Three Tips For Single Home Buyers

Here are three financial tips for prospective home buyers. According to the National Association of Realtors' most recent data from 2014, 24 percent of home buyers are single. Full article  

KNOW WHAT YOU CAN AFFORD  Affordability is a huge issue. That means not only affording the mortgage but also the taxes, the maintenance, the insurance and having money set aside for emergencies.

"Otherwise, you are house rich, cash poor," said Kathleen Grace, certified financial planner and managing director at financial services company United Capital.  The conventional wisdom for a down payment has not changed. Expect to put down 20 percent for the mortgage. At the same time, have an emergency fund to cover at least six months of expenses, experts say.

Even if you are purchasing a new property, you will need a reserve to cover repairs. Remember that you have to pay property taxes, too. A good way to make sure that you can is to divide the tax bill by 12 and set the money aside each month.

A spreadsheet can help you figure out all the costs of owning the property. Use a housing calculator like financial services company Fidelity's (here) to figure out what you can afford.

"Only take on buying a home if it's something you have ample funds for," said personal finance expert Farnoosh Torabi.

PROTECT YOUR ASSETS  When you are buying a property alone it becomes even more important that you have adequate insurance coverage. That includes life, disability as well as healthcare insurance.

You might also want to look into setting up a trust so that the proceeds from your insurance policies go to your independent beneficiary if something happens to you.

"All the responsibility lies on you," said Chantel Bonneau, wealth management adviser at Northwestern Mutual. "So it's even more important that you protect your income, which is your biggest asset."

If you get married, you can also look into shielding your home in the event of a divorce with a prenuptial agreement. Another option? Keep your property entirely in your name, said Torabi.

CONSULT EXPERTS AND TAKE YOUR TIME  Since buying a home is one of the biggest financial decisions most people make, it is a good idea to work with a real estate agent and consult with a financial adviser. Do your research and take your time.

That's exactly what Lorenzo did. The process of finding and buying the condo, which was priced in the $300,000-range, took about four months. She went through several offers before finding the right place.

"It's a demanding process that requires a lot of critical thinking," Lorenzo said. "You can only grow from the experience."

Three Times You Can Kiss Your Earnest Money Goodbye

The earnest money deposit—the cash you offer to essentially call dibs on a house—is one of the most important and misunderstood parts of the home-buying process.

Depending on where you live, you can expect to put down anywhere from 1% to even 10% of the home’s purchase price as earnest money. (In some highly competitive markets, buyers are making even larger deposits in an effort to stand out.) An earnest money deposit tells a seller you are serious about closing. Without earnest money, you could theoretically make offers on multiple homes, essentially taking them off the market until you decide which one you like best. Full Article

1. You waived your contingencies  In highly competitive markets, it’s becoming more common for buyers to waive contract contingencies regarding financing or an inspection. You might be tempted to do the same—it will make you a more attractive buyer. But it also comes with serious risks. You guessed it: You might lose your earnest money deposit.

The financing contingency guarantees that you’ll get your money back if for some reason your mortgage doesn’t go through and you’re unable to purchase the house. The inspection contingency allows you to renegotiate the price or demand repairs if serious defects are found during the inspection.

If your contract doesn’t have such buyer protections and you run into trouble with the inspection, you won’t be able to get your money back if you abandon the deal. Most experts recommend that you not waive the inspection contingency, unless you’re planning on tearing the property down.

As for the mortgage-financing contingency, waiving it may be the only way to compete with all-cash buyers. But you’ve got to be absolutely sure that you’ll be able to get approval from your bank.

2. You ignored the timeline outlined in the contract  Your contract usually sets out a specific time frame in which you’ll need to secure financing, get the home inspected, and be available for the closing. Generally speaking, as long as you’ve made a good-faith effort to adhere to the timeline, sellers will grant a reasonable extension if a lender drags his feet or there are other extenuating circumstances that delay things.

However, in some cases sellers may include a “time is of the essence” clause in the contract. Watch out for this phrase in your paperwork—it means the closing date for the sale is binding. If you can’t make it to close for any reason, you’ve breached the contract and could lose your deposit.

3. You get cold feet  If you have a change of heart about the home you’re buying—but there’s no problem with the property or the financing—you likely will not get your money back.

“If a buyer changes her mind and was able to request the down payment be returned without consequence then the whole idea of a contract would no longer be worth much,” says Marc Kaufman, a real estate attorney with Wexler Lehrer & Kaufman in New York City. “One party cannot simply walk away and default on a whim.”

The earnest money deposit serves a protection for the sellers when they take their home off the market. If late in the game you decide that you no longer want to make the purchase, they get to keep it as compensation for the time and money they have to spend on listing their home again and looking for another buyer.

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5 Fall House Hunting Tips

Check out some tips to help you find success on your home search this fall. Full Article

1. Know Your Market  Different areas may follow different patterns during the fall. Sometimes there may be a limited selection of properties, while some may be experiencing value appreciation. You can work with a knowledgeable real estate agent who will help you navigate the market or do some online and in-person research yourself. The more you know about your ideal destination and the homes nearby, the better you will be able to find something you are looking for in your price range.

2. Check on Maintenance Needs  Seeing homes in a different weather pattern can help you get an idea of what a property can really handle and what it needs in terms of improvements. Observe how the gutter drainage and general yard upkeep is going and try to check if anything needs repairs. You can go inside and see how a lower temperature impacts your comfort while looking out for drafts, leakage issues and other possible structural or maintenance problems.

3. Look for Negotiation  The fall real estate season may mean fewer options, but it also often means fewer competitors. While many families may have wanted to be in a new home before the school year started, there may be home sellers who are now willing to lower the asking price. There will probably be some homes you may have seen on the market a few months ago that have not been sold. Sellers may even be desperate to sell, giving you room to negotiate.

4. Ensure Cheap Labor  No matter what level of work a property needs, the fall and winter can be a great time to do it. Especially in colder climates, construction tends to slow as the holidays approach. You may be able to get some deals from your local contractor to replace the outdated kitchen or bathroom in your new home.

5. Take Advantage of Tax Breaks  The fall season means people are starting to think about year-end tax breaks. Many sellers and builders try to offer various incentives to buy a property before Dec. 31 to avoid paying another year of maintenance and property taxes. Owning a home can yield some serious returns in tax breaks as both mortgage interest and property taxes are deductible from gross income.

The Fed Keeps Interest Rates Near Zero

The U.S. Federal Reserve has decided not to raise interest rates at its September Federal Open Market Committee meeting. The committee’s two-day meeting concluded with Fed officials voting to keep interest rates near zero—the U.S. central bank’s target range for the federal funds rate will stay at 0 to 1/4 percent.

The decision comes after much anticipation—it would have been the first time the Fed raised interest rates in nearly a decade. There was an economic case to be made for keeping rates low, as well as to begin gradually raising them. According to a survey of private economists by The Wall Street Journal, 52 percent of private economists believed a rate increase would not happen today.

The U.S. job market has been putting in solid numbers in recent months, data that Fed watchers believed might convince the Fed to hike rates. The counter-argument against raising rates, though, is that inflation remains very low. Full Article 

Buying with Savvy Lane

We understand real estate isn't one size fits all and every buyer has different needs, you have three options when it comes to buying with us.   Search for your next home here.

A Guide to Getting Your First Mortgage

To buy your first home, you likely will need a mortgage. In fact, before you even start looking at houses, you should look into your mortgage prospects. Full Article

Here are 12 things to know before getting your first mortgage:

Meet with a mortgage officer before looking at homes. This will help you determine whether you have credit problems that need to be solved first. It will also let you know how much house you can afford before you begin your search.

Pay off as much debt as you can first. This will help keep what’s known as your debt-to-income ratio down. Lenders look at your income and all your debts – student loans, car payments, credit card debt – to determine how much you can afford to borrow. If your total debt, with the new house payment, would be more than 43 percent of your income, you’re unlikely to get the loan. Some lenders may want a lower ratio.

Develop good credit habits way before you plan to buy. Missing payments on student loans or habitually paying your bills late will lower your credit score and make borrowing for a home impossible or more expensive. Once a bill goes into collections, it can take months or years to recover from the damage.

Consider consolidating or refinancing student loans. If you can’t pay off student loans before you buy a home, investigate whether you can lower your payments. You’ll have to decide whether it makes sense to stretch student loan payments over more years to buy a home sooner.

Show a solid work history. If you’ve just finished graduate school in engineering and gotten your first engineering job, a lender may not care that you don’t have two years of work history. But if you’ve just left graduate school and gone to work at Starbucks, you’ll have a hard time getting a mortgage until you’ve had that job for two years. That goes for part-time jobs, too. However, taking a part-time job on the side and using the money to pay down debt or add to your cash reserves may be helpful even if the lender isn’t willing to consider that income.

Be prepared to document everything. You’ll need tax returns, bank statements, brokerage statements and documents to verify the source of any money you plan to use. The lender will also verify your employment and income, once at the beginning of the process and again a day or two before closing.

Don’t buy anything on credit or apply for any credit while your loan is pending. You may be tempted to buy new furniture for your new home and put it on a credit card. Or, perhaps you realize you’ll have enough cash left for a down payment on a new car. “Once we start this process, don’t spend a dime that you don’t have, don’t put anything on credit cards, don’t apply for any credit,” Fleming warns. Otherwise, you may jeopardize the deal.

Talk to several lenders or mortgage brokers. Not all lenders offer the same loans, so it makes sense to shop around. Be careful that you’re comparing apples to apples. All lenders let you choose whether you’d like to pay more upfront, in the form of “points,” to get a lower interest rate. If a lender offers you a “no closing costs” loan, find out where you’re being charged extra to compensate for that.

Shop for closing agents. The actual closing costs, such as document preparation, legal fees and title insurance, vary considerably. In a state where those costs are high, you can save several thousand dollars on the transaction by choosing a different closing agent. Ask both your real estate agent and mortgage officer for recommendations, as well as friends and family.

Make sure you have enough cash to cover all your costs. In addition to closing costs charged by the lender and the closing agent, you’ll need to pay for a home inspection, an appraisal, a survey and city, county or state transfer taxes. Not only that, most lenders ask for at least a year’s worth of homeowners insurance and property taxes upfront.

If you’re self-employed, prepare to jump through more hoops. People who own small businesses often can’t qualify for a mortgage until they’ve been in business two years, though exceptions are likely for professionals, such as doctors, who leave a staff position and become self-employed in the same field. Most self-employed professionals write off enough expenses on their taxes to make their adjusted gross income much lower than their actual income. The lender will consider that lower number your income.

The house may also have to qualify. If you’re getting an FHA mortgage, the house has to meet certain standards. Lenders may also set standards for home conditions for conventional mortgages. Plus, the house has to be insurable.

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Why Real Estate Could Be a Better Investment Than Stocks

Once you're on track with your financial goals – such as retirement contributions or repaying student loan debt – you may find yourself exploring real estate investments in lieu of the stock market. Buying real estate as an investment can be lucrative, but it's also cash-intensive and carries risks. Full Article

Risk versus expected returns. Whether putting cash into the market or purchasing real estate, you need to assess the risk versus the expected returns. Traditional equity investments are much easier to analyze in this way. You have historical data, and although past performance is not indicative of future results, you have a bit more control over how much risk you're exposed to when deciding what amount to invest, the asset allocation and so on. Investing in single stocks versus an index fund is a calculated risk some are willing to take in search of higher expected returns.

Required capital. Virtually anyone can invest in traditional equity assets. Some shares can be very inexpensive and you can often determine the volume as well. The same cannot be said for real estate. To purchase a property, you need to either come up with a down payment yourself, or enlist partners to invest with you. Typically, you need to put down 20 percent for a traditional mortgage, and although various programs can help you to put down a smaller percentage, there are fewer options for investment properties.

Taxes. Another aspect to consider when deciding to invest in real estate or the stock market is taxes. If you own property, you will be required to pay property taxes every quarter, based on the assessed value as determined by the city or country. This is included in your mortgage payment. Whether you want to flip the property or hold onto it as a landlord, you will also have to pay tax on the sale or rental proceeds.

Inflation. Real estate can be a potential hedge against inflation as historically, rental rates and home prices rise with inflation. This provides a potential inflation hedge for both your rental income and sale of the property. Since your mortgage payments will not increase with inflation, it offers a benefit over time.

Time. Another factor to consider when choosing to invest in real estate or the stock market is to factor in your time as a cost during the analysis. While you do need to do some research when deciding which funds to buy, you can purchase traditional equity investments in a matter of moments. There is a lot more time required in buying and maintaining a property, as well as managing any improvements. As a landlord, you will be on call for the tenants as problems arise. Hiring a property manager is an option, but depending on the size of your property, could eliminate your profit margin.

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