caused assets in money-market funds to increase to approximately $4.6 trillion, the highest level on record according to Refinitv Lipper. The question becomes should an investor be "out of the market" until things settle down or should they seek to find alternative investments to produce satisfactory results.   Even in the middle of this uncertainty, residential rental property has been a stable performer. Rents are continuing to increase along with values.   Investor mortgages are available at 80% loan-to-value at fixed interest rates for 30-year terms.   Most other investments must be purchased for cash or at best, are limited to low loan-to-value loans, at floating interest rates for relatively short time frames. The use of borrowed funds, especially at today's lo...

It seems like most homes have sprinkler systems and if they do, they have some form of controller to automatically turn the water on and off for the time and days you feel necessary.  It seems like basic functionality and if it isn't broken, you may not feel the need to replace it.   Today, there are so many smart home devices that are not only convenient, but they'll end up saving you enough money to pay for the upgrade.  There are different manufacturers, but you should at least consider the Rachio if for no other reason than the easy installation procedure .   The process is simple.  Unplug the old controller and disconnect the wires being sure to label which wires went to which stations.  Using the Rachio template, mark three spots on the wall, drill holes in the drywall, insert the anchors into the holes and screw the new controller to the wall.   This model has convenient wire connectors that do not require crimping a ...

People are always looking for a "down and dirty" way to determine the value of a home and square footage seems to be one of the most common things used by people whether they are buyers, sellers or real estate agents.   While it seems straight forward, there are several variances that can lead to inaccurate determinations. The market data approach to value uses similar properties in size, location, condition and amenities to compare with the subject to arrive at a price.   Differences in any of these things can affect the price per square foot.   Appraisers are trained and licensed to make these adjustments but the differences are not necessarily objective and that is where opinions start to influence the value. Even if a person were to make accurate adjustments, they would be based on the assumption that the square footage of the comparable properties is correct.   That leads to the next area of concern: how was the subject property measured. It is commonly ac...

There are hundreds of thousands of people who believe, for one reason or another, they cannot afford to buy a home currently.   Some people  may not for any number of reasons but it would be very surprising to know how many who can buy but have gotten some bad information along the way.   It's worth digging a little deeper to find out the facts. John and Karen have been renting a home for the last five years at $2,000 a month.   During that time, the value of the home they were renting went up by $30,000 in value while the unpaid balance decreased by $18, 400.   Even though they were fortunate enough the rent remained constant over the five years, they missed out on close to $50,000 of equity that the owner realized instead of them. Another thing to consider with today's low interest rates, it is quite common for a mortgage payment to be lower than a tenant is paying rent for a similar property.   So, in this example, John & Karen paid more to rent ...

More people grill in July, June & August than any other months and correspondingly, there are more injuries, as well as fires, due to grilling accidents in those months. Even though Labor Day is in September, we still need to be aware of safety. Close to 20,000 patients per year visit the emergency room due to injuries involving grills.   Approximately half of the injuries involving grills are thermal burns.   If you are around fire, there's a chance of getting burned.   About 2/3 of American households own at least one outdoor barbecue, grill or smoker.   Interestingly, gas grills contribute to more fires than charcoal grills.   In addition, there are over 10,600 home fires started by grills each year. While grilling is associated with celebrations, good food, fun and friends, it is important to make sure that accidents don't interrupt your activities.   Only use BBQ grills outdoors and in ventilated areas Place the grill away from ...

Forbearance is a temporary postponement of mortgage payments.   The lender can grant this option to a borrower instead of forcing the property into foreclosure.   The CARES Act provides protections for homeowners with mortgages that are federally or Government Sponsored Enterprise backed or funded such as FHA, VA, USDA, Fannie Mae and Freddie Mac. A mortgage holder should contact the lender to explain the temporary difficulty they are having making payments and ask for relief under forbearance or other options.   Once the lender grants approval, it is important for the borrower to get the terms of the forbearance agreement in writing to be clear about when the payments will resume and how the missed payments will be recovered. Generally speaking, homeowners in a forbearance plan will not incur late fees and it should not adversely affect their credit.   Unfortunately, borrowers must be vigilant to see that the lender is protecting them from delinquent credit mark...

During the first major stay-at-home event that most of us have experienced in this country, a pool can give you and your family enjoyable recreation without leaving the home.   For those without a pool, the NPD group reports that the Covid-19 pandemic has increased pool building by 161% this year. When your children are small, pools become a magnet for not only your children but their friends as well.   It can also be a great place for the summer holidays, Memorial Day, 4 th of July and Labor Day.   Any day during the summer, especially on the weekends, can be an opportunity to enjoy the pool, cook outside and bask in the sun. Some of you may have even made the transition from your children enjoying the pool to your grandchildren.   Usually, there is an interim where you may have wished that your home didn't have a pool so you would not have the maintenance and required upkeep.   Then, the new generation of family starts using it regularly and again, you a...

Three reasons to refinance a home include lowering the cost of housing, shortening the term of the mortgage to pay it off sooner or to using the equity to accomplish another purpose. Replacing the mortgage at a lower interest rate, which is entirely possible in today's market, would reduce the payment.   On the other hand, shortening the term of the mortgage could make the payments increase but would allow the home to be paid for sooner.   In either case, the equity would not be reduced unless the refinancing costs were rolled into the new mortgage. Refinancing the home to take money out would increase the mortgage on the property and lower an owner's equity; careful consideration should be made before doing so. Mortgage rates are considerably lower than credit card rates and usually lower than short term borrowing like student loans or car loans.   For that reason, homeowners will sometimes refinance to payoff higher cost debt. Some people refinance for more than...

The soothsayer in Shakespeare's Julius Caesar issued his famous warning "Beware the Ides of March."   Who knew that in 2020, around the middle of March, the world, as we knew it, would force such dramatic changes on us from the Coronavirus. In America, it has brought our economy to its knees as we sheltered in place for over four months.   During this time, changes have affected our lives and many of those changes could be permanent. Previously, smaller homes were becoming the trend for not only efficiency but upkeep so owners would have more time to do things including travel.   Now, travel is minimal and our world, in some respects, is reduced to our home. For families with children, their home has become a school.   With so many people working from home, it has become our office or store or studio.   If there is more than one working adult in a home, it needs to have space for each party to work.   The home fitness industry is experiencing record s...

Whether you like to or not, buying and selling a home involves negotiation at all stages of the process.   It is not like the retail world where once you decide to purchase, you pay the price.   It is easily the most expensive purchase or sale that most people experience and emotions get involved that could affect the negotiations adversely. The word "home" by itself conjures up emotions and selling a home you've lived in for a while could even complicate things more.   A real estate professional can separate their emotions from the process to be able to help the one they are representing. The price of the home, the type of financing and concessions, closing costs, personal property, closing dates and possession are just a few of the many things that can be negotiated in a contract.   Since the seller wants to get the most for their house and the buyer wants to pay the least, their objectives are diametrically opposed. Even after the contract is signed, removin...

The National Association of REALTORS® just released the Market Recovery Survey of a random sampling to close to 100,000 members conducted June 24-26, 2020.   The following statements are the members' opinion on various aspects of the recovery to the Covid-19 pandemic as it relates to real estate. In response to the safety of buyers, sellers and agents, REALTORS® are expecting within the next year to have increased demand for the following technologies used to market properties: 67% - Zoom or other video technology to communicate with clients 66% - virtual tours 63% - live virtual tours conducted by agent using video 60% - virtual open houses Nine out of ten respondents indicated that some of the buyers have returned to the market or never left the market.   Agents currently working with buyers report that slightly more than half of buyer's timeline has remained the same with about the same level of urgency.   27% believe the buyers...