You Can Negotiate Your Mortgage Closing Costs

The costs related to homebuying continue to increase, meaning it's more important than ever to shop around. The Loan Estimate, introduced in October 2015, is intended to ease that process for borrowers like you, who want to make the mortgage transaction more affordable.  Full Article

The Loan Estimate is given to you within 3 business days of turning in a mortgage application. It outlines the various terms attached to the loan, including your interest rate, estimated monthly payments and the cash you need to close.

What to look for on Page 2 Page 2 of the Loan Estimate gives you an idea of how much it may cost to close on your mortgage, including the origination fees charged by the lender and other estimated closing costs.  

The first 2 sections on Page 2 -- sections A and B -- are the most important for borrowers to understand, says Vicki Bott, senior vice president of credit strategy for Wells Fargo Home Mortgage. Here, you'll find the estimated lender fees, also known as "origination charges," and costs for third-party services that the lender will secure as part of the loan transaction.

You cannot shop around for the services listed in Section B. The amounts may vary by lender. These costs include the appraisal, credit report, flood certification and tax services.  Both sections answer the question: "What costs is this specific lender I'm shopping with charging?" Bott says.  

Shop around and save on these services Section C details the costs over which you have the most control -- you can comparison-shop for the services listed.

"There is opportunity for the borrower to go out into the market and determine if there is a vendor or company who may provide a more competitive fee," Bott says.

One major service you can and should shop around for is title insurance, though where you live may determine whether you're able to do so. For example, in Texas, the cost of title insurance is regulated, so all title companies charge the same price.

Lender fees: Any room for negotiation? The lender's fees are believed to be fixed but there could be some wiggle room, Polychron says.

 "Origination fees vary based on a number of factors, but may be negotiable both as a dollar amount or an offered interest rate."

One way to negotiate the lender fees is to ask if any of the fees may be waived, such as the application fee.  Your lender may also offer you a credit to offset some of your closing costs, but it comes with a price, usually in the form of a higher interest rate on your mortgage.  

Why Do I Have to Pay My Real Estate Agent 6%?!

Selling a house can be expensive. Not only are you probably going to have to lay out some cash to spruce it up so you can get top dollar, you also have to plan on paying a real estate commission, which usually runs 6% of the sales price. On a $300,000 home that’s $18,000 — not a small chunk of change. Full Article

So why 6%? Why not 3%? Why not a flat fee of $2,500?  In the 1940s and ’50s, the National Association of Realtors required its members to set commissions at a certain level — and also required its members to either work full time or have enough customers to earn a living as a Realtor — in order to join (only members had access to the Multiple Listing Service). In 1950, the Supreme Court ruled that requiring certain rates was illegal. (After that it became a “suggested” rate, some sources say.)

How it became 6%, however, no one seems to know.

Is the 6% Commission Outdated?  One thing to keep in mind is that real estate services are generally bundled. Services on the seller side may include marketing, advertising, open houses and help during the negotiation process. On the buyer side, real estate professionals may spend a lot of time finding and showing houses to prospective buyers, as well as helping them navigate the purchase. Similar to other bundled services, like Internet, cable or phone service, however, bundling sometimes requires consumers to purchase services they don’t need.

More and more, consumers are seeking (and finding) an “unbundling” of such services. Years ago, potential homebuyers talked to an agent, seeking advice on areas with good schools and public transportation, or low crime — now they may research it themselves. In addition, they may be checking online for homes for sale and contacting agents about a house that just went on the market, instead of looking to a real estate agent to find them a home. Furthermore, sellers may not want open houses, or to pay for services they won’t use.

Before You Buy a House, Ask Yourself These 5 Questions

A home can be a wise purchase, but don't get in over your head. Too many people jump into buying a house without giving it enough thought, simply because it seems like the next "thing to do" on their life checklist. Full Article

#1: Should You Buy, Rent or Rent-to-Own? 
First of all, should you buy a home? Or are you better off renting? There's a pervasive myth that people who rent are "throwing money away," but that's a gross oversimplification.

Take a good look at your one-, five- and ten-year plans. Ask yourself how long you plan on staying in your area. After all the transactional costs that come with home buying (closing costs, realtor commissions, inspections and appraisals), it might be cheaper for you to rent, if you think you may be moving soon.

If you're not sure, you can always rent-to-own. This is officially called a "lease purchase," or a lease with the option to buy down the road. (To use a stock market or business analogy, it's like having a "call option" or a "first right of refusal" on the property.) 

#2: How Much of a Down Payment Can You Afford? 
Making a significant down payment can eliminate your private mortgage insurance (PMI), which is tacked on to each mortgage payment you make. 

PMI is a lender's way of protecting themselves in case you default on your mortgage. This mandatory insurance can cost an extra $40-$50/month for every $100,000 you borrow. 

If you're able to put down 20 percent or more of the purchase price of the home, you'll avoid this extra fee.

#3: Do You Know How Much You'll REALLY Be Paying?  
Your principal and interest aren't the only numbers you need to estimate when buying a home. You want to get a grasp on other ongoing costs like real estate taxes and homeowner's insurance. Different areas have different tax rates, so take that into consideration when looking at neighborhoods. 

Bear in mind the county can always raise taxes, and your insurer can always raise rates, so you don't want to be too close to the brink when it comes to how much you can afford. Leave yourself a little "wiggle room" for future increases and stay away from those homes that are in the tip-top of your budget.

#4: Can You Afford the Upkeep?  
 Even brand-new homes need repairs and maintenance. If you get a reputable home inspection, you should hopefully avoid buying a money pit, but you'll still have to deal with occasional repairs and the everyday upkeep of lawn maintenance, snow removal, gutter cleaning, tree-pruning, HVAC tune-ups and even the higher utility costs that come from moving from an apartment to a house.

#5: How Soon Will You Sell? 
When you buy a home, you'll need to pay for a huge heap of closing costs. These include real estate agent commissions, title insurance, attorney fees, recording fees, surveys, excise tax, points to the lender, inspection fees, warranties -- the list feels interminable. 

In theory, closing costs are negotiable. You can ask the seller to cover some of these expenses. But "negotiable" is not a guarantee of anything. The seller might reject your offer. Or they might counter with a purchase price that's higher than they otherwise would have granted. One way or another, those closing costs will get paid.

In the End
  Purchasing a home can be a savvy financial move, as long as you manage it well. Make sure to ask yourself the above questions before signing on the dotted line, and your dream home can bring you joy for many years to come.

Join the Savvy Lane Revolution

Savvy Lane has rebuilt real estate from the ground up by combining For Sale by Owner and the traditional process. Using our flat fee MLS service will save you thousands of dollars by eliminating the traditional 6% commission. By having your property listed on the MLS and hundreds of real estate websites you will increases your exposure tenfold.

Today 98% of buyers start their search online, make sure your property is seen on as many sites as possible with our flat fee MLS options. As a licensed brokerage Savvy Lane will provide access to the MLS, forms, yard signs, lock boxes and support to help you sell like the pros. Our proven technology has transformed the selling process.  

Savvy Lane has helped thousands save millions on commissions. Join the revolution and let us help you today.

Your finances: 3 things to get started on now

This is the time of year when certain money issues come more into focus, including those related to income-tax planning, charity scams and checking up on the financial health of family members. Full Article 

NEVER TOO EARLY FOR TAXES:  Tax planning isn't shaping up as anything remarkable over the waning weeks of 2015. Congress hasn't passed any blockbuster legislation affecting individuals this year and, with gridlock on Capitol Hill, might not. That leaves the fate of several popular tax provisions dangling. These "extenders" must be acted on fairly soon or they won't be in force for the coming tax-return filing season.

In any year, investors are wise to determine paper gains and losses in taxable accounts, with an eye on realizing or harvesting losses before year's end. If losses exceed gains, up to $3,000 of the excess can be used to offset ordinary income, and additional losses can be carried forward to future years. 

Otherwise, taxpayers generally would be wise to defer taxable income to next year, if possible, while accelerating deductions so they can be taken in 2015. But that strategy doesn't necessarily hold if you expect to have much larger deductible expenses next year, as with a pending medical procedure, for example. 

In that case, it might pay to bunch deductions into either this year or next, if you might not qualify to itemize both years. Charitable donations are one type of deductible expense for which the timing is easy to control.

CHARITY CAVEATS: Now also is a prime time for charitable donations, and non-profit groups — and scammers — know it. Americans make about one-quarter of their charitable donations over the waning weeks of the year, according to one study. That makes it critical to give money wisely, without getting so caught up in a feel-good moment that you drop your vigilance.

Another option is to search through the "exempt organizations select check" section at irs.gov (https://apps.irs.gov/app/eos/), though this database can be cumbersome. If you donate to a non-profit that isn't legitimate and claim a tax deduction, your deduction could be disallowed, and it might trigger an audit.  

In fact, consider whether you can take advantage of a charitable tax donation. Roughly two in three Americans don't itemize and thus won't get the deduction. An alternate option, especially if money is tight, might be to donate your time instead of your cash.

FAMILY MATTERS: Holiday get-togethers offer an opportunity to check the financial health of friends and family members — elderly relatives especially. Many seniors are affluent yet susceptible to giving away their money for reasons that could involve fear, loneliness, cognitive problems and others.

Strangers account for more than half the financial fraud committed against the elderly, but family members, friends and neighbors sometimes can cause problems, too.  

Wells Fargo suggests watching out for several telltale signs that things might be amiss. Some are obvious, such as large, unexplained loans taken out by an elderly person or personal belongings that have gone missing. Also, watch for wire transfers or large credit card charges, gifts to a caretaker, utility or other routine bills not being paid, and changes to the person's will or other estate-planning documents.

(Photo: Getty Images/iStockphoto)

Selling Your Home: Why It Pays To List In Winter

According to a study from Redfin, homes listed for sale during winter are more likely to sell within six months than homes whose owners held off until spring. This article from Daniel Bortz of TIME offers helpful suggestions on how to sell your home faster this winter.  Full Article 

 Spring may still be peak home-shopping season, since most families want to move when the kids are out of school. Yet it actually pays to list in the winter, when buyers tend to have more urgency: A study by online brokerage Redfin found that average sellers net more above asking price during the months of December, January, February, and March than they do from June through November, even in cold-weather cities like Boston and Chicago. And homes listed in winter sold faster than those posted in spring.

Should you put your home on the market now? Unless you need to sell (say, you’ve purchased your next home or are relocating for a job), “timing always depends on supply and demand,” says Indianapolis real estate agent Christine Dossman.

To understand your local climate, check the number of days on the market for current and recently sold listings. If most are sitting for more than 60 days, it’s safer to wait until spring, when more buyers will emerge. Yet “if properties are selling quickly, take that as a green light to list,” says real estate broker Peggy Yee of Vienna, Va.

If you do move forward, these strategies will help make your home a hot seller this winter.

Price it right. The quieter winter market brings special pricing considerations. Unlike in spring, when there are more shoppers – and it may make sense to price low to try to generate a bidding war – you’re less likely to receive multiple offers. Winter is also a bad time to test the market and list high. If the house doesn’t sell, you may need to drop below market value to nab a buyer before new properties appear in spring and make yours look stale by comparison.

Schedule a tune-up. Winter buyers are particularly attuned to issues related to heating and maintenance. Get your furnace, HVAC, and roof inspected, and make any necessary repairs. Also on your to-do list: Clean the gutters, change air filters, and weather-strip the windows.

Brighten your home. Snow and gray skies make for a gloomy first impression. Warm up curb appeal with basic landscaping, and add inexpensive cool-weather plants like holly to invigorate outdoor space. Fix chipped paint, caulk windows, and repair cracked window seals, which can cause condensation that freezes over and creates an eyesore.

Thinking of renting a home? Don't.

Based on home prices from last month, it's about 23 percent cheaper to buy a home than rent one in America's 100 major real estate markets, if you're a "young buyer" looking for your first place. Full Article

A new report from real estate group Trulia analyzed the cost difference between buying a home and renting one, with a special focus on buyers ages 25-34. Trulia examined current housing prices under the assumption that "young buyers" will move every five years and can only afford a downpayment of up to 10 percent. The "Rent vs. Buy" report also assumed a 3.85 percent mortgage rate on a 30-year fixed-rate loan, itemized federal tax deductions and a 25 percent tax bracket. Even so, the conclusions are hugely encouraging: Out of America's 100 biggest housing markets, only two -- Honolulu and Silicon Valley -- showed a higher price for buying a home vs. renting one. Everywhere else, the costs tipped in favor of buying a home.

Researchers credit a changing economy for the good news: Interest rates are nearing record lows, and the housing market continues to rebound from financial letdown. Trulia estimates that this is the best time to buy a house since 2012, since the gap between the cost of renting and the cost of buying is huge in many metros, especially in Southern and Midwestern markets. How huge? Check out Trulia's 10 markets where buying is much better than renting (assuming buyers are staying for five years and putting down less than 10 percent):