Tips for Budgeting and Saving for a House Down Payment

Prior to buying a home, you need to assess the amount and source of your down payment funds and check in with a lender of choice to determine what kind of loan is best for you. You should work on getting your credit score as high as possible and create a reasonable budget so you can save the needed down payment funds.

There are down payment assistance programs that will help keep the size of your down payment to only 3.5 percent of the purchase price. In some cases, with lender-required education, there may be no down payment required.

Plan on buying a home that fits your savings plan of an amount equal to 3.5 percent of the price. You can always move up to a larger home later as your equity grows.

It is not uncommon for all or part of a down payment to be gifted from a family member. This option may allow you to buy a home sooner than expected because your funds are immediately available.

To help save money to buy a home, have your bank set up an automated transfer of at least 10 percent from every paycheck to a separate account that is reserved for your down payment funds. Have your budgeting plan include reducing some of your more luxurious indulgences. Eat out less often, shop for more affordable getaways and evaluate how much you are spending on items you could really live without.

If you can find a way to increase your income, even if only temporarily, your down payment fund will grow even more quickly. You may have a hobby that could be a marketable commodity, or freelancing your skills could supplement your income.

Reach out to learn how you can put yourself in the best possible position to purchase a home.

Is a Fixer-Upper the Right Investment for Me?

You’ve read the headlines: Build sweat equity. DIY special. Needs some TLC. These homes are far from turnkey, but they can offer good opportunities. With the right renovations, fixer-uppers can be a profitable investment.

But is this type of purchase right for you? To answer this question, consider three important factors.

Your plans. If you’re hoping to get a good deal on real estate and flip it for a profit, this can be a good option. Another great option is buying a fixer-upper and doing the repairs yourself in order to transform the house into your dream home. On the other hand, if you have watched a lot of real estate shows and expect to spend a couple of weekends working on the home and then make big bucks, you’re probably on the wrong path. Keep in mind that renovations are often costly, time-consuming, and far more complicated than they look on television.

Your budget. Consider whether you can realistically afford the renovations. How much would it take to make the home liveable? Would basic cosmetic changes be enough, or do you need a budget for more extensive repairs? If major construction is required, you may qualify for a home improvement loan program. If you’d like more information about current loan programs, I can review what is available and connect you with a lender to check your eligibility.

Your time. Examine your calendar. First, consider if you will have a place to live while renovations are completed. If you’re selling your current home and need to move out by a certain date, you’ll need to make plans for temporary housing. You must also consider the time required to manage this type of project. You’ll need to hire and coordinate contractors, or, if you’re doing the work yourself, you’ll need to budget significant time for your labor.

Think a fixer-upper might be right for you? I can help you find deals in your area. Just give me a call.

A ‘Dear Seller’ Letter Offers a Unique Negotiation Strategy

You’re probably familiar with letters to Santa. You’ve most likely heard of letters to the editor.

But have you heard of a homebuyer letter? In some areas, buyers are including these communications when they submit offers to purchase a home. If the trend grows, these messages could become common documents among real estate paperwork. Here’s the scoop.

What is a homebuyer letter?

These notes are designed to make a buyer’s offer more personal and appealing. The goal is to encourage the seller to choose the writer of the letter over another buyer.

In hot markets, a seller may receive multiple offers at once and must then choose which offer to negotiate or accept. To make their offer stand out, buyers are using these letters. They are written to sellers to plead the buyer’s case, offering reasons the seller should accept this offer over others.

What is included in the letter?

The exact details vary from letter to letter, but many contain similar details. Buyers often mention the features of the home that they love, discuss how they plan to use the house, or reassure the sellers that they don’t plan to make significant changes to the home. This can prove helpful in situations where the seller has lived in the home a long time or the property has been in the family for generations. Buyers may also include personal information such as hobbies and professions to try to further connect with the seller.

Does it work?

Apparently, it can. Real estate agents have reported instances when sellers did not choose the highest bid because of a letter included with a lower offer.

Of course, this tactic is not guaranteed to work. For many sellers, the price is all that matters. And to others, the letters can come across as corny or inappropriate.

Is this a good strategy to use for your next offer? Should you polish up your writing skills and submit a homebuyer letter? Maybe.

Consult with your real estate agent to determine what’s best for your situation.

Home Seller’s Guide: Top Do’s & Don’ts for a Quick Sale

You want to sell your home quickly and for the best possible price, right? What’s the secret to achieving this goal? There are several. Use these do’s and don’ts to guide your home sale process.

What to Do

Get out of Dodge: When potential buyers view your home, they want to see your property, not you. Always leave the premises. The buyers will feel more comfortable and are likely to spend more time looking at your home and fully considering it if you are not there.

Put out the welcome mat: Go the extra mile to make your home show well. Declutter. Clean. Turn on all lights and open all window treatments before showings to create a bright, airy atmosphere.

Partner with a pro: A real estate agent knows what works best in your market. He or she can provide invaluable input to make your home stand out among the competition.

What Not to Do

Take it personally: A home filled with personalized décor can turn buyers off. Neutralize your home to make it appealing to the maximum number of buyers. This might mean removing family photos or repainting your bright orange bathroom.

Crowd the skeletons: When you declutter your home, don’t simply throw everything in the closets. Your storage spaces need to look large, useful, and inviting.

Overinflate: While you want to get the biggest bang for your buck, overpricing your home only delays your sale. Consult with a real estate agent who can help you determine the right price for your home based on features, location, and current market trends.

Increase Property Value by Avoiding These Landscape Blunders

Everyone knows the importance of making a good first impression. It’s no different when it comes to your home’s curb appeal, which refers to your property’s overall appearance from the street.

To make your home’s “frosting” as appealing as possible, you’ll definitely want to think about planting stunning blooms and making sure your landscaping is well manicured and maintained. Implementing a long-term landscaping plan can help increase your property value when it comes time to sell.

When you go to plant, make sure to avoid the below common landscaping mistakes that homeowners make when planting trees and shrubs.

First, avoid planting invasive tree species. Some such species, like bamboo, grow quickly and actually push out native plants, which does tremendous damage to an area’s biodiversity.

Another no-no is planting too much and too close together. When too many trees and plants are crammed together, the greenery doesn’t have enough space to grow bigger, stronger, or healthier. While aesthetically this could look good for the first few years, the plants will eventually mature and fight each other for light and nutrients. So, unless you want a property covered in dead leaves and branches, it’s best to save your coins and plant less.

When planting anything, you’ll want to make sure you’re not too close to home. This, professionals warn, is a nightmare in the making. Trees planted too close to the home will, over time, get woody and grow too close, which will bring bugs and moisture inside. The resulting dampness could actually lead to rot inside your house, and the tree’s big roots could damage your property’s foundation or basement.

When it comes to planting and maintaining your home’s green exterior, do your research and exercise restraint. While trees and shrubs certainly boost your home’s value and curb appeal, some green mistakes could cost you.

Down Payments Depend on Your Mortgage Type

A question from home buyers, particularly first timers, is: “How much do I have to put down to buy a house?” The answer is: It depends. The most important of those factors will be your credit, followed by income.

Conventional loans 

These mortgages are loans obtained through Fannie Mae or Freddie Mac. If you have really good credit, you may be looking at a minimum down payment of 3%.

This is definitely something that first-time home buyers should be looking into when they start the financing process. With a down payment this low, you will require mortgage insurance, which, when certain conditions are met sometime in the future, can be removed.

Also, ask your mortgage professional about what is called the HomeReady mortgage program, obtained through Fannie Mae. This program caters to low-to-moderate-income borrowers and those purchasing in lower-income areas.

FHA loans

The minimum down payment with FHA programs is 3.5%. This program is ideal for borrowers whose credit scores may be on the low side.

While FHA is good for people who may be unable to qualify for conventional financing through Fannie Mae or Freddie Mac, the challenge here is that these loans are generally more expensive to own. This is due to the fact that you will be required to have two kinds of mortgage insurance, and, unlike in conventional mortgages, the mortgage insurance will be in place for the life of the loan.

Keep in mind that, in addition to the down payment on both of the loan types listed above, you can expect to have other outlays of cash associated with the purchase, including closing costs and some type of escrow account.

You will still be able to get seller credits to help you with these other outlays, but note: seller credits can’t be used to help you with a down payment.

Millennials’ Homeownership Dreams Can Come True

For many millennials, the dream of homeownership feels far away, if not impossible. Salaries that haven’t grown with the cost of living, new mortgage rules, volatile housing markets, and a plethora of other reasons have made buying a home more difficult than it’s ever been for young people.

A survey by Apartment List of 24,000 American renters found that 80% of millennial renters want to become homeowners, but 72% are held back by affordability. Some 44% don’t have savings to put toward a down payment.

Many who find themselves in that position are trying to reach their homeownership goals with second and even third jobs in order to save extra money. Some are moving to smaller towns where housing is cheaper, while others are living with Mom and Dad in order to save on rent. But Fundrise, a Washington, D.C.-based start-up, has another, more creative solution.

Fundrise is a real estate crowdfunding start-up that sells shares in “eFunds” that build and/or remodel urban housing. An investor can be part of an eFund for $1,000, and the target audience is millennials.

Notes a recent Forbes article on the project: “(T)he goal is for a subset of the fund investors to become owners of the very places their money is helping build. Fundrise calls these ‘homebuyer investors’ or HBIs.”

So if a millennial could invest in a property today, he or she could be taking advantage of gains toward what might eventually become his or her home.

As well, says Forbes writer Samantha Sharf: “Fundrise’s effort is unique in tackling the dearth of affordable supply, which many economist [sic] agree is the biggest issue in the housing market today.”

The Fundrise project launched this past summer, so it’s too early to assess its success in encouraging new supply or in attracting millennials.
But this initiative may soon become one of many – millennials deserve their shot at homeownership too.

Second Mortgages: Make Your Dreams Happen – Carefully

RateHub defines a second mortgage as “an additional loan taken out on a property that is already mortgaged.” Sounds risky – and indeed it comes with plenty of risks. But it also comes with rewards.

There are two major kinds of second mortgages: The home equity line of credit (HELOC) has a variable interest rate and acts much like a credit card, allowing you to withdraw the cash you need, when you need it. And the fixed-rate home equity loan allows you to borrow a lump sum and make set monthly payments.

Second mortgages provide speedy access to money at a generally favorable interest rate – and the interest you pay on mortgages may also be tax deductible. Compared with money borrowed on a credit card or a standard consumer loan, a second mortgage may be easier to obtain, and you can use the money for whatever you want: home remodels, tuition – even a dream trip.

The most important disadvantage: because your home secures the loan, the second mortgage lender takes on less risk than with a personal loan, and may offer you more money than you need. Many borrowers are happy to comply, only to find themselves in trouble.

Ensure you can make your monthly mortgage payments easily, even when interest rates go up or personal circumstances change. And note that if interest rates increase, so will your monthly HELOC payments. Home equity loan payments aren’t affected by rate increases during the term of the loan.

So go ahead and make that bucket-list trip a reality – but plan carefully.

Should You Invest in a Vacation Home This Fall?

Many people dream of owning a vacation home, but wonder if it’s a good investment. According to the real estate gurus, it may well be.

According to many experts, fall is a great time to consider buying a vacation home, as prices are often lower in the off-season. And, while you may envision a summer hideaway or a perfect winter retreat for you and your family, you also could consider raising additional income by offering it as a three- or even four-season rental.

In a recent online article, the InvestorJunkie wrote: “We don’t normally think of vacation properties as investments, but at certain times and under certain circumstances, they can be one of the best investments you can make.”

RISMedia recently reported that, according to an annual survey of residential homebuyers by the National Association of Realtors: “Vacation home sales cooled off in 2015 but remained at the second-highest amount in nearly a decade.” In addition, the median price of vacation homes increased in 2015.

As with any investment, there are risks; as InvestorJunkie notes, “Vacation property is luxury real estate, not the basic roof-over-your-head type. It’s more discretionary than it is necessary, and that means the market for it can dry up much more quickly. When it does, prices can crash even when the general housing market is stable.”

Nevertheless, CNBC contributor Shelly Schwartz says if you can afford it, do it. The title of her article is “The Time to Invest in a Second Home Is Now.”

Preparing to Sell? Consider the Tax Implications

If you’re planning to sell your home, here are some things you should know about taxes and the impact they may have on your decision to sell:

Primary residence: When you sell your primary residence, you can exclude up to $250,000 of capital gains from your taxes. For married couples who file jointly, the exclusion is $500,000. Unmarried people who sell a jointly owned home can individually exclude up to $250,000, if each meets the criteria.

Criteria: You must have owned and lived in the home as your principal residence for at least two of the five years prior to the sale. And you cannot have sold a home in which you excluded capital gains for two years before selling your current home.

However, if you don’t meet these criteria, you still may be entitled to a whole or partial tax break in certain circumstances, such as divorce, change in employment status, change in health condition, or other unforeseen situations such as a death in the family.

What counts? When calculating the gain from sale of your home, you may deduct, among other things, closing costs (such as prepaid interest or points and your share of prorated property taxes) and selling costs (including real estate commissions; title insurance; legal, escrow and inspection fees; and advertising and administrative costs)

For more information, see IRS Publication 523 (IRS Publication 523, Selling Your Home). Also note: This information is not meant to replace advice from a professional real estate agent or a certified tax advisor or financial consultant.

How to Find the Mortgage That’s Right for You

The mortgage world can be confusing, and it pays to educate yourself about the pros and cons of different types of mortgages.

Fixed-rate mortgages offer rate and payment security, although they can be costlier than adjustable-rate mortgages (ARMs). So, while the low initial cost of ARMs may be tempting to home buyers, they do carry a degree of uncertainty. Consider the following:

  • A 30-year, fixed-rate mortgage is a stable fixed-interest-rate home loan. This is a good choice for borrowers who plan to remain in their homes a long time and want the security of knowing their monthly payment will never change.
  • A 15-year, fixed-rate mortgage typically has a lower interest rate than the 30-year fixed. Borrowers pay off the loan more quickly, and they also build equity faster. This appeals to buyers of less expensive homes and those looking to refinance without extending the loan out another 30 years.
  • An ARM adjusts periodically after a specified time (typically one year or five years) based on a mortgage index, such as Libor. If rates go down, payments are reduced, but if rates increase, payments increase. An ARM can be a good deal if you do not plan to remain in your home for long, providing you have the financial flexibility to cover higher payments if rates increase.

Other types of mortgages include interest-only mortgages, balloon mortgages (which have a low rate for a period of time before the loan balance comes due), and assumable mortgages, which can be transferred from a homeowner to a buyer, so a new mortgage isn’t required. This can be a selling feature.

You’ll want to choose a loan that minimizes your total cost (based on interest rate and upfront fees) over the time you expect to own the home, assuming the payment is affordable and you are comfortable with the risk you’re taking on.

Property Investing Requires a Cool Head, Cash and Help

While TV shows on buying investment properties make it look easy, becoming a real estate investor can be a trap for the unwary. Here are several things novice investors should be aware of.

Pick a Niche: When you’re new to real estate investing, you’d be wise to start small and pick a niche where you can develop your investment property owner skills. Get your feet wet on one or more smaller properties before tackling a bigger and more complicated investment. Consider everything from a single family home to building a rental apartment in the basement of your own house.

If you’re in a position to acquire a two-family unit or mixed-use property (with a business on the ground floor and living quarters above), you can live in one unit and rent the other. The tenant may pay a portion or all of your mortgage and maintenance costs.

Do Your Homework: Once you’ve decided on your niche and found just the right property in the right location, conduct due diligence before buying, to ensure your investment is sound. Most importantly, work with a good real estate agent who has experience in investment properties, knows the neighborhoods you’re considering, and is familiar with applicable bylaws.

Do the math: Before you buy, crunch the numbers to be sure you can afford it. Factor in the cost of repairs, overestimate the total cost, and underestimate the payback. Remember, your rental could be vacant for some time between tenants, so plan ahead for the reduced income.

Redecorating on a Dime? Work With You’ve Got

The price of redecorating can be out-of-this-world, but it doesn’t need to be. With creativity, DIY perseverance, and craftiness, you can decorate on a dime…or very close to it. How do you do it? Easy – just use the suggestions below. As you might guess, it’s all about working with what you’ve got.

Find out what you have to work with: Get reacquainted with your own possessions. What do you want to do with the old stuff in your new space-to-be? Keep? Relocate to another room? Store? The inventory process spurs creativity and stimulates planning, and helps you to decide what’s missing and what you will need to invest in.

Repurpose: Determine how you can repurpose items you already have to create what you want. Maybe you’d like a new entertainment center. But wait; you have a nice old sideboard, so you can remove drawers to create space underneath, add a lick of paint, and …there’s your entertainment center. Cost: paint and some manual labor.

Swap items room-to-room: Just rearranging furniture can change a room’s look dramatically. From furniture, to what you have on the walls, to decor items, re-arrange or swap things between rooms.

Slipcover: Maybe you have a couch or some slipper chairs you’d like to change up. Check online for slipcovers. These days, it’s not about your grandmother’s slipcovers; there are some attractive and affordable options available now, and they can totally transform your space.

Relax and Relish: Relax and relish your new space. You deserve it.

Don’t Confuse ‘Pre-qualified’ With ‘Pre-approved’

You should always be in a state of readiness when you’re house-hunting. And this means ensuring you have a letter from a lender signifying that you’re ready to buy a home.

In the past, your real estate agent or broker chose a lender whose job it was to arrange a mortgage loan after the seller had accepted your offer.

Now, you need documentation showing that you’re in a position to buy. Many buyers confuse pre-qualified with pre-approved, believing that if their lender pre-qualifies them for a mortgage, it means that they have been pre-approved for a home loan. Not so. The terms “pre-qualified” and “pre-approved” are different, and a misunderstanding may prove disastrous.


To get a pre-qualified letter, you need to supply the lender with your overall financial picture, including your debt, income, and assets. This can be simply done with a phone call, and you likely won’t be charged a fee. With this information, the lender will have an idea of the amount of mortgage you will qualify for. However, this process does not look closely at your credit report, and it also won’t tell your lender whether you’re actually able to purchase a home.


Obtaining pre-approval is more complicated. You’ll be required to pay an application fee and supply the necessary documentation to complete the lender’s picture of your financial background and current credit rating. From this, the lender can figure out the specific mortgage amount you’re approved for. You’ll also have a better idea of the interest rate you’ll be charged on the loan and, in some cases, you might be able to lock-in a specific rate.

When you find the right home, you fill in the appropriate details, and the pre-approval becomes a completed mortgage application. Finally, a “loan commitment” is issued by the bank when your application is approved. Then, finally, you buy your home.

Beware the Fix-up: Your Dream Home May be a Money Pit

Even though TV shows frequently feature “fixer-uppers” that are magically transformed into dream homes, many people don’t realize just what’s involved in the transformation. Not, that is, until they’re the proud owner of what has turned out to be a money pit.

Agreed, it’s a great idea to buy a fix-up in a good neighborhood at a discounted price and turn it into the best property on the block by spending some time, energy, and money.

If the property qualifies, you may be able to access funding through an FHA 203K rehab mortgage, but outside of this program, the cost of repairs can be prohibitive.

Most potential buyers don’t know what repairs cost; what may look like a home in need of cosmetic work may actually require major repairs to the roof, plus electrical and plumbing upgrades, and possibly even structural work.

As well, it’s only a bargain if you can do much of the labor yourself. And then there’s the prospect of living in the middle of endless projects with dust everywhere.

Finally, a fixer-upper is not for every buyer. Time, resources, and ability are required, not to mention the credit score and income you’ll require to obtain financing.

And you need the ability to see through the mess and imagine what the home will look like finished.

As tempting as the purchase price is for a house in need of a little TLC, the buyer must decide whether the fix-up is the right fit, or a potential money pit.


Law May Stymie Your Carry-Back Mortgage Plans

It’s not good news for a seller when your buyer can’t qualify for a mortgage from a bank. In this situation, the seller has two alternatives: He or she can start looking for another buyer, or act as the bank for the buyer and carry the mortgage him or herself. To both the seller and the buyer, this may sound like an ideal plan, but thanks to a rule implemented in 2010, this option may not be the best choice for either of you.

In the past, if the seller had sufficient equity and didn’t need an influx of cash, he or she simply had the buyer’s credit verified, became familiar with the state’s mortgage default and foreclosure laws in case the buyer’s payments ceased, and “carried the paper.”

Assuming all went well at the closing of the transaction, the mortgage note could then be sold to an investor at a regular discount.

In the last few years, however, sellers have been required to comply with Dodd-Frank, a law that restricts sellers who want to carry their buyers’ mortgages.

When the Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted into law on July 21, 2010, it said that you could only do three seller carry-back transactions a year, and those transactions had to meet certain requirements:

  • The note could not have a balloon (a payment required at the end of a mortgage loan to repay the balance)
  • It had to have a fixed interest rate for five years; then it could be adjusted
  • The seller had to prove and document the buyer’s “ability to repay” in accordance with the Qualified Mortgage rule (QM), which is quite restrictive.

If you are interested in this option, before volunteering to become your buyer’s bank, you would be wise to consult an attorney familiar with carry-back mortgage laws.

Hiring a Licensed Appraiser Can Benefit Sellers

The most important step in listing your home is establishing the price. That doesn’t necessarily mean what you need or even want for your property; it means a realistic price that reflects its true value. An unbiased perspective is vital – as the homeowner you’re proud of the upgrades you’ve made. But can you be realistic about whether the upgrades are still in good shape and on trend?

Unfortunately, most sellers don’t have the time or energy to compare their home to similar properties in the area. Your real estate agent can give you a good estimate of your home’s value.

However, unless he or she is also a licensed appraiser, your agent can only provide a broker’s estimate of value, established through a Comparative Market Analysis (CMA).

CMAs can be very accurate in estimating your home’s value, but your agent may suggest you consider hiring a licensed appraiser to really nail down the value, and likely can advise you on good appraisers he or she has used before. Expect to pay a licensed appraiser $300 to $400.

Appraisers are unbiased. They usually use the cost approach – estimating how much it would cost to build a new house exactly like yours.

This has a side bonus: You’ll get a sense of how your older home compares to new builds.

He or she will look at everything from your neighborhood to the cracks in the home’s foundation. It is in probing behind the cosmetics of your home that an appraiser earns his or her stripes.

That’s when you’ll find whether or not your upgrades are still assets, or if now is the time to fix that leaky roof.

If it’s good news, you may want to share your appraisal with buyers who are close to making an offer, especially if the buyer appears to be talking down the property with a view to submitting a lowball offer.

Buying a Short Sale? Why You Need an Agent

Most people realize the necessity of hiring a real estate agent to sell a home, but they take an entirely different approach and opt to go it alone when buying, especially when the property is a short sale.

Before buying a short-sale property, though, people should consider the benefits derived from working with a knowledgeable real estate agent.

Following are some things to think about:

Advanced Listings

The short-sales market has heated up.

So has the competition.

Get advanced listings sent to your attention as soon as possible by working with an agent who specializes in short sales.

Experience Is Key

Buying a short sale isn’t always simple, so finding an agent with a track record of success can go a long way toward making sure all the requirements are satisfied.

An agent with experience in short sales will help to expedite your transaction and protect your interests.

Seek Help

Buying a short sale takes a lot of time, but teaming up with an agent who knows and understands your individual situation dramatically reduces the effort required to find the perfect property.

Locating a property, researching it and dealing with the numerous requirements required to close is time consuming and frustrating.

Team up with someone who knows the ropes.

Lender Pays

Perhaps the best reason to consider using the services of a real estate agent when purchasing a short sale is the price tag.

After all, the services of an agent are free to the buyer.

The lender traditionally covers the commission in a short sale transaction, making it a win-win situation for all involved.