Buying VS Renting

There is definitely an upside to renting:

• Flexibility. Check out neighborhoods if you are new to town or are researching where you want to buy. By renting you can test an area without committing to it.
• Uncertainty in your career. If you think you might need to move in the near future, or are mulling job changes that span several areas of town or are located elsewhere in the country, you might want to rent, since buying ties you down to a greater extent.
• Uncertainty in income. If you expect a pay hike or pay cut in the near future, that can change your borrowing ability as well as impact your ability to pay a mortgage.
• Got bad credit? Creating a history of on-time rental payments can help you build the sort of credit you need to qualify for a mortgage.
• No maintenance. When the pipe leaks under the sink, you don’t head to Home Depot, you head for the telephone and call the landlord.
• Incidental expenses. The landlord pays for many utilities such as water, sewer, garbage, and in some cases heat and hot water as well.

There are upsides to buying a home:

• Equity. When you pay rent, you don’t own anything. When you pay a mortgage, you increase your degree of ownership in your home with every payment. Also, you can borrow against your ownership (or equity) in the home to pay for major purchases, refinance your home at favorable rates, or, once you’ve paid the entire mortgage off, borrow to fund major purchases like a second home or your child’s education.
• Tax deductions. You can deduct mortgage interest as well as your property taxes. Uncle Sam doesn’t give renters this bonus. Not only that, but if you meet certain requirements the IRS won’t apply a “capital gains” tax on your profits from the sale of your home. You can keep the first $250,000 in profit you make when selling the home if you’re single, or the first $500,000 if married. In addition, those who work from home may be eligible to take deductions for their home office and portions of utilities.
• Creative control. So, you like dozens of pictures on the wall? Well, hammer away — they are your walls now. Go ahead and paint them mango! Wish you had another room? Go ahead and add one.
• Maintenance choices. If you live in a house, you can decide how to approach maintenance, either doing it yourself or picking your own contractor. If you live in a condominium or homeowners’ association, you may pay a monthly fee to have maintenance work covered by the association’s contractors.

Smart ways to turn your tax refund into Homeownership

Home buying (and selling) season usually kicks off around Tax Day in early Spring! For most the scramble to save as much as you can prior to buying a home can seem daunting, Closing costs, down payment, inspections and earnest money oh my…. Here are some of the top ways you can spring forward into homeownership this spring and use your hard earned dollars to help.

1. Pay down debt – To purchase a home you need a credit score of 580 or higher and this is a crucial factor to determine your eligibility in obtaining a loan. Increase your credit score and lower your debt to income by paying off high interest credit card debt. For other tips on what should be paid down its a great idea to speak with a lender.

2. Down Payment– Depending on what loan you and your lender choose you will need 3.5 percent -5% down this is a total amount based off the purchase price of the home you choose. That IRS windfall you were not counting on can really add to what you have saved quickly.

3. Earnest Money Deposit- When you find the perfect home you will be required to give a deposit which is called Earnest Money. This amount will later come off the total down payment and closing cost amount needed to secure your loan. This Earnest Money is given within a few days after a contract is signed and usually equal to 1% of the home price. on a $200,000 home most sellers like to see $2,000. as Earnest money.

4. Home Inspections- While it is not a requirement to get a home inspected before you purchase it, we always recommend you do so. Its a good idea to make sure your not getting in over your head or that something will cost more than you budget for repair. Home inspections are completed within the first 5 business days a home is under contract and typically range in price based off the home square footage.

5. Savings- Start that rainy day fund. A great rule of thumb is to have 6 months worth of mortgage payments in an account in case you should ever need it to fall back on. Sometimes when owning a home you have unexpected maintenance costs having money aside can release you from the financial burden.

6. Build Equity- Not every home is move in ready and currently lots of deals on homes that need a little bit of work, build some sweat equity with your savings and make some simple renovations that can help you increase the value of your home exponentially.

Thinking of taking the plunge into homeownership? Reach out and I will get you on the right path! 

Applying for a pre-approval online can help save time and make it easier to get the best rate, but before you decide on a lender, ask for referrals.

Friends, family and coworkers who own their homes can be a great source of information.

You can also ask a Realtor for a list of preferred lenders.

Small Versus Large Lenders

Choosing between a small local lender or a larger national lender is mostly a matter of preference, but knowing which you’d prefer can help you find the right deal for your situation.

If you like personal service, and enjoy the face-to-face contact, it may make sense to choose a small mortgage lender in your local area.

If you don’t have much time to waste and seek a well-organized lender, having a larger lender may be the choice for you. Also, a large lender may have more payment options such as online payment or automatic mortgage deduction.

Mortgage Company Reputation

Generally, a good lender will have a solid reputation with accreditation and reviews to back it up. To figure out where your lender stands, start by doing this research yourself:

• Check with the Better Business Bureau for ratings, reviews and complaints against the mortgage company.
• Look for a posted mission statement or customer service rewards on the lender’s website.
• Verify the lender’s standing with the local Chamber of Commerce.
• Check review sites for both negative and positive reviews of the mortgage company.

Mortgage Company Customer Service

Finding a lender with great customer service can make things easier, especially if you have questions about the application or terms—or find yourself needing help with your mortgage down the line.

Test the lender’s customer service skills by calling with a few simple questions about the application or the lending process. After you talk with a representative, ask yourself these questions:

• Did the lender seem knowledgeable?
• Did you wait on hold for a long time?
• Was the lender helpful?
• Did you feel rushed?

Remember, first impression can be very telling in the business world, and buying a home is a big financial commitment—so you should expect to be treated well by your mortgage company.

Good Faith Estimate

Once you’ve narrowed down your choice to three or four lenders, ask for a good faith estimate: a detailed list of costs provided by a bank or mortgage lender to a borrower, required by law. The costs listed include the following:

• Settlement or closing costs
• Title insurance
• Taxes
• Attorney fees
• Interest rates
• Partial month interest
• Credit check costs
• Hazard and property insurance rates

While these are only estimate and may vary slightly from your actual costs, you can use your good faith estimate as a tool to help you chose the most reasonable lender.