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Down Payment


The Numbers vs Emotion argument…

Meet Marcus and Kelly – they are a young couple, selling their home and buying a new one. Being that it’s a seller’s market, Marcus and Kelly will do very well and walk with $100,000 from their sale.

So, what do they do with the money? Do they put some, half or all of the funds down on the new home purchase? We are going to break down what the best decision is, by the numbers, for the purchase of their $250,000 “forever home”.



Option A
(20% down)
Option B
(ALL Funds)
RATE 4% 4%
LOAN AMOUNT $200,000 $200,000
DOWN PAYMENT $50,000 $100,000
PAYMENT $954.17 $716.12

Marcus and Kelly have come down to option A, putting 20% down, having a $200,000 loan amount and investing the remaining $50,000. Or option B, putting the full$100,000 down, having a $150,000 loan amount and investing the difference in payment, which is $237/month.

Future Value Analysis – @ 8% Return

Option A Option A Option B Difference
YEAR 10 $85,542 (less additional $237/mo) $43,358 $39,184
YEAR 15 $122,686 (less additional $237/mo) $82,011 $40,675
YEAR 30  $461,466 (less additional $237/mo) $353,215 $108,251



To properly analyze, Marcus and Kelly are assuming an 8% return on their funds. Option A returns are adjusted for the higher mortgage payment and option B assumes that the difference in mortgage payments is invested each month.

By using the same assets, with proper investment advice, option A winds up giving Marcus and Kelly an additional $39,000 by year 10, and $100,000 over 30 years, just by properly applying the concept of time value of money.

So to conclude, provided the difference in payment won’t keep you up at night and you have time for your investments to grow, then only put 20% down and invest the rest with a knowledgeable investment advisor.

Numbers you should remember: $110k, $50k and $220k

In this 2017, inventory challenged market, a renovation mortgage is becoming more and more of an option for you to turn an ordinary house into the home of your dreams.

What is a Renovation Mortgage?

Simply (as possible) put, a renovation mortgage is a transaction where you finance in the improvements. However, in order for the lender to take on the risk, the funds are held in escrow and disbursed in progress payments as the work is completed, phase by phase.

The name of the products are either a 203k (FHA) or Homestyle (Conventional)


So, how does a Renovation Mortgage work?

In the case of a purchase, you can buy a beaten down home, usually a foreclosure or a home that is dated or otherwise in some state of disrepair.

Purchase Price $110,000

You can get a bid from a contractor for say $50,000 to improve the home to your specifications.

This means you’re financing $160,000.

After the home is complete, the home then becomes worth say $220,000.

Why might this be the perfect option for you in today’s housing market?

In every corner of the real estate market, all we are hearing is “inventory shortage, inventory shortage”! This option can help you turn the house that no one wants, into the home you love!


This statement always raises an eyebrow…or 10, when I say in this market, with just a moderate down payment, you can buy a home for less than what you pay in rent.

Buy a home for less than rent

This is how it comes out by the numbers:

Let’s take a $175,000 house in this market, assuming a 5% down payment.

Principal and Interest  @4.25 817.88
Taxes @1.25% 182.29
Insurance  100.00
Mortgage Insurance    81.74
Total     $1,181.88


Lets compare that to a reasonable rent payment in this market of $1,250. This is how we come to prove the statement that you can buy a home for less than your rent.

Even further, after the tax benefits of mortgage interest, and the doors which this immensely valuable deduction opens, the net effect means an amazing savings to the home buyer over renting.

For more information, check out HomesteadU

Low Mortgage Rates

Ever since the November presidential election, we heard all of the catchy phrases which meant mortgage rates are going up… “Trump Bump”, “Trump Trade”.   The benchmark, 10 year US Treasury yield has moved from 1.78% pre-election to as high as 2.60% in less than 4 months.
Then, April came… Now fears of the “Trump Trade Fade”, and the “Trump Bump Dump” have really just normalized the rate movement to more sane levels. Add some global uncertainty, and that’s how we have seen a great amount of downward movement in mortgage rates in April, and it’s happened without much notice.
Translation for the homeowner – With this recent drop in rates, how would refinancing benefit me?
– You have a rate in the 4’s with mortgage insurance on a 30 year or in the 3’s on a 15 year.
– You have any other consumer debt where consolidation makes sense.
 – You may have seen your credit card rates and other lines of credit increase recently due to rate increases by the Federal Reserve which act independently from mortgage rates.
Again, as always, if you ever want to find out if a refinance makes sense for you — that conversation is always FREE!

I Didn’t get the Cash Out I Wanted on My Mortgage RefinanceSo those borrowers who would like to refinance and pull “Cash Out” of your home but were turned down or told the home didn’t appraise for enough, there are some options which you can do fairly quickly to change your outcome.

1. Increase your credit score.

Often, lenders have a limitation on how much cash they can lend, many times, it may be due to credit score. For example, you may be able to borrower up 70% of your home’s value at a 640 score on a conventional loan, but if you have above a 700+ score, you may be able to go up to 85%

2. Apply for a renovation loan.

Many borrowers just want the cash for home improvement, unaware that a renovation loan is what they need. In some cases a renovation loan appraisal can yield a much higher value because it can value the home, “subject to” the improvements being done which is rare. Due to the their technical nature, a renovation loan isn’t common. However, they can be well worth it, with the right circumstances.

3. Apply for a HELOC

A HELOC is a Home Equity Line Of Credit. This is technically a 2nd mortgage but has a lot more flexibility to pull cash out and repay. They also can go to a higher Loan-To-Value than most other products.

So, what do you do if this is you? Like anything when you are dealing with professional services…get a second opinion and ask them about any of the above options.

Homestead Financial | Mortgage Rates Drop

The U.S. Federal Reserve raised its key, Federal Reserve Funds Rate (Fed Funds) .25% on Monday, March 13th, 2017 for the second time this year, citing economic growth, job gains and confidence.

Then the mortgage market did something odd. Mortgage rates dropped. The yield on the 10 year US treasury peaked at 2.60% the day the FOMC chair, Janet Yellen announced the Federal Reserve would raise its key Fed Funds rate to 1.00%, from .75%.

The reason? Consumer debt gets pricing from DC and mortgages get their pricing from Wall Street. Fed Funds is the interest rate the Federal Reserve changes its member banks for short term loans. There is no direct correlation between the Federal Reserve raising rates and mortgage rates.

So in other words, Fed Funds going up has an effect on your credit card rates and consumer loan rates, rates tied to the prime lending rate, but not mortgage rates.

So what do I do if I’m in the mortgage market? The best indicator of mortgage rates is the yield on the 10 year US Treasury which can be found here https://finance.yahoo.com/quote/%5ETNX?p=^TNX

Before Picking a Real Estate Agent

Picking a Real Estate Agent

In “Tips for Picking a Real Estate Agent — Part I,” we discussed the importance of doing your homework. Before you pick a real estate agent it helps to obtain a list of what they’ve listed and sold the past twelve months, to verify licensing and disciplinary action with state boards, to seek out agents who are the recipients of designation awards as well as those with the right credentials. In “Tips for Picking a Real Estate Agent — Part II,” we discuss additional tips for deciding on the most well-suited person to find or list your home.

Research an Agents Experience

There’s no substitute for experience. Picking the best real agent requires you to research how long the agent has been in business. This information may be obtained from the state licensing authority or by simply asking the agent. An agent who has been in business less than five years is learning on you which isn’t to your benefit. Look for an agent who is actively engaged in your area and in your price range. What you’re looking for is an agent’s knowledge of these two factors and whether or not they can demonstrate them. This shows you what kind of market presence they have.

Look at Current Listings

Another tip for picking a real estate agent is to look at their current listings. You can do this by checking out an agent’s listings online. You can look online in two places — the agency’s own site and Realtor.com. The Realtor.com website is a searchable online database that has compiled properties from the Multiple Listing Service. A website says a lot about a person or business. What you want is an agent who uses their website as an effective marketing tool. If they don’t use their website to effectively market themselves and their clients’ homes, then how will they market yours? An attractive presentation on the web is evidence that this agent cares and understands how important marketing properties is. When you’re on the agent’s website, look at their listings to see how closely they mirror the property you’re looking to buy or sell. Are the agent’s listed properties in the same area as yours? Are the properties in the same price range? The number of listings is important too. The agent should have enough listings to indicate a health business but not so many that you’ll just be a number.

Do Your Homework

Finally, be sure and ask potential real estate agents about other houses that are for sale nearby. A good agent will know about the properties available in your area off the top of his or her head. But before you ask them, be sure you’ve done your homework too. Familiarize yourself with a house in your area that’s recently sold or is currently for sale and ask the agent if he or she knows the property. A good agent should not only know about that particular property, but they should also be able to give you a few details. This will show that he or she knows the homes in your area and is a person who’s on top of the market.

How to Pick a Real Estate Agent

How to pick a real estate agent

One of the most challenging parts of buying or selling a home is picking a good real estate agent. How do you know who’s good and who’s not? Can you rely on word of mouth or should youdo some investigating of your own? Whether you’re a buyer or a seller, there are things you can and should do to assess a real estate agent’s past performance in order to gauge their potential success for finding or selling your home. Here are some tips for picking a real estate agent.

Because we don’t typically have the information about real estate agents that we have about other service professionals, it helps to ask potential agents for a list of what they’ve listed and sold the last twelve months. Be sure to ask the agent if any of the clients listed will be pleased or disappointed before you begin making phone calls. When you speak with past clients ask what the asking price was and then what the sales price was. You’ll also want to ask how long their home was on the market. If you are selling your home, you’ll want to ask if the properties on the list are similar in price, location and other salient features to yours. What you should be looking for is an agent who specializes in the same type of home you’re selling.

Look up a Real Estate Agents Credentials

Another way to check a potential real estate agent’s background is to look up their licensing. There are boards that license and discipline real estate agents in every state. To find out if the person you’re considering is licensed and if they have experienced any disciplinary actions or complaints you’ll want to check with your state’s regulatory body. In some states, like Virginia, Arizona and California, this information is accessible through online databases.

Knowing how to avoid a real estate agent who has been disciplined is one thing but, how do you pick one that’s a winner? Look to the awards. Peer-given awards are huge endorsements. One that speaks mountains is the “Realtor of the Year” designation award. This is awarded by the local or state branch of the National Association of Realtors. These are agents who have been judged to be the best by their peers.

You wouldn’t select a brain surgeon to perform your heart surgery and the same is true when it comes to selecting a real estate agent. You want one with the right credentials. Real estate agents, like doctors, also specialize. When you see alphabet soup after an agent’s name, this indicated this person has taken additional classes and are specialized in certain areas. For example, an agent with CRS (Certified Residential Specialist) behind their name is someone who has completed additional training for handling residential real estate.

If you see 4ABR after their name, this means they have completed additional coursework to represent buyers in real estate transactions. They are an Accredited Buyer’s Representative. An agent with the SRES designation is a Seniors Real Estate Specialist who has completed training that allows them to better help buyers and sellers who are aged 50 and up. An agent with “R” behind their name is a member of the National Association of Realtors. This is an individual who has formally pledged to support the association’s code of ethics. Nearly half of real estate agents out there are realtors compared to one-third five years ago.

In “Tips for Picking a Real Estate Agent — Part II,” we discuss additional tips for deciding on the most well-suited person to find or list your home.

In “When the Going Gets Tough the Tough Buy HUD Homes – Part I,” we discussed why it’s important to work with a real estate agent when it comes to purchasing a HUD home, programs

Couple with new home

that are often available to help you save money on closing costs and why owner occupant buyers have an advantage of real estate investors.

Here are some additional things to consider when it comes to purchasing a HUD home.Purchasing a property that is a government foreclosure offers first time homebuyers with an excellent opportunity to purchase their dream home for a lot less money. However, when purchasing a government foreclosure, you’ll want be sure to remember the importance of doing due diligence. You’ll want to take the time necessary to thoroughly investigate the home’s price to ensure you’re getting a reasonable deal. While preliminary research can be done on websites like Zillow.com, there’s other data that only real estate agents have access to. This is why working with a real estate agent is essential. Your real estate agent can provide you with a comparative market analysis that equips you with the knowledge you need to ascertain if buying a particular government foreclosed property is a good deal in the current home market. Never assume that a property is going to be an excellent buy just because it is a HUD home. When you’ve done your homework, there are fewer surprises and you have the peace of mind that comes with knowing when you’ve truly gotten a good deal.

First Time Home Buyers

Many first time homebuyers may have encountered government foreclosures that are being sold “As Is,” but aren’t fully aware of what to expect with such a property. Government foreclosures that are sold “As Is,” means the property has either suffered some damage or is in need of some repairs. The damage and repairs needed could be minor to extensive and so viewing the property and doing the homework mentioned above is imperative. There are situations where money may be offered in escrow to pay for certain repairs but not always. It’s up to the buyer to view to property, assess any damage and repairs that need to be made and determine if the home is worth the amount of money it will cost to purchase home plus the money it will take to repair it.

First time homebuyers should also be mindful of government foreclosures that have been on the market for longer than four months. For example, if a home here in St. Louis was first listed on the market back in May 2013 and you first see it in August 2013, there are certain repairs that aren’t immediately visible. A small leak around a window or in the roof can cause a home to become overrun by mold both inside and outside the home’s walls. Unless you have a hypersensitive nose or allergy to mold, the only way you’d discover this is several months down the road as the problem grows worse, or by getting a thorough home inspection. Regardless of whether you think a home has mold or not, getting a home inspection is the best way to discover those surprises before you purchase the home. The deal’s not done until closing and so you still have time to change your mind depending on what the home inspector finds. A good home inspection is worth its weight in gold.

Most of the time the damage and repairs needed in many HUD homes simply requires a little bit of know-how and some elbow grease. It’s this know-how and elbow grease that can save you thousands on the next purchase of your home.

When first time homebuyers start their search for a new home many are hesitant to consider looking at HUD homes because they are under the misconception that such properties

aren’tworth as much because they are located in blighted areas. This isn’t always true. The current housing market is flooded with HUD government foreclosures in areas at every price point, making a HUD home a viable option for achieving homeownership. Here are some things to consider when it comes purchasing a HUD home.

The good news about shopping for HUD homes is that there are plenty available on the market today. With so many HUD homes out there you’re bound to find one you like, making the dream of homeownership a reality sooner and more affordable than you might think. Finding the HUD home that’s right for you is no different than buying any other home — it takes the same amount of research. Unlike other homes on the market, a real estate agent is the only person who can legally show you a HUD home. Working with a realtor and sharing your wish list and desired area with them is the best way to find the HUD home that’s right for you.

There are government foreclosures in cities all across the country. If you have a specific area or neighborhood in mind, there’s a good chance you’ll find a HUD home in that area and at your desired price point. In some cases the previous owner has simply defaulted on their loan and moved out, leaving the house in excellent condition. However, there are some instances when the home has sustained damage. But if you’re handy, you may be able to benefit from purchasing a HUD home that comes with money in escrow with repairs or specific programs that offer funding for rehabilitating and repairing HUD properties.

Many first time homebuyers never even consider a HUD home because they believe it will be difficult for their bid to win against real estate investors. The truth of the matter is owner occupant buyers have an advantage over investors because investors are not allowed to bid on HUD homes until the property has been listed for 30 days. Working with a real estate agent to submit a competitive bid that’s more likely to be accepted is the best strategy.

Many first time homebuyers save a long time to come up with closing costs and escrow fees. Fortunately, help is available for these expenses when purchasing a HUD home. There are some cases when HUD will pay up to 3% of closing costs for buyers who have negotiated for it in their bid for the home. And depending on the situation, HUD will also pay the escrow fee, potentially saving homebuyers $350-$900. Savings like these make a huge difference when it comes to making the purchase of your new home more affordable.

In “When the Going Gets Tough the Tough Buy HUD Homes – Part II,” we will discuss due diligence, “As Is” foreclosures and things to consider when looking at properties that have been on the market for several months.

With housing inventory down 40% or more from two years ago, purchasing a house has become much more competitive. To land the home of your dreams you have to be savvy, creative and well-educated about your local housing market. This begs the question, how do you beat other buyers to the property you want? Here are some methods to consider.

Tips for buying your dream homeA fundamental part of buying your dream home is knowing the difference between what you need and what you can live without. Real estate brokers often advise their clients to come up with a wish list of everything you want in a home. But it’s also helpful to be realistic and make a list of things you can and cannot live without. A four bedroom house might be nice, but if you can manage with just three, that’s one less bedroom you’ll have to clean or pay for. You should also consider how long you plan to live in the home and your future needs, especially if you plan to start a family. Plan to buy a home to accommodate a growing family for five to seven years ahead.

Another way to beat other buyers to the property you want is to get pre-approved for a loan rather than pre-qualified. When you get pre-approved for a loan, you know the exact amount you can borrow. A pre-approval letter shoes potential sellers you are a serious buyer and have the funds to go through with purchasing the home. While there are investors who will offer to buy the same house for cash, your pre-approval letter is the next best thing to an all-cash offer.

Knowing the neighborhood where you plan to buy a home is essential as well. Relying on real estate agents for a home search in the multiple listing service is not the best way to find the right neighborhood. You’ll want to thoroughly research a location so you can determine whether or not the neighborhood offers the amenities that you prefer. When you know a neighborhood well and like it’s amenities, you’re better prepared to move quickly when the right home goes up for sale.

When it comes to a competitive housing market, it helps to be in the know and be ready to go. A good real estate agent will notify you right away when a house that matches your criteria shows up in their listings. But not always. After all, you probably aren’t their only client. This is why many savvy buyers who found their dream home set up mobile alerts with several consumer real estate listing sites and hit the refresh button frequently throughout the work day. When the house you’ve been watching for comes on the market, you’re ready to go.

It never hurts to make yourself stand apart from the competition. Attaching a personal letter to your offer that tells a little bit about your family and why you want the house can make a big difference to the seller. In some cases it could beat out all-cash offers. There’s something to be said when the seller sees that the home will go to a good family who can not only afford it but will also take care of it.

The last thing a seller wants is a lowball offer and no one wants to spend a lot of time going back and forth either. Especially since the seller could receive a higher offer and take it. In a competitive housing market it’s best to make an offer that’s close to or even above the list price. It should be an offer you feel good about and one you where the seller is more likely to come back with a stronger counteroffer.

Finally, do your best to avoid adding any stipulations, requirements or requests for personal property in your offer. When you include add-ons it complicates things. When it comes to comparing offers, it’s easier for the seller is to seek offers that are cleaner and more clear-cut. You can always talk to your real estate agent about items that can be negotiated after the offer is accepted.

Plan ahead for the harsh weatherLabor Day Home Improvement

One of the best opportunities to do some home improvement projects to get your home ready for winter is Labor Day weekend. Having an extra day off from work gives you the extra time you need for projects that require more time. The trick is to plan ahead and focus on preparing your home for the harsh weather that winter brings.

If you yearn for BBQ on the last official weekend of summer, look no further than your crock pot. Buy a full slab of ribs on Thursday or Friday before the weekend hits. On Saturday morning get up early and brown the ribs in your oven. Once browned, cut them into separate pieces, place them in the crock pot on low with a bottle of your favorite sauce and simmer for 6-8 hours. When dinner rolls around you’ll have tender meat that falls off the bone and you won’t have to stand next to hot grill after working hard on other projects all day.

One of the best ways to prepare your home for winter is by cleaning the gutters or eaves. This protects your home from any water leaks which can cause roof damage and a wet basement. When gutters are full of leaves, branches and dirt, water pools and your home’s eaves is more prone to sagging, rusting and pulling loose from the house. When this happens water drains into your basement or into your ground floor, damaging drywall, floors and carpeting. Excess water causes mold, an even bigger and more costly mess to clean up.

To clean your home’s gutters you need a ladder and a good pair of gloves to protect your hands from the gutters’ sharp surfaces. This task can be done in as little as 30 minute to an hour depending on the size of your house. It’s best to position the ladder in one spot and clean the gutters from the roof rather than moving the ladder around the house, climbing up and down every time. Better to maneuver on your hands and knees from the top of your roof. Homeowners who experience vertigo, have a fear of heights or are prone to clumsiness should consider hiring someone to do this task.



Replace Door Trims or Weather Stripping

Another Labor Day weekend project that gets your home ready for winter and actually saves you money on your heating and cooling bills is replacing door trims or weather stripping. There are two types of weather stripping for doors. Look for sweeps for the bottom of the door and foam weather-stripping for the area around the door’s trim. Attach sweeps to the bottom of your doors with the screws provided. Be sure your door’s trim is clean as the foam strips have self-adhesive that require extremely clean surfaces in order to stick well.

A third Labor Day weekend project that also protects your home’s outdoor surfaces from the elements is outdoor painting. Grab your scrapers, brushes, rollers, primer and paint so you can protect your home’s siding, trim, doors and eaves before the weather gets bad. Paint is the best way to protect these surfaces before they require a more expensive repair or replacement later. When unprotected wood rots you face a much more expensive and labor intensive project.

A fresh coat of paint on your home’s fascia boards, soffits and under-hangs helps extend the life of your roof and adds more curb appeal and value to your home. When the boards that support your roof are well protected your roof will last longer. Labor Day weekend is also the time to paint or seal a deck or back porch. Textured paint and sealer makes walking on these surfaces when their wet or covered in snow that much safer.

A little bit of elbow grease goes a long way to protecting your home for the harsh weather winter brings. Labor Day weekend is the perfect time to do these home improvement projects.

First Time Home Buyers

In “The Fifteen Most Commonly Asked Questions by First-Time Homebuyers Part II,” we discussed down payments, loan qualification, working with Homestead mortgage and mortgage costs. In this article we’ll discuss what first time home buyers should take with them when they are ready to apply for a mortgage, how to determine which mortgage is best for you, how much to offer when you find the home you want, what to do if your offer is rejected and what to expect at closing.

Applying for a Mortgage

When first time homebuyers are ready to apply for a mortgage they can save a good amount of time if they bring everything they need with them to Homestead. Be sure you have your social security numbers for you and your spouse with you. You’ll also want to bring copies of your statements for your savings and checking accounts for the past six months; evidence of financial assets like stocks and bonds; recent paycheck stubs that will detail your earnings; a list of all your credit card accounts with the monthly amounts owed on each, the account numbers for car loans and any other loans along with the balance, your income tax statements from the last two years and the name and address of a person who can verify your employment.

With so many different types of mortgages out there it’s difficult to know which one is best for you. This is why it’s ideal to learn as much as you can before you start the process. Many first time homebuyers use a fixed-rate mortgage, a mortgage where the interest rate remains the same for the term of the loan. This is typically 30 years. The benefit to having a fixed-rate mortgage is always knowing exactly how much your monthly payment will be which allows you to budget accordingly. There are also Adjustable Rate Mortgages (ARM), a loan with an interest rate and monthly payments that can go up or down as often as once or twice a year because the adjustment is tied to a financial index, usually the U.S. Treasury Securities index. ARMs have allowed many first time homebuyers to get into a more expensive home because the initial interest rate is lower. A third type of mortgage many first time homebuyers often take advantage of is an FHA mortgage, a mortgage that’s insured by the FHA. Thanks to this insurance, many first time homebuyers have qualified for loans who might not have otherwise.

How Much Do I Offer on the Home.  

First Time Home buying couple

First time homebuyers frequently ask how much they should offer when they find the home they want. Consider if the seller’s asking price is in line with similar homes in the area. You should also determine if the home is in good condition or if you’ll have to spend a lot of money to make it the way you want. Another factor that should be considered is how long the house has been on the market. Usually, the longer a home is on the market, the more motivated a seller is to accept a lower offer. Be sure you can afford a mortgage required to purchase the house. Finally, you and your spouse will want to discuss how badly you want the house. Your offer is more likely to be accepted the closer your offer is to the asking price.

If your offer is rejected, it’s not the end of the world. You are in the driver’s seat and have a choice. You can either walk away or negotiate. Negotiations can go back and forth several times before many deals are made. In some cases sellers are willing to cover some or all of the closing costs in exchange for a higher offer on the home. The important thing is to not lose sight of what you really want and can afford.

But if your offer is accepted, congratulations! In a few weeks your loan will be ready to close. At closing you’ll sit with your broker, the closing agent and sometimes the seller’s agent and seller. The closing agent will guide you through a stack of papers you and the seller will sign. The closing agent is there to answer your questions and will provide a basic explanation of each page. It’s a good idea to know what you’re signing especially since you’re committing to paying a lot of money for a lot of years. Your Homestead loan specialist will provide you with an estimate of closing costs and what you’ll need at closing.

In “The Fifteen Most Commonly Asked Questions by First-Time Homebuyers Part I,” we discussed the tax benefits of home ownership, HUD homes, buying a home with bad credit, home ownership for single parents and working with a real estate broker. In “The Fifteen Most Commonly Asked Questions by First-Time Homebuyers Part II,” we’ll discuss down payments, loan qualification, working with Homestead mortgage and mortgage costs. Continue reading “The Fifteen Most Commonly Asked Questions by First-Time Homebuyers – Part 2”

First Time HomebuyersWhen mortgage rates increased last month, millions of Americans questioned if they had missed their window of opportunity for home ownership. Now is still an affordable time to buy a home. If you’re still contemplating home ownership, here are fifteen of the most commonly asked questions by first time home buyers. The answers may surprise you.

Many folks contemplating home ownership wonder why they should buy a house instead of rent one. When it comes to owning your own home it’s important to think of your home as an investment. When homeowners pay their monthly mortgage payment they are building equity in their home. Homeowners can deduct the cost of their mortgage loan interest from their federal income taxes. And the same holds true for most state taxes. Deducting interest saves you lots of money over the long term with the interest you pay making up most of your monthly payment for the majority of the years of your mortgage. Property taxes can also be deducted. Over the years your home’s value will have appreciated which benefits you when it comes time to sell. When you rent the check you write each month is gone forever and you haven’t built any equity nor can you deduct mortgage loan interest on your federal or state taxes.

Many first-time homebuyers ask about HUD homes and if they are a good investment. When a homeowner can’t no longer make their mortgage payments on a HUD insured mortgage, the lender forecloses and HUD (Housing and Urban Development), an agency of the U.S. federal government, pays the lender what is owed on the loan. HUD owns the home and then sells it at market value as quickly as possible. In many cases, a HUD home can be a good deal.

First-time homebuyers with bad credit and not a lot of money for a down-payment are often afraid to ask if homeownership is even a possibility. First-time homebuyers in this situation should contact Homestead loan officers who can work with you to help you sort through your options.

Single parents also have concerns about first-time home ownership and inquire about grants or programs available for single parents. It helps to become familiar with the home buying process and to work with a well-respected real estate broker. Getting pre-qualified for a mortgage will allow you to know your price range which is extremely important since single parents don’t have the benefit of two incomes when it comes to qualifying for a loan. A Homestead loan officer can direct you to local homebuying programs. In some cases single parents have worked with their mayor’s office or the county executive’s office for supplemental financing to help qualify them for their home mortgage.

First-time homebuyers also ask if they should use a real estate broker and how they can find one. There are so many financial particulars involved with home buying and a good real estate


professional can make things much easier by guiding you through the process. An experienced real estate broker who is well-acquainted with an area you are interested in can provide information about the school district, safety of the neighborhood, the number of children in the area, traffic volume, etc. They can narrow down your home search by keying in your preferences to the multiple listing service, with immediate access to homes that match your criteria as soon as they are put on the market. This saves you time driving around. When you’re ready to make an offer on a home a real estate broker will lead you through the contract paperwork step by step and answer your questions.

In “The Fifteen Most Commonly Asked Questions by First-Time Homebuyers Part II,” we’ll discuss down payments, loan qualification, working with Homestead mortgage and mortgage costs.

We all knew the day would come when mortgage rates would rise. Last month when Federal Reserve Chairman, Ben Bernanke hinted the Fed might begin backing off its monthly quantitative easing, mortgage rates climbed up well over 4%. This has many potential and existing homeowners who had been considering purchasing a home or refinancing one in a panic and under the misconception that it’s too late to do so. Last month refinancing applications dropped 3.4% and home purchases fell 3%. But the truth is there’s no reason to panic since home financing is still extremely affordable at today’s interest rates. Continue reading “Why We Should Stop Panicking over Rising Mortgage Rates”

Getting a home appraisal

The home appraisal. It’s why so many homebuyer’s sweat bullets during the buying or selling process. The last thing a person wants is to lose a mortgage because of a low appraisal when buying or selling a home. Here are some steps to take for getting a fair appraisal.

Professionals are Best for Serious Home-buying Needs

While automated valuation websites like Zillow, HomeGain and Trulia are a convenient and quick way of getting a ballpark figure of the worth of homes in certain areas, they shouldn’t be used when you’re buying or selling a home. Websites like these can only give an estimate because the figures are based on a limited amount of information. It’s okay to use websites like these when you’re at the beginning of your home search but turn to professionals when things turn more serious.

If you’re serious about buying a home, it’s best to work with a real estate agent who can prepare a competitive market analysis (CMA) or provide a broker’s price opinion before you make an offer on a property. Proactive home owners who are looking to sell their homes often have their own appraisal done before pricing their homes. This is especially helpful in a market where prices are fluctuating or where there are a lot of foreclosures. An appraisal usually costs $1,000 or less. Homeowners use appraisals to guide their pricing decisions and as a reference to compare to the appraisal done by the buyer’s lender.

Homestead uses Qualified Appraisers

At Homestead we work with qualified licensed appraisers and homebuyers with the goal of getting a fair appraisal of the home. Our appraisers have residential appraiser certifications as well as professional designations. Home buyers and sellers will work with appraisers who have the Appraisal Institute’s senior residential appraiser (SRA) and member of the Appraisal Institute (MAI) designations.

TFamily in new homehe appraiser should be familiar with the local market in order to arrive at a fair appraisal. To insure a fair appraisal, Homestead works with appraisers who come from the same county or neighboring county.
For home owner’s selling their homes, it’s important to meet the appraisal when your home is inspected. Be sure to share the appraisal you had done or the CMA from your real estate agent. You’ll want to share all the upgrades and improvements you’ve made to the home with the appraiser. If you are aware of any important pending neighborhood improvements like commuter rail lines, shopping centers, parks, roads or schools, you’ll want to provide that information to the appraiser as well. New companies moving to the area or major employers that are expanding are also important items for appraisers to know about and consider as they are assessing the value of your home.

When you’re selling your home you’ll want to do as much as you can to get the highest appraisal so the buyer can get necessary financing to meet your asking price. When a low appraisal occurs, both the buyer and seller should question it. Double check the paperwork to make sure short sales and foreclosures weren’t used as comps and make sure all improvements made to the home were taken into account. Unintentional human error and oversights happen. If a second appraisal is necessary, be sure to ask for a current comp that reflects the current real estate market conditions.

It’s a glorious day when the home mortgage is paid off. No longer does the bank have a claim on your home. You are the sole owner. Getting to that point takes time and payment after payment. Many people don’t live long enough to see that day, and others see it quite often as they pay off the mortgage every time they refinance the home. Continue reading “How to Calculate Your Mortgage Payoff”

Buying a home is the all-American dream. It starts with an idea, then saving for the down payment, and finally shopping for the perfect place to call home.

When you prequalify for a mortgage, your house shopping will run smoother, giving you—the future homeowner—some guidelines in regard to how much you can spend. There’s no point in falling in love with a house that you can’t afford. Prequalifying will keep your shopping in the reality zone and eliminate getting in over your head. Continue reading “How to Prequalify for a Mortgage”

Preparing your home for a tornado could be the difference between life and death for you and your family. In “Preparing Your Home for a Tornado Part I” we discussed steps to take before the storm hits. In Part II we discuss additional steps to take during and after the storm.

Find Immediate Shelter When you Hear the Sirens

Preparing Your Home for a Tornado

If you are fortunate enough to live in an area where there are tornado sirens, find out what they sound like. When you hear tornado sirens you and your family should find immediate shelter, moving to an interior room, storm shelter or basement. You and your family should listen for tornado watches and warnings. A tornado watch is issued when conditions are right for tornado development in your area. Whether a severe thunderstorm watch or tornado watch has been issued, you should be aware of weather conditions in your area. A tornado warning is issued when a tornado has been seen or radar indicated the presence of a tornado in your area. Seek immediate shelter when a tornado warning has been issued.

Tornado emergencies are tornado warnings that are issued because a tornado has been spotted and is heading to a densely populated area. This was the case in Oklahoma City, OK two weeks ago. When a severe thunderstorm warning is issued you and your family should take precaution, staying indoors and watching for the possible development of tornadoes.

Prepare your home for a storm

You may not always be at home when tornado warnings and watches are issued. If you’re in a structure, move to the most interior room on the first floor or to the basement. Stay clear of windows and anything that could hit you like chairs and bookcases. Mobile homes and trailers offer little protection. Move away from these structures to more secure locations. If you are in your car, drive to the nearest shelter away from the storm. If you can’t make it there in time, keep your seat belt on, duck below and cover yourself with a blanket or a coat. Don’t hide under overpasses or bridges. These places will not protect you from flying debris. If you’re caught in an open field during a storm, duck as close as possible to the ground and cover your head. Once you’ve reached a secure location, wait until high winds have died down before you go outside.

If a tornado has touched down in your area, here’s a list of things to do to keep your family and your home more secure. Address your injured family members first. Wait out the storm and seek medical assistance. Next, shut off your utilities. Turn off your water, electricity and gas. Gas leaks are extremely dangers and can cause explosions or fires. If you suspect a gas leak, refrain from using a lighter if you’ve not already turned off your utilities. Before leaving your house, inspect it for structural damage that could harm your family. If any part of your home is not safe, you need to find different shelter. Families whose homes have been damaged or destroyed should seek an evacuation center. While evacuation centers often have supplies, it’s a good idea to bring whatever emergency supplies you can with you.

If you were fortunate that your home was spared, join in the rescue efforts or volunteer. Help your neighbors with the clean-up, removing hazardous objects with care, taking pictures for insurance companies. Follow public officials orders so you are making a positive contribution and not damaging the situation any further.