Tuesday, October 21, 2008

Three Important Benefits of HR 3221

The Housing and Economic Recovery Act of 2008 is a $300 Billion rescue plan aimed at helping struggling homeowners avoid foreclosure. Although the bill is several hundred pages long and contains a number of far-reaching provisions, here are the top three changes that may benefit you:

1. Tax credits. First-time home buyers who purchase their primary residence between April 8, 2008 and July 1, 2009 are eligible for up to $7,500 in tax credit, provided they haven't owned a home in the last three years and fit certain income parameters. The credit is generous, but it is actually an interest-free loan that is paid back over 15 years at $500 per year when taxes are filed.

2. Larger loans at lower rates. This is a great benefit for homeowners with "jumbo" mortgages, which range between $417,000 and $625,000. If you are considering purchasing a home in that price range, this provision may be ideal for you. Please call or email to schedule a meeting to discuss your options.

3. FHA Hope for Homeowners. This provision is designed to help homeowners who are "upside down" on their mortgage - that is, people who owe more on their house than they can sell it for in today's market. Essentially, this plan allows borrowers who meet specific requirements to refinance their mortgages to new 30-year fixed FHA mortgages. If you're upside down on your mortgage and struggling in today's economy, this is an option worth exploring.

Monday, October 13, 2008

Renters Have Much to Gain by Pursuing Home Ownership

Buying a home vs. renting is a big decision that takes careful consideration, as most mortgage consultants & realtors will agree. But the rewards of home ownership are great. For many years, purchasing real estate has been considered an extremely profitable investment. It is an achievement that offers a sense of pride, financial stability and potential tax advantages.

Yes, there are certain responsibilities associated with owning a home. Landlords will often argue the benefits of renting, and for obvious reason. If you are renting, you're helping them make their mortgage payment.

The numbers are staggering if you look at it this way. If you are paying $1,000 per month for an apartment, and you know your rent will increase 5% every year, then over the next five years you will pay your landlord $66,309. If you are currently renting a house, you may be paying much more than that each month. Either way, you gain no equity by shelling out this monthly housing expense and you certainly won't benefit when the property value goes up!

However, if you were to purchase your own home or condominium, you would be well on your way toward building equity within that same five-year period. By choosing a fixed-rate loan program, you can have the comfort of knowing that your monthly mortgage payment will never go up. In fact, you would have the option of refinancing to a lower interest rate at some point in the future should interest rates drop, and this would cause your monthly mortgage commitment to go down.

In addition to building equity, there are tax advantages that come into play with home ownership. Depending on your tax bracket, owning a home is often less expensive than renting after taxes. Interest payments on a mortgage below $1 million are tax-deductible, and your mortgage consultant should help you evaluate the tax advantages of various loan scenarios.

There are many different types of loan programs available, including "low" and "no" down payment mortgage programs. These types of programs require the borrower to provide less than 3 percent of the loan amount as down payment.

Housing is an expense that takes a big bite out of the monthly budget. If you are a renter and feel that "home" is more than just someplace to hang your hat, think about the advantages of purchasing real estate. It may be time to take the step into building your personal net worth as a home owner.

Tuesday, September 23, 2008

Why Invest in Real Estate?

Most investments pay interest only on the amount you invest. However, Real Estate appreciates on the full value of the property even though you have invested only the amount of your down payment!

Historically, Real Estate has shown a consistent growth in value, even when many other investment choices were less stable.

Real Estate Makes Sense!

  • Profit from Rental Income - let your tenants pay your mortgage!
  • Increase Your Equity with Improvements - any improvements you choose to make increases the value of your investment
  • Deductible/Depreciable/Deferrable - no investment reduces your taxable income better than real estate!
  • Stable - minimal volatility & minimal risk
  • Build Your Net Worth - as your mortgage is paid down, your equity in the property increases and adds to your net worth
  • Live in Your Investment - one of the few investments that can put a roof over your head if you desire

How much has your financial situation improved in the past five years? How much will it improve in the next five or ten?

Putting some of your assets to work in investment properties today could bring you those same improvements PLUS the ownership of several apartment buildings in just a few years!

Long-Term Benefits:
  • Increased Personal Wealth
  • Increased Income
  • Significant Tax Advantages
  • Greater Security
  • Greater Financial Freedom

Put Your Assets to Work!

You probably have assets that are earning LOW interest (savings, CD’s, mutual funds, etc.)
… and other assets earning NO interest (the equity in your home or money in your checking account). Keep in mind that you can obtain financing for as little as 5% down!

Consider the following options for your down payment:

  • Tap into a home equity or other line of credit
  • Refinance another property
  • Temporarily borrow against a life insurance policy or 401K
  • Use purchase credits (security deposits, rent credits, tax credits, etc.) to reduce the amount of your down payment
  • Use seller financing
  • Assume a current mortgage
  • Borrow the money from a private party
  • Partner with someone

Shouldn't your assets be helping you achieve a better lifestyle for you and your family?

Thursday, September 18, 2008

Understanding FICO Scores

FICO® scores were developed by Fair Isaac & Company, Inc. for each of the credit repositories - (Equifax) Beacon®, (Experian formerly TRW) Experian/FICO and (TransUnion) Empirica®.

They are simply repository scores meaning they only consider the information contained in a person's credit file; they do not consider a persons income, savings or amount of a down payment for a mortgage.

Basically, the scores were designed to assess risk or a person’s likelihood to pay back a loan. The portion of the credit file considered and the weight (as provided by Fair Isaac) are as follows:

  • Previous credit performance (35%) Trade line information specific to payment history

  • Current level of indebtedness (30%) Current balance compared to the high credit

  • Time credit has been in use (15%) Opening date

  • Types of credit available (15%) Installment loans, revolving accounts, debit accounts

  • Pursuit of new credit (less than 5%) Inquiries

In their booklet, "Understanding your FICO® score" (available for download in PDF format) Fair Isaac states, "A credit score is a number that summarizes your credit risk, based on a snapshot of your credit report at a particular point in time... Lenders use FICO® scores to help them make billions of credit decisions every year. Fair Isaac develops FICO® scores based solely on information in consumer credit reports maintained at the credit reporting agencies."

Scores range from 350 (high risk) to 950 (low risk). If your credit score is too low, you may be denied a loan or credit card. If it is low, but acceptable, you may be offered credit at a higher interest rate. In other words, high risk borrowers will be required to pay more than a person who has wisely used credit.

Here’s an example from the myFICO website for a $300,000 home loan (30 year fixed interest rate using sample September 19, 2008 data):

Keep in mind, this is a snapshot and is subject to change based on the time the loan is requested, the loan amount and the customer’s credit history. The lesson, however, is obvious. The better the credit score - the lower the payment.

To improve your credit score, here is what FICO® has to say: http://www.myfico.com/CreditEducation/ImproveYourScore.aspx

There are three major credit agencies that track and report your use credit:

Equifax - PO Box 105873 Atlanta, GA 30348 (800) 685-1111
National Consumer Assistance - CenterPO Box 2002Allen, TX 75013
Consumer Credit Questions: 888 EXPERIAN (888 397-3742)
Trans-Union - PO Box 390 Springfield, PA 19064 (800) 916-8800 (800) 851-2674

If you are ever denied credit you have the right to request a free copy of the report that was used to evaluate the decision. Contact the agencies or check the weblinks for more detailed information.

If you’d like to know more about purchasing a home in Southern Maine, please let me know. I’m a real estate agent based near Portland. In addition to helping you with finding a home, I can help you obtain your credit score and better understand how it will impact your ability to buy a home. I work with experienced lenders who can let you know how much money you’re able to borrow and how much your monthly payment is expected to be.

I hope this information has been helpful. Call me any time with questions - my advice is always free.

10 Important Points That Cost (or Save) Sellers Serious Money

Selling your home can be an exhausting experience. Last minute walk throughs, inconvenient calls, price adjustment and the possibility of being stuck with two mortgages are real concerns. If you are not completely prepared you could end up losing hundreds, even thousands, of dollars in profit.

The difference between a profitable smooth transaction and a break even, miserable experience is often a fine line. In the majority of cases it comes down to the subtle know how of your real estate agent. By utilizing the knowledge of a well-trained real estate agent, you will ensure the quick, profitable sale of your home.

Here are 10 important points that sellers should take keep in mind:

  1. Refusing to Make Profit Inducing Repairs - It always costs you more money to sell ‘as is' than to make repairs that will increase the value of your home. Even minor improvements will often yield as much as three to five times the repair cost at the time of sale. Your agent will be able to point out what repairs will significantly increase the value of your home. Seemingly small fix up jobs can have quite an impact.
  2. Provide Easy Access for Showings - Accessibility is a major key to profitability. Appointment-only showings are the most restrictive, while a lock box is the least. However there are certain considerations to take into account: your lifestyle, time frame for the desired sale and the relationship with the person representing your interests. The more accessible your home is, the better the odds of finding a person willing to pay your asking price. You never know if the one that couldn't get a viewing was the one that got away.
  3. Pricing Too Low or Pricing Too High - One critical reason to find an experienced professional real estate agent is to make sure the property is priced appropriately for a timely and profitable sale. If the property is priced too high it will sit and develop the identity of a problem property. If it's priced too low it could cost you considerable profits. The real estate market has subtle nuances and market changes that should be re-evaluated to help you maximize your return.
  4. Relying Solely on Traditional Methods To Sell Your Home -A real estate professional who is innovative and willing to offer new strategies of attracting home buyers will always outperform those who rely on traditional methods. Demand around the clock advertising exposure, innovative lead generation methods and lead accountability. These services exist and should be offered on your home sale.
  5. Market Timing/Seasonal Selling - Just as a broker who continually follows the trends of a stock, your real estate professional continually follows trends of your home market. They will know if the market cycle is poised to net you the most money. Avoid believing that property sales are seasonal.. property is always selling.
  6. Refusing to Make Cosmetic Changes - The prospective home buyer's first impression is the most important. Hundreds ordf thousands of home sales have been lost to unkempt lawns, cluttered rooms, bad stains, unpleasant odors... all the seemingly little things. Imagine you were the home buyer and clean your place from top to bottom... military style.
  7. Wasting Time With An Unqualified Prospect - Your real estate representative's responsibility is to screen a prospect's qualifications before valuable time is lost. Be sure to align yourself with the right professional and eliminate negotiating with unqualified prospects.
  8. Don't Test The Market - Never put your property on line to sell unless you are serious. The right real estate professional will find you buyers and if you are harboring indecision... you will blow the sale.
  9. Don't Believe That You are Powerless to Make a Difference - Be a part of the team! Take an active role with your real estate professional to see what you can do to facilitate your sale. Networking with professional peers and personal friends often results in the sale of a home. It's surprising how many homes are sold this way.
  10. Don't Believe That All Realtors, Brokers & Others are the Same - With all the intricate details and critical decisions to be made concerning your home sale, should you rely on anyone but an experienced real estate professional? Many friends and family members have been estranged as a result of failing to meet expectations. Your home sale is a time consuming, effort related, difficult task. Maximize your profit by utilizing an experienced real estate professional.

10 "Do’s & Don’ts" for Home Buyers

Avoiding common mistakes can make the home buying process simpler and less stressful. Keep the following in mind to help improve your home-buying experience:
  1. Do Your Homework - Enter the market well-prepared by researching location, school district, deed restrictions and taxes.
  2. Don't Try To Make a Shrewd Investment - Focus on finding the best place for you and your family to live rather than trying to predict the real estate market.
  3. Location, Location, Location - Consider what part of town you would like to live in and avoid homes located on busy streets.
  4. Don't Overlook an Inferior Floor Plan for an Attractive Exterior - Choose a great floor plan over a great exterior because you'll spend far more time inside the house than outside.
  5. Don't Overlook How the Home Will Function For Your Family - Consider features that are most important to your family and choose a home that will meet those needs.
  6. Always Have the Home Properly Inspected When Buying a Resale - Hire a state-licensed, professional inspector to evaluate the home's true condition, which could save you thousands of dollars in repairs and maintenance.
  7. Always Have the Home Properly Inspected When Buying a New Home - Research the number of homes sold, homeowner satisfaction, years in business, industry recognition and warranties offered.
  8. Avoid Not Getting What You Want Because You're Impatient - If it's a used home, allow time to negotiate and get the best deal possible. Refusing to rush the process could save you $5,000 on the purchase price.
  9. Avoid Waiting For a Better Time to Buy Based on the Market and Interest Rates - History shows that those who purchased homes and kept them for three to five years or more did better than those who didn't. Waiting is one of the biggest mistakes a home buyer can make.
  10. Not Buying At All - The biggest home buying mistake is not buying at all. Buying a home will give you a place to call your own and allow you to take advantage of tax breaks and build equity.