WHICH DOWN PAYMENT STRATEGY IS RIGHT FOR YOU?

You’ve most likely heard the rule: Save for a 20-percent down payment before you buy a home. The logic behind saving 20 percent is solid, as it shows that you have the financial discipline and stability to save for a long-term goal. It also helps you get favorable rates from lenders.

But there can actually be financial benefits to putting down a small down payment—as low as three percent—rather than parting with so much cash up front, even if you have the money available.

THE DOWNSIDE

The downsides of a small down payment are pretty well known. You’ll have to pay Private Mortgage Insurance for years, and the lower your down payment, the more you’ll pay. You’ll also be offered a lesser loan amount than borrowers who have a 20-percent down payment, which will eliminate some homes from your search.

THE UPSIDE

The national average for home appreciation is about five percent. The appreciation is independent from your home payment, so whether you put down 20 percent or three percent, the increase in equity is the same. If you’re looking at your home as an investment, putting down a smaller amount can lead to a higher return on investment, while also leaving more of your savings free for home repairs, upgrades, or other investment opportunities.

THE HAPPY MEDIUM

Of course, your home payment options aren’t binary. Most borrowers can find some common ground between the security of a traditional 20 percent and an investment-focused, small down payment. Give me a call and let’s talk about it.

UPSIZING YOUR HOME

Unfortunately, our homes don’t always grow with us. What may have initially worked fine for a single person, a young couple’s starter home, or a family with a newborn can quickly become too small as families expand and multiple generations live under one roof.

Remodeling and adding to your home is one option for creating more space, but it can be costly, and the size of your property may be prohibitive. That’s when moving to a bigger home becomes the best solution.

WHERE DO YOU NEED MORE SPACE?

The first thought when upsizing your home is to simply consider square footage, bedrooms, and bathrooms. But it’s important to take a more critical approach to how your space will actually be used. If you have younger children (or possibly more on the way), then focusing on bedrooms and bathrooms makes sense. But if your children are closer to heading off to college or starting their own families, it may be better to prioritize group spaces like the kitchen, dining room, living room, and outdoor space—it’ll pay off during the holidays or summer vacations, when everyone is coming to visit for big gatherings.

MOVING OUTWARD

If you need more space, but don’t necessarily want a more expensive home, you can probably get a lot more house for your money if you move a little further from a city center. While the walkability and short commutes of a dense neighborhood or condo are hard to leave beyond, your lifestyle—and preferences for hosting Thanksgiving, barbecues, and birthdays—might mean that a spacious home in the suburbs makes the most sense. It’s your best option for upsizing while avoiding a heftier price tag.

FINANCING

Call me about financing your next move or fix up, I’m always here to help!

5 NEGOTIATING TACTICS THAT KILL A SALE

Negotiation is a subtle art in real estate, but skilled negotiators can usually find some common ground that satisfies all parties. On the other hand, using the wrong negotiation tactics can sink a deal pretty quickly. Here are some negotiation tactics buyers (and real estate professionals) should avoid:

  1. Lowball offers: Going far below market value when you make an offer damages your credibility as a buyer and can be insulting to the seller. The seller has a range in mind that they’ll accept, and if you’re not even approaching the low end of that range, they won’t even consider the offer.
  2. Incremental negotiations: Don’t continue to go back to the seller with small increases in your offer ($1,000 or less). The constant back-and-forth can grow tiresome and lead the seller to consider other opportunities.
  3. “Take it or leave it”: Try not to draw a line in the sand with your initial offer. The seller can get defensive and consider other offers if you immediately show that you’re unwilling to budge. Even if it’s true, don’t make a show of it.
  4. Nitpicking after inspection: Obviously if inspection reveals a major issue, it should be factored into the final sale price. But insisting on a lower price for every minor repair can put negotiations in a stalemate.
  5. Asking for more, more, more: Some buyers will request that the sellers throw in add-ons like furniture or appliances that weren’t included in the listing. Try to avoid giving the seller a reason to build up resentment and think that you’re being greedy.

Remember that you are negotiating to achieve a desired result rather than just to “win” the argument. If you keep the big picture in mind, your negotiations will be successful.

5 NEGOTIATING TACTICS THAT KILL A SALE

Negotiation is a subtle art in real estate, but skilled negotiators can usually find some common ground that satisfies all parties. On the other hand, using the wrong negotiation tactics can sink a deal pretty quickly.

Here are some negotiation tactics buyers (and real estate professionals) should avoid:

  1. Lowball offers: Going far below market value when you make an offer damages your credibility as a buyer and can be insulting to the seller. The seller has a range in mind that they’ll accept, and if you’re not even approaching the low end of that range, they won’t even consider the offer.
  2. Incremental negotiations: Don’t continue to go back to the seller with small increases in your offer ($1,000 or less). The constant back-and-forth can grow tiresome and lead the seller to consider other opportunities.
  3. “Take it or leave it”: Try not to draw a line in the sand with your initial offer. The seller can get defensive and consider other offers if you immediately show that you’re unwilling to budge. Even if it’s true, don’t make a show of it.
  4. Nitpicking after inspection: Obviously if inspection reveals a major issue, it should be factored into the final sale price. But insisting on a lower price for every minor repair can put negotiations in a stalemate.
  5. Asking for more, more, more: Some buyers will request that the sellers throw in add-ons like furniture or appliances that weren’t included in the listing. Try to avoid giving the seller a reason to build up resentment and think that you’re being greedy.

New Conforming Mortgage Loan Increases for 2018

According to Fannie Mae and Freddie Mac, the two government sponsored corporations that buy home loans from lenders, the new one family mortgage limit for conventional conforming loans starting January 2018 will go from $424,100 to $453,100. As a point of reference, the loan limits held steady for about a decade at $417,000 until the beginning of last year. It is an indication of the increased value of today’s real estate market.

What this means for you:

If you are looking to purchase a home, that is the maximum amount you can borrow before the mortgage is considered a High Balance or Jumbo mortgage and higher rates kick in. This gives you an extra $29,000 to borrow. For some, it will give them extra buying power and a lower monthly payment for the extra amount of money.

FHA has increased their maximum mortgage in New York from $636,150 to $679,650 for government insured mortgages. Depending on your credit score, you can put as little as 3 percent down to purchase a home using one of these programs.

Lenders have generally relaxed their credit score and debt to income requirements from a few years ago. With rates expected to increase in 2018, if you are thinking of purchasing or refinancing to a lower rate or to consolidate your debt, now is the perfect time to do so.

Give me a call to discuss your personal situation.

Common Risks Involved in Real Estate Investments

While a good many millionaires will agree that their fortunes were made in real estate, the honest ones will also tell you that they’ve probably lost a few fortunes in real estate along the way. This is a risky business and every property purchased doesn’t always pan out to become a successful investment.

There are many risks involved in real estate investing and you would be going to battle unprepared if you didn’t take a moment to carefully study these risks and work to avoid them when planning your property investment strategy.

Unfortunately, there are very few one size fits all risks for real estate investing, as each type of investing is inherently different. This means that each type of real estate investment will involve a new set of risks.

Below you will find a brief overview of different styles of investing and the common risks that are involved in each.

Rental Properties

This type of investing offers some risks that are unique and some that are also risks when investing in properties that are lease-to-own or rent-to-own as well. First and foremost is the risk of failing to make a profit. If the property in question cannot achieve an adequate monthly income to cover the expenses of operating the property then it is not a solid investment.

Other risks include the risk of getting bad tenants. This is particularly hard on first time investors. Bad tenants are costly and in some cases destructive (which leads to even greater expense).

Vacancies are another risk for rental properties. These properties are only costing money as they sit empty rather than earning money as they were intended. Short turnovers are in your best interest as are long-term tenants.

“Flipped” Properties

This is one of the most enjoyable types of property investments for many ‘hands on’ investors. This allows the investor to roll up his or her sleeves and take an active role in creating the masterpiece that will eventually bring in serious revenue (at least that is the hope). This is also one of the riskier investments, particularly when trying to turn a profit in what is known as a buyer’s market.

The risks are simple but often overlooked and they can have a significant impact on the overall success or failure of the project. First of all, the biggest risk is in paying too much for the property. Other risks include underestimating the costs of repairs, over estimating the ability of the investor to do the work him or herself, taking too much time, experiencing a down turn in the housing market, making the wrong judgment call for the neighborhood, becoming overly ambitious, and getting greedy. Sometimes it is much better to walk away with a lesser profit than to end up loosing money by holding out.

Personal Residence

Keep in mind that your personal home is essentially an investment. The intention is that your home will gain in value over time and that equity in your home will build as you age. There are risks involved in this transaction as well. Buying a home that is in a ‘borderline’ area or one that is not showing obvious signs of growth is one of the biggest risks. This puts your home in the position to lose rather than gain value. This can make your home a burden rather than the investment it was intended to be. Other risks involve is becoming involved in a loan situation that is not at all beneficial (such as an adjustable rate mortgage or an unreasonable balloon payment).

Perhaps the biggest risk of all when purchasing a personal residence as an investment, is failing to get a proper inspection that could rule out potentially costly and even dangerous problems within the home your purchase for you and your family.

Toxic mold is one problem that comes easily to mind that most proper home inspections would almost immediately rule out. Others include structural problems that are costly to repair and dangerous to leave in disrepair. Each of these risks should be considered before an offer is made on any property.

For those seeking to turn impressive profits in short order, real estate is one way in which this can be accomplished. It is in your best interest, however, to be aware of the risks that are involved and take careful steps to minimize those risks. Taking these steps now may cost a little more on the front end but in many cases, the pay off for doing so well outweigh the expenses.

Investing in Real Estate – A Beginners Guide

Many people who are looking for extra income are now looking into real estate investing. With home values increasing, it is an excellent way to earn extra cash, and possibly a gateway to a new and profitable career. You just have to learn the ins and outs of the business.

I would suggest starting out with residential real estate, which is something that most people are familiar with. If you are good with your hands or know someone who is, you will start off with an advantage.

When you are first starting out with investing in houses, you should always look for ugly or bad houses that need a moderate amount of work. These homes are much cheaper to purchase, although they will take some work to improve. You should start out by looking for houses that need some work, such as clean up, painting, and in some cases new carpet. You don’t want to buy something too run down, as it could cost a fortune to repair.

As I stated earlier, if you think of yourself as a handyman and feel that you can do the repairs yourself, you can save a lot of money. On the other hand, if you need to hire someone, you should always make sure that the individual or company that you hire is qualified to do the repairs. If you aren’t comfortable with doing any of the repairs, you should inquire about a subcontractor or company that will do it for a reasonable price, or perhaps a share of the money once you have resold the house.

If the house you are thinking to purchase and resell has any type of structural problems, you should always get an estimate from a reliable contractor before you make the purchase. If you decide to stay in the business, you’ll learn a lot more over the years, although you should always hire a contractor when you first start out. Once you get all of the estimates together, you can make the final decision on how much of an offer you want to make on the property. You should also make sure you can obtain mortgage financing on the house, unless you are able to pay cash.

After you have a team together and successfully renovated and resold several homes, you will begin to feel more confident with buying homes that need repairs. All it takes is time and practice – and you’ll be buying homes that the average investor wouldn’t think twice about. This can be a huge advantage when you are looking for homes to buy and resell, as there will be less competition to worry about. You’ll also be able to get a lower price when buying the home, simply because you can use the cost of the repairs to your advantage.

Once you are able to do repairs on homes, including structural problems, you’ll have a huge advantage in the market. You’ll be able to buy virtually any home, including those that other investors choose to ignore. Doing so can be very profitable for you, especially if the house is in a well known and well desired neighborhood. After you have done the repairs, you can resell the home for a much higher price than you paid to acquire the property.

When you start looking for houses that you can repair and resell, you should always take your time and buy the right homes. You won’t have the money, time, experience, or support to buy the bigger houses at first, which means you won’t have room for mistakes. Once you have purchased and resold a few smaller homes, you’ll eventually be able to work your way up to the bigger homes – which is where the big profits will come into play.

Always keep in mind that when you first start out, you’ll need to take things slowly. You can’t expect profits to come overnight, as it will take you some time to learn. Once you have been at it a few years and have several houses to your credit, you’ll be ready to tackle anything. At that point – you’ll make a lot of money in a career that is truly exciting.

Buying A House In A Sellers Market

In different parts of the country right now it’s definitely a sellers market. Inventory of homes for sale is low, interest rates are low, and there are a lot of buyers out there looking to get into a home. The recent uptick in mortgage rates have even more buyers pulling the trigger. So how are you going to find your dream home when you are competing against so many other buyers?

When you find a home you like be sure to act on it quickly! Have your agent give you a tour of the house, don’t wait for an open house to happen! A lot of homes are getting offers within the first couple weeks of being on the market, so it’s important to arrange a showing quickly if it’s a home you are interested in. Wait too long and the home could be under contract.

Once you find the home you like it’s time to make an offer. Your agent should be doing a comparative market analysis of recently sold homes in the area that are similar sizes. This will help you determine if the list price is over or under what it will most likely be appraised at. Once you come up with a number you feel comfortable with, submit it to the seller and hope for the best!

If you find yourself in a multiple offer situation you might want to take a different approach. If it’s a house you really love consider doing an escalation clause. Instead of listing a price of what you’d like to buy at, tell the seller you are willing to pay $2,000 to $3,000 more than the highest bidder and want right of last refusal.

A seller is not going to object to getting more money for their home, and if the highest offer is outrageous you can always walk away from the home knowing it’s not worth it. But this way you’ll have peace of mind knowing that you didn’t overpay by thousands of dollars.

If the seller accepts your offer the house isn’t yours quite yet. It’s key that you get a home inspector to look over the home and try to find any damages that you might not be aware of. This includes things like a cracked foundation, mold, leaks in the roof, and other major repairs.

You can use your inspection as a way to gain leverage in negotiations, asking for items to be repaired or for credits at closing to make up for the repairs that need to be done. If the seller refuses to renegotiate this is one of the several points in the buying process in which you can walk away from the home with a valid reason.

The purchase of your home will also be contingent on the appraisal and your mortgage being approved. Using the right mortgage broker (like yours truly) will insure that the mortgage process won’t be long and frustrating.

Once you are clear to close by the bank the house can finally be yours! But until then be prepared for the emotional roller coaster that is buying a home.

Protecting Yourself from Mortgage Fraud

It’s hard to believe, but there are people out there looking to prey on people’s ignorance when it comes to buying property. The mortgage fraud game is larger than you think, and every year, thousands of people fall victim to over-appraised properties, higher than normal interest rates, and loan amounts that are way more than their budget allows.

How do you know if you’re being hustled? It’s not as cut and dry as you might think, but here are some tips to help you see through the charade:

The first tip is to trust your gut. For this scam to be pulled off, you’re going to have to deal with a crooked real estate agent who points you to a piece of property, then an appraiser who will over-value the property, and then a bank officer who will validate that price. With all these dishonest people floating around, your gut should tell you something is wrong at some point. Keep your eyes open and if something starts to smell fishy (like the land they are trying to make you buy) than start asking questions.

Keep an eye out for scams like these targeting the elderly; they tend to be more trustworthy than younger people, and tend to take people at their word. These scams have also been known to target first-time buyers who don’t know how transactions like these are suppose to go.

So, how to protect yourself? Here are some warning signs to look for:

If your real estate broker demands that you use a particular lender (i.e. the lender that’s in on the scam), just say no. Tell your broker that you’ll use whatever lender or mortgage broker you want and that you’ve shopped around and you’ve chosen a different one. If your broker or agent gets a little testy at this, you might want to consider dumping them.

Another good sign that you’re dealing with less than honest people is that your lender is trying to talk you into borrowing more than what your budget allows. This is never, ever a good idea. You should go into every discussion with your lender knowing exactly what your limits are.

This one is just common sense, but make sure you get copies of everything you sign. If you don’t, demand them. Also, if you feel you’ve signed something less than honest, take the documents to a lawyer to have them looked over.

Scammers have been a part of the real estate scene for as long as there has been swampland in Florida or a bridge in Brooklyn to sell. They aren’t going anywhere (except maybe to prison) so you have to equip yourself with the knowledge of how to deal with them.

 

Basic Things to Know When Buying a Home

The most important investment you will ever make is probably the purchase of a home. Finding the right home can be a long and arduous process, but there is no getting around that.

Know Your Wants And Needs

Before embarking on your journey of house hunting, you must know what you really want to find. Sit down with pen and paper and list all the features you care most about, such as:

– Location (in a particular city, school district or neighborhood)

– Size — how many bedrooms and bathrooms

– Parking — a 1-car garage or 2?

– Style — 2-story house or ranch style home?

– Heating — central heating and/or air conditioning?

Equally important, on a new sheet of paper list all the features you absolutely do not want in a house. For example:

– high-traffic area.

– high noise area (airport, train station or highway in close proximity)

– maintenance — major repairs needed

As you look at houses, keep both lists in mind. Your lists may change over time as you do more looking. You’ll want to add or remove features, or perhaps you’ll become willing to make compromises. Realize that you most likely will not find the “perfect” home. Experienced homebuyers will tell you, perfect homes are not found, they are made perfect through hard work.

Get Your Credit Report In Order

Prior to looking at properties, you must get your finances in order. This is the time to review your credit report and clean it up, if need be, to maximize your credit score. Many people do not realize how important it is to check your credit report periodically to make sure it is accurate. You should pay off any past due amounts, or negotiate a settlement price to close the debt. Get such agreements in writing, before paying any settlement. Keep all receipts for any settled items from your credit report since it may take months to get the debt actually removed. You can obtain a free credit report once a year from www.AnnualCreditReport.com

Research Your Home-Buying Options

Decide what kind of property you are interested in. Do you want a HUD property, a foreclosure, real estate, or property for sale by owner?

A number of web sites list homes according to city, state, or price range. Visit these sites to see pictures of homes, many with virtual tours, and review the listing features.

Get Pre-Approved For A Loan

You’re ready now to find a lender and get yourself pre-approved for the loan. Being pre-approved offers a number of advantages. It will clarify the price range you can afford. Also, once you find the home you want, you can place an immediate offer. If you have to wait for pre-approval, someone could buy the house right out from under you. Feel free to contact me to obtain a pre-approval.

Find A Good Real Estate Agent

It is wise for a first time homebuyer to work closely with a real estate agent, no matter what type of property you’re looking for. A knowledgeable real estate agent will make your house-hunting much easier. A good real estate agent is usually a good negotiator, and will be able to help you with the complicated paperwork involved in placing an offer on a house or in closing a deal.

To select a real estate agent, you should check with your friends and neighbors for recommendations. Find an agent you feel comfortable with and who is knowledgeable about the area you hope to buy in.

These are just the basics of home buying. You will find many details you need to master as you move through the buying process, but having these basics under your belt will give you a head start.