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Dawn & Peter Balzano

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Are you Considering a Kitchen Remodel?

by Dawn & Peter Balzano

Many people are considering doing a kitchen remodel. I found this interesting and informational graphic from the National Kitchen & Bath Association that outlines what part of the remodel will get you your money back.  
If you are interested or thinking about selling, give me a call! I can give you more insights on successful strategies for preparing to sell.

Thinking of a new home?

by Dawn & Peter Balzano

Dreaming of Living in a New Place? Here’s How to Make It a Reality

Even if you love your home, there’s a chance it isn’t in your ideal place to live. But the space between fantasizing about your dream location and actually moving there is potentially miles and thousands of dollars apart.

Just over a quarter (26%) of Americans aren’t living in their ideal location type — whether that’s a city, suburb, small town or rural area — according to a new survey from NerdWallet. There are many reasons people live where they do — better school districts, proximity to work, bigger yards, and nearby friends and family, for example. And, according to the survey, financial obstacles are among the most common reasons why people don’t leave.

“Moving and getting a new place are major financial events,” says Holden Lewis, NerdWallet mortgage expert. “But long before you cross those big items off your list, you’ll tackle a lot of smaller tasks. Some are enjoyable, like browsing real estate listings for homes you like, and others are merely necessary.”

Here’s how to bring your dream move closer to reality in the coming months and years:

1. Get real

Moving to a new home, let alone moving to a completely different location, is a big, expensive step. And sometimes the idea of new surroundings is more appealing than the real thing. You want to live in the city, but are you really ready for the steep cost of living, the noise and the little-to-no backyard? If you dream of small town or country living, are you ready to leave the excitement of the city and its amenities behind?

Weigh your options carefully before committing to a major move, and understand such a big step could take significant effort.

2. Move-proof your credit

Approval on a rental or mortgage application will depend, at least in part, on your credit. And if your credit needs work, making it approval-worthy could take some time.

Start by reviewing your credit report and looking for errors. Then, make sure you’re paying your bills on time — your payment history accounts for as much as 35% of your credit score. Also, try to use no more than 30% of your available credit — higher credit utilization can weigh down your score significantly.

3. Attack debt

In the survey, 1 in 5 (20%) Americans not living in their ideal location say they have too much debt to afford moving and still have enough left for housing costs. Paying down debt not only boosts your credit, it also frees up your money for other things, like moving expenses.

But tackling debt can mean major sacrifices. Cutting excess spending or taking on a part-time job could speed up the process. Of the folks not living where they would like, 38% say they would take on a job to make the move possible, while 28% would give up travel. More than 1 in 5 (21%) say they would stop or reduce their retirement savings — a concerning approach because it could do more harm than good.

Take a critical look at your budget — how much money is coming in and where it’s going. Then, make paying down debt a priority, but not to the detriment of your future financial security; try to leave your retirement fund alone.

4. Start a moving fund

The cost of moving depends on a number of factors, such as the distance, the amount of stuff you have, whether you opt for professional movers and whether you’ll be temporarily without an income. It’s not unrealistic to plan for expenses starting at a few thousand dollars, if not more.

Start saving for these expenses as soon as you’ve squared away your debt. A high-yield online savings account is one option to earn some interest while keeping your money easily accessible. Automate your savings by setting up a direct deposit for a small portion of each paycheck or simply figure it into your list of monthly bills.

5. Zero in on the specifics

As your moving fund gets bigger, it’s time to start nailing down the specifics. Research the locations you’re most interested in to see how much you’d pay for housing and things like child care and other regular expenses. Identify neighborhoods that best fit your needs and Contact Dawn a local real estate agent to discuss housing options in the area. If a new job is in order, ready your resume and begin scouting out the local job market.

6. Be flexible

If you’re not already in a financial position to make a big move, preparing to change living locations is a long-term project. And, as with all future goals, it’s vulnerable to the swings in life, such as job losses or promotions, marriage or divorce, or any number of things that could change your financial situation or life priorities.

Also, you may need to compromise. If you dream of one day living in a big city, you may have to look at several cities before you find one that fits your lifestyle and your financial situation. Or you might have to abandon your ideal neighborhood for a similar one in a more affordable town.

Removing the financial barriers between where you live now and where you would like to live is good for your financial health. Even if your goals change and you decide to delay (or abandon) any plans to relocate, tidying up your credit, paying down debt and starting an additional savings fund won’t be for naught. No matter where you make your home, these steps can make it more comfortable.

How to Buy a House Without Help From Your Family

by Dawn & Peter Balzano

 

On the highway to homeownership, coming up with a sufficient down payment continues to be one of the biggest roadblocks. In fact, many prospective home buyers, particularly first-timers, find it hard to overcome this challenge without the kindness of loved ones.

Among recent home buyers age 28 and younger (who are more likely to be first-time home buyers), 28% got down payment help from a relative or friend, according to a 2019 report from the National Association of Realtors. With home buyers ages 29 to 38, 21% relied on down payment gifts.

But turning on the family money faucet isn’t an option for everyone. And not all home buyers have friends with spare cash to contribute. That’s OK; you can help yourself buy a house. Here’s how:

1. Coddle your credit score

A higher credit score is the key that unlocks low-down-payment mortgage options, down payment assistance programs (more about those below), and attractive mortgage interest rates. Credit scores aren’t based on how much money you make, but how you manage the money and debts you have.
 
How to do it: Check your credit report often and fix any errors, keep your credit card balances low and pay them off when you can, and avoid late bill payments like the plague.

2. Seek out low-down-payment loans

Many people think you need a 20% down payment to buy a house — but they’re wrong. Qualified buyers can get a conventional loan with a down payment as low as 3%, an FHA loan with 3.5% down, or VA and USDA loans with no down payment at all. Lower down payment requirements can reduce the amount of time needed to gather sufficient funds, which means you may be closer to your housewarming party than you think.

How to do it: Contact Dawn lenders that specialize in low- and no-down-payment mortgages, to get a list of qualification requirements. If you’re not ready now, ask what you can do to get ready.

3. Take advantage of down payment assistance

Nearly every state offers a down payment assistance program for first-time home buyers. Some city and county governments offer assistance as well. These programs may provide grants (read: free money), as well as zero-interest forgivable or deferred-payment loans you can use as a down payment. These programs often have income limits and credit score requirements, and they may require you to complete a home buyer education class.
 

How to do it: Investigate first-time home buyer programs in your state. Read over the eligibility requirements for down payment assistance. If you have questions, talk to a participating lender or contact the agency directly.


 
The article How to Buy a House Without Help From Your Family originally appeared on NerdWallet.

The ‘Good Enough’ Home May Be Just Perfect

by Dawn & Peter Balzano

Constructed from inspirational Instagram feeds and reality TV, the dream home floats in the imagination like a castle in the sky but dissolves in the rain of hard numbers.

Chasing the dream can lure buyers to overextend themselves financially. Or the high prices can lead first-time home buyers to delay a home purchase — and the opportunity to start building home equity.

For many homebuyers, buying a “good enough” home can be a sounder strategy, particularly for those most eager to become homeowners.

“I’d rather see people buy a good enough home versus buying a dream home and being cash-strapped over the next 20 years,” says Alyssa Lum, certified financial planner and founder of Luminate Financial Planning in Herndon, Virginia.

Here’s the beauty of a good enough home.

It has the essentials

A good enough home may not have artisan tile or stainless steel appliances, but it has the essentials.

Look for a home that’s well-maintained, has “good bones” and is in a good location, says Kelly Roth, a real estate agent with Pearson Smith Realty in Ashburn, Virginia. A well-maintained home in a good location will likely increase in value and probably won’t be a money pit.

Buyers tend to home in on cosmetic upgrades, Roth says, but she advises focusing on basics, like windows, the roof and the heating and air conditioning system. Then you’re less likely to face surprise repairs just to make the house functional.

If you can’t have it all — and most people can’t — list the features you want, and decide where you’re willing to compromise.

Amber Miller, a certified financial planner with The Planning Center in the Minneapolis-St. Paul area, bought her first home two years ago. It has features she wanted, such as hardwood floors and a separate dining area, but isn’t flawless.

One of the bathrooms has outdated salmon-pink tile. “I thought, well, it’s not beautiful but it’s clean and functional,” she says. “This isn’t going to be the house I’m in forever, but it’s good enough for now, and I love it.”

It fits your lifestyle

Roth tells of a couple who fell in love with a home that looked like a dream. But the commute to work — 90 minutes each way — became a nightmare.

“They bought it in August and sold it in March,” Roth says.

“Good” is personal. A big yard could be a must for a family with a dog, but a pain if you hate yardwork.

And a good home matches your timeline. It should meet your needs for the years you plan to live there, which probably isn’t forever if it’s a first home, Roth says.

It doesn’t squeeze your budget

A good enough home has a reasonable price for your budget. Lum recommends keeping your debt-to-income ratio under 30%. That’s the percentage of gross monthly income that goes toward debt payments, including the mortgage.

Lenders will qualify buyers with considerably higher ratios. But that may not leave much for other expenses, says Trey Reed, a loan officer with MVB Mortgage near Washington, D.C.

“Maxing out (debt-to-income) is something I see people do, but not something I recommend,” Reed says.

A good enough home leaves you with enough money for other priorities, such as saving for retirement and emergencies, and for all the costs of ownership besides the mortgage. That includes home insurance, property taxes, utilities and maintenance.

Fifty-five percent of homeowners — 68% of those ages 21 to 34 — had regrets about their preparation for the homebuying process, according to Bank of the West’s 2018 Millennial Study. The top regret for all age groups: costly maintenance.

Miller says to budget about 1% to 3% of the home’s value annually for maintenance.

It can be transformed

Over time, you can add dreamy features.

When shopping for a home this year in Leesburg, Virginia, Jenny and Mike Virbickis found a beautifully upgraded house priced $75,000 more than they planned to spend. They kept looking and found a home that fit their budget.

“I’d rather have a house my family can grow into and we can fix up to make it our own rather than something we can’t afford,” Jenny says.

Their home has space for their toddler to play, is structurally sound and is in the neighborhood they wanted. Eventually, they’ll make home improvements. But for now, it’s perfect. After a block party in their cul-de-sac recently, Jenny says, “I came home and said, ‘This is where we were meant to be.’”


 
 

9 Trends for Fall 2019

by Dawn & Peter Balzano

The first half of 2019 surprised housing markets across the country: Mortgage rates fell. That’s the opposite of what the experts had predicted at the beginning of the year, and it’s welcome news for home buyers, sellers and homeowners. Millions of owners could benefit from refinancing at these unexpectedly lower rates.

 

In other ways, housing forecasters’ predictions for 2019 were correct. Buyers are still competing for a short supply of homes, but the market isn’t quite as tilted in favor of sellers as it seemed six months ago. Home prices continue to rise, but not as fast as they have over the past few years. Many would-be buyers struggle with affordability.

NerdWallet has identified these nine housing and mortgage trends to watch in the second half of 2019.

1. Wanted: More homes for sale

In real estate, it’s been a seller’s market since August 2012. More would-be buyers exist than homes for sale, giving sellers a stronger negotiating position. While the market still favors the seller in most places, the balance of power is moving in the buyer’s direction.

More homes are available for sale now, so buyers have greater choice. In April, there were 1.83 million pre-owned homes for sale, an increase of 30,000 from the same month last year. Meanwhile, 327,000 new single-family houses were for sale, an increase of 33,000.

Even with thousands more homes on the market, there’s still a shortage of homes for sale. Freddie Mac estimates that in 2017, 370,000 fewer homes were built than needed to satisfy demand resulting from population growth. “Until construction ramps up, housing costs will likely continue rising above income, constricting household formation and preventing homeownership for millions of potential households,” Freddie Mac concludes.

2. Home prices will keep going up

Toward the end of last year, many forecasters predicted that home prices would continue to rise in 2019, but at a slower pace. They were right.

In the first four months of 2019 (the latest numbers available), buyers were paying more for resold homes than a year before — but the year-over-year price increases each month were less than 4%. For the same period in 2018, year-over-year prices were more than 4.5% higher.

“Home price appreciation will slow down — the days of easy price gains are coming to an end — but prices will continue to rise,” says Lawrence Yun, chief economist for the National Association of Realtors. The NAR predicts that home prices will continue hitting the brakes and that year-end prices will be 2.2% higher than at the end of 2018.

Not everyone believes the pace of home prices will slow much in 2019. Fannie Mae has revised its price forecast, but it still predicts that prices for existing homes will rise 4.3% this year.

3. Mortgage rates will remain low

Fannie Mae, Freddie Mac and the National Association of Realtors all predicted that mortgage rates would rise through 2019. Instead, mortgage rates have tumbled.

After peaking at 5.09% in November 2018, the average APR for a 30-year fixed-rate mortgage fell to 4.09% by June 2019, a decline of a full percentage point, according to NerdWallet’s daily mortgage rates survey.

The forecasters now predict that the 30-year fixed will remain relatively steady through year’s end, not changing by more than a couple of tenths of a percentage point.

The unexpected drop in fixed mortgage rates means fewer people are getting adjustable-rate mortgages. At the end of 2018, experts thought rising rates would cause a surge in ARMs this year. With fixed rates dropping back to enticing levels, that surge never happened.

Interest rates have been falling based on the perception that the economy is cooling off, and because of trade tensions between the United States and China. The Federal Reserve, which typically cuts short-term interest rates in response to economic weakness, is expected to reduce rates at least once by the end of 2019, which could ease upward pressure on long-term mortgage rates.

4. Affordability continues to be a concern

Even as home price growth slows and mortgage rates fall, home buyers still have difficulty affording homes — especially first-timers toward the less expensive end of the market.

“While affordability is much better than we expected it to be, rising prices have offset much of the benefit of lower mortgage rates,” says Danielle Hale, chief economist for Realtor.com. “What that means for the individual buyer is that their monthly payments might be roughly the same as if you had bought a year ago.”

Mark Boud, chief economist for Metrostudy, calls the national housing market “top-heavy.” He means that there are plenty of homes available for buyers who can afford to pay $800,000 or more. But buyers outnumber sellers of homes priced $400,000 or less. “We’re still very short of supply in this lower price range,” he says.

The share of newly built homes under $400,000 has gone down. In April 2018, 67% of new homes sold for less than that price; this April, 64% did.

5. More people could save by refinancing

While the drop in mortgage rates benefits home buyers, it’s good for homeowners, too — specifically, homeowners who would snag lower monthly payments by refinancing into a mortgage with a lower interest rate. Every time rates fall, there’s an increase in the number of homeowners who could save money by refinancing.

Black Knight, a technology provider for the mortgage industry, estimates that 5.9 million homeowners could cut 0.75% or more from their mortgage interest rate by refinancing.

Does a lower mortgage interest rate automatically mean that you should refinance? No. You might benefit from a smaller rate decrease, or you might have to wait for a bigger rate drop. A mortgage refinance calculator can help you figure out the ideal time to refinance, which can depend on the rate difference, your loan size, how long you’ve had your mortgage, the loan fees you’ll have to pay and how long you plan to have the refinanced loan.

Even if you bought your home recently, it’s worth checking whether you should refinance. Black Knight estimates that 953,000 homeowners who got mortgages in 2018 could save an average of $162 each month by refinancing.

6. New homes get bigger

From a home buyer’s perspective, most markets need more houses for sale, and they need to be on the affordable end of the price scale. After all, many first-timers buy starter homes instead of forever homes, with prices below the area’s median. Sizes of new homes trended mostly downward in 2018, but the median home size went up in the first quarter of 2019.

Builders construct larger homes during economic recoveries “as high-end homebuyers … return to the housing market in relatively greater proportions,” wrote Robert Dietz, chief economist for the National Association of Home Builders, in a May blog post.

Year-over-year median prices for new homes followed the increase in size, going up sharply in April to $342,200 — an 8.8% increase over the median price 12 months earlier of $314,400.

7. Attention is on first-time buyers

The mortgage and real estate industries are focused on serving first-time home buyers, and for good reason: There’s a lot of pent-up demand.

Tian Liu, chief economist for Genworth Mortgage Insurance, says roughly 3 million first-timers delayed buying homes between 2007 and 2015.

Those buyers are “reaching that age when they can no longer delay,” Liu says. “Their housing needs are really catching up with them. It doesn’t feel right to be raising a family in a rental apartment. They want to own their place. So I think those drivers will be very significant for the next few years.”

From the early 1990s to around 2005, first-timers accounted for roughly 40% of home sales, according to NAR research. That share soared to 50% in 2009, then fell; it was 33% in 2018. With millions of millennials reaching their 30s, market forces could cause the first-timer share to rise again in the coming years.

8. Lending standards ease a little

After the housing crisis, lawmakers required mortgage lenders to assess borrowers’ ability to repay. The regulatory changes made it harder to get a home loan.

The Urban Institute’s Housing Finance Policy Center has argued that lenders overcorrected after lending too freely in the two or three years preceding the financial crisis of 2008.

There is evidence that lenders agree. Gradually, they have been relaxing lending standards, says Matt Hackett, operations manager for Equity Now, a mortgage lender in New York City.

He says he has observed that the relaxed standards come in the form of reduced documentation requirements, lower credit scores and bigger loan-to-value ratios (smaller down payments, basically).

Mortgage data provider Ellie Mae shows that credit standards for lending were about the same in April (the latest data available) compared to 12 months earlier. The average credit score for a conventional purchase loan was 753 in April, compared to 752 a year earlier. Debt-to-income ratios, which measure borrowers’ debt loads, remained the same.

9. Overconfident sellers could struggle

The inadequate pace of home construction, along with rising prices, mean 2019 will remain a seller’s market where there are more buyers than affordable homes for sale. But home sellers shouldn’t count on bidding wars breaking out among desperate buyers.

That’s especially the case with people who are selling homes that are relatively expensive for their local market, Realtor.com economist Hale says. Pricey homes appeal more to move-up buyers than to first-timers — and one-third of buyers are first-timers.

As a seller, Hale says, “If you’re in that above-median price point, you’re going to have to price competitively and offer incentives for buyers.”

Prices vary by neighborhood and region, and the differences from place to place are stark. In the western United States, the median home resale price this spring was $395,100, according to the NAR. In the Midwest, it was $210,500.


The article 9 Housing and Mortgage Trends for the Rest of 2019 originally appeared on NerdWallet.

Consider a Mortgage Refi

by Dawn & Peter Balzano


Mortgage rates have fallen so much lately that millions of homeowners might benefit by refinancing — even if they bought a home just last year. A typical refinancer could save more than $150 a month.

Some homeowners have gotten the message: Refinance applications have almost doubled compared to a year ago, according to the Mortgage Bankers Association. But many homeowners might be unaware that mortgage rates have declined so dramatically that they could save money by refinancing.

Many potential refinancers

One rule of thumb says to consider refinancing if you can cut the mortgage rate by three-quarters of a percentage point. By that measure, 5.9 million homeowners could benefit by refinancing into today’s mortgage rates, according to Black Knight, a technology, data and analytics provider for the mortgage industry. About 953,000 of those potential refinancers got their mortgages in 2018, the company says.

This refinancing opportunity has arrived because mortgage rates have been falling for about seven months. Not a lot of press attention has been paid to the decline, so it might catch some homeowners by surprise. The 30-year fixed rate recently reached its lowest levels since September 2017.

The downward movement has resulted in a dramatic difference in mortgage rates compared to late 2018. The 30-year fixed-rate mortgage averaged 3.82% in mid-June this year, according to Freddie Mac. The week before this past Christmas, it averaged 4.62%. That’s a decline of a little more than three-quarters of a percentage point — enough of a difference to make it worthwhile to look into refinancing.

People who bought homes from late summer to late fall 2018 might be in a position to refinance. Each week from Sept. 13 to Dec. 20, 2018, the 30-year fixed rate averaged 4.6% or higher.

You can save a lot

The average size of a refinanced mortgage was $386,800 in the first week of June, according to the Mortgage Bankers Association. On a loan of that amount, the difference between a 4.75% rate and a 4% rate is $171 a month ($2,053 a year) in principal and interest, rounded to the nearest dollar.

To find out how much you could save:

  • Look at your loan paperwork to see what interest rate you’re paying, and then check out today’s refinance mortgage rates to see the difference.
  • Get an estimate of the fees you’ll pay for your refinance using a closing costs calculator.
  • Finally, calculate your potential savings using NerdWallet’s refinance calculator.

If the numbers look promising, you’ll want to estimate your break-even period: the time it takes for the accumulated monthly savings to exceed the loan fees. For example, if you pay $4,500 in fees to save $150 a month, it will take 30 months to break even ($4,500 divided by $150 equals 30). If you believe you’ll stay in the house beyond the break-even period, it might be worthwhile to refinance.

Tips for the best refinance

In most cases, you can refinance whenever you want, although some lenders require “seasoning” between mortgages, requiring a certain period to pass between appraisals.

You don’t have to start all over again and refinance for 30 years, but you may want to if you’d like to lower your monthly payment.

You can refinance to the same payoff date as your current loan, which can be useful when you want to pay off the mortgage before retirement or the kids go off to college. For example, if your 30-year mortgage is exactly 5 years old when you refinance, you can request to pay off the new loan in 25 years. Tell the lender to amortize the mortgage for 25 years (or whatever term you wish).

When they can afford it, many people refinance from a 30-year to a 15-year loan. The shorter loan usually has higher monthly payments, but the interest paid over the life of the loan is much less.


 

The article Consider a Mortgage Refinance, Even If You Bought Recently originally appeared on NerdWallet.

Are you prepared for Hurricane Season?

by Dawn & Peter Balzano

We found this check list and thought it would be handy to share. It came directly from FEMA and something that should be reviewed by you and your family prior to the arrival of any storm. If you are new to Florida, this is something not to take lightly. We hope you find it useful. 

 

Consider a Refinance Even if you Just Bought a Home

by Dawn & Peter Balzano

 

Consider a Mortgage Refinance, Even If You Bought Recently

Mortgage rates have fallen so much lately that millions of homeowners might benefit by refinancing — even if they bought a home just last year. A typical refinancer could save more than $150 a month.

Some homeowners have gotten the message: Refinance applications have almost doubled compared to a year ago, according to the Mortgage Bankers Association. But many homeowners might be unaware that mortgage rates have declined so dramatically that they could save money by refinancing.

Many potential refinancers

One rule of thumb says to consider refinancing if you can cut the mortgage rate by three-quarters of a percentage point. By that measure, 5.9 million homeowners could benefit by refinancing into today’s mortgage rates, according to Black Knight, a technology, data and analytics provider for the mortgage industry. About 953,000 of those potential refinancers got their mortgages in 2018, the company says.

This refinancing opportunity has arrived because mortgage rates have been falling for about seven months. Not a lot of press attention has been paid to the decline, so it might catch some homeowners by surprise. The 30-year fixed rate recently reached its lowest levels since September 2017.

The downward movement has resulted in a dramatic difference in mortgage rates compared to late 2018. The 30-year fixed-rate mortgage averaged 3.82% in mid-June this year, according to Freddie Mac. The week before this past Christmas, it averaged 4.62%. That’s a decline of a little more than three-quarters of a percentage point — enough of a difference to make it worthwhile to look into refinancing.

People who bought homes from late summer to late fall 2018 might be in a position to refinance. Each week from Sept. 13 to Dec. 20, 2018, the 30-year fixed rate averaged 4.6% or higher.

You can save a lot

The average size of a refinanced mortgage was $386,800 in the first week of June, according to the Mortgage Bankers Association. On a loan of that amount, the difference between a 4.75% rate and a 4% rate is $171 a month ($2,053 a year) in principal and interest, rounded to the nearest dollar.

To find out how much you could save:

  • Look at your loan paperwork to see what interest rate you’re paying, and then check out today’s refinance mortgage rates to see the difference.
  • Get an estimate of the fees you’ll pay for your refinance using a closing costs calculator.
  • Finally, calculate your potential savings using NerdWallet’s refinance calculator.

If the numbers look promising, you’ll want to estimate your break-even period: the time it takes for the accumulated monthly savings to exceed the loan fees. For example, if you pay $4,500 in fees to save $150 a month, it will take 30 months to break even ($4,500 divided by $150 equals 30). If you believe you’ll stay in the house beyond the break-even period, it might be worthwhile to refinance.

Tips for the best refinance

In most cases, you can refinance whenever you want, although some lenders require “seasoning” between mortgages, requiring a certain period to pass between appraisals.

You don’t have to start all over again and refinance for 30 years, but you may want to if you’d like to lower your monthly payment.

You can refinance to the same payoff date as your current loan, which can be useful when you want to pay off the mortgage before retirement or the kids go off to college. For example, if your 30-year mortgage is exactly 5 years old when you refinance, you can request to pay off the new loan in 25 years. Tell the lender to amortize the mortgage for 25 years (or whatever term you wish).

When they can afford it, many people refinance from a 30-year to a 15-year loan. The shorter loan usually has higher monthly payments, but the interest paid over the life of the loan is much less.


 

The article Consider a Mortgage Refinance, Even If You Bought Recently originally appeared on NerdWallet.

Fixer- Uppers FYI's

by Dawn & Peter Balzano

What First-Time Home Buyers Should Know About Fixer-Uppers

A perfect home can be hard to find these days, especially if you’re a first-time home buyer on a budget.

That could be why nearly 60% of home shoppers age 18-34, many of whom may be buying for the first time, say they’re open to a house that needs renovations, according to a 2019 survey from Realtor.com.

Fixer-uppers — existing homes in need of updates or repairs — usually sell for less per square foot than homes that are in good shape, says Dan Bawden, president and CEO of Legal Eagle Contractors in Houston, Texas.

But before you start bargain hunting, you may want to practice your deep cleansing breaths. Simple projects can become complicated once the demolition starts, and if costs end up higher than estimated, finishing your to-do list can take longer than you think.

Use these pointers to help decide if buying a fixer-upper is right for you.

1. Buying a fixer-upper can be a shortcut to homeownership

High prices, limited inventory, weak credit scores and saving a down payment: These challenges often stand between new buyers and their first home. Buying a fixer-upper is one way you may be able to overcome them.

Because they need improvements, fixer-uppers are typically priced at a discount and may get passed over by buyers who can pay for move-in-ready homes. Also, homes that need work are still eligible for loans with relaxed requirements, like 3% minimum down payments or the ability to qualify with a credit score in the 500s.

2. It matters which mortgage you choose

Renovation loans let you finance a house and improvements at the same time. With a renovation loan, you can pay off improvements over a longer period of time and at a lower interest rate than other types of financing. Options include:

  • FHA 203(k): Offered through the Federal Housing Administration, FHA 203(k) loans allow lower income and credit scores than conventional mortgages. They can be used for most improvement projects.
  • VA renovation loan: The Department of Veterans Affairs recently updated its VA loan guidelines to include the purchase and renovation of a home. A VA-approved contractor is required, eligible projects are somewhat limited and your lender may charge a construction fee.
  • HomeStyle: Guaranteed by Fannie Mae, HomeStyle mortgages require higher credit scores than FHA 203(k) loans. But almost any improvements are eligible, including “luxuries” like a pool or landscaping.
  • CHOICERenovation loan: Guaranteed by Freddie Mac, this mortgage allows improvements that help homes withstand natural disasters, among other upgrades. And borrowers can make repairs themselves to earn a down payment credit.

A renovation loan may help cover your mortgage payments if you have to live elsewhere while improvements are in progress and may include extra funds in case projects exceed the estimated cost.

3. Match the house to your skills and budget

“There’s less-than-perfect shape and then there’s total disrepair,” says Carolyn Morganbesser, senior manager of mortgage originations at Affinity Federal Credit Union in New Jersey. Hire a professional contractor to estimate the cost of all the work that’s needed before you make an offer. The house that’s right for you depends on your skills, schedule and the way you plan to finance the improvements.

If you get a traditional mortgage, you’ll have to pay for upgrades with cash, a credit card or a personal loan. These boot-strapped financing options might put a low ceiling on your budget and limit you to one project at a time, so a home that needs simpler repairs may be right for you.

A renovation loan can expand your budget and allow you to tackle larger projects simultaneously, which may make it more reasonable to buy a house that needs a lot of work.

And whether you DIY or hire a pro, don’t be surprised if there are roadblocks along the way. “It always takes longer than you thought it was going to take because that’s the nature of remodeling,” Bawden says.

If your fixer-upper is a foreclosure, brace for delays during the mortgage offer process as well, Morganbesser adds. You’ll be negotiating with the bank that owns the property, and they may reject your offer more than once, she says. That makes for a slow start to a project that could take months.

4. Your lender will be watching

Renovation loans often require extra consultations, inspections and appraisals designed to protect your lender’s investment.

A standard FHA 203(k) loan, for example, requires you to hire a HUD consultant who’ll approve your plans, manage contractor payments and inspect the property after each phase of work is complete.

Using the CHOICERenovation loan’s sweat equity provision means you’ll go through two appraisals — before and after improvements. The appraiser will confirm that workmanship and materials match what’s promised in the contract, and that the newly renovated home lives up to its estimated value.

Don’t be frustrated by these additional hurdles; they help to ensure the work is on-time, on-budget and up to snuff.

5. You’ll create a home that’s uniquely yours

There’s no doubt that buying a fixer-upper is more work than a move-in ready house, but the reward most likely will match the effort.

When the dust clears and the paint dries, your first home will be full of personal touches rather than the remnants of someone else’s life.

A house that’s just how you want it without the premium price tag of new construction? Now that’s a first-time home buyer’s dream.


The article What First-Time Home Buyers Should Know About Fixer-Uppers originally appeared on NerdWallet.

Buying an Energy-Efficient Home: A Financially Bright Idea

by Dawn & Peter Balzano

Whether you give a hoot about the environment or not, it could pay to think about energy efficiency when shopping for a home.

Newer houses certified by Energy Star — the federal government’s energy-efficiency rating program — use an average of 20% less energy than homes built to the 2009 International Energy Conservation Code, according to the U.S. Environmental Protection Agency, which oversees the system.But using less energy is just the beginning. Green certification programs like the National Green Building Standard (NGBS) or Leadership in Energy & Environmental Design (LEED) go even further, with strict standards for indoor air quality, greenhouse gas emissions and water conservation, among other things.

Although energy conservation might not sound as exciting as a luxury bathroom or backyard patio, improving health and comfort while reducing energy bills could help turn your house into a true dream home.

Benefits of an energy-efficient home

Thirty percent of homeowners say their monthly housing costs, including utilities, are expensive, according to a 2018 NerdWallet study. The cost to heat, cool and illuminate an entire house can be especially shocking for first-time home buyers who may be more accustomed to fewer square feet.

Buying a home that’s built to conserve resources can help you avoid those breathtaking bills, but it may require a slightly bigger mortgage.

Energy Star homes cost around $2,500 more to build on average, the EPA told NerdWallet in an email. And LEED certification can add an extra 2.4% to the total cost of building a home, on average.

Home buyers can recoup the added investment in several ways, however. In addition to lowering utility bills, energy-efficient homes often sell faster and at a higher price than noncertified homes, studies have shown.

If you buy a certified efficient house, it could give you an advantage should you ever sell. Energy-efficient homes bring in around $5,000 more than standard homes, a 2019 National Association of Home Builders study concluded.

What makes an energy-efficient home different?

Certification rules vary, but in general, you can expect region-specific design, high-efficiency features and appliances, and rigorous performance evaluations. But the house isn’t the only thing held to a higher standard.

For a home to qualify for Energy Star certification, for example, the builder, HVAC contractor and energy rater must have proper credentials, and in some cases, EPA training.

NGBS or LEED certification involves close inspection of the home’s location and lot design, sustainability of building materials, and even access to alternative transportation to meet minimum standards.

How to find an energy-efficient home

Demand for energy-efficient homes helps explain why millions have been built in the U.S. since 1995, with more being added each year. Use these tips to help you find one.

1. Look for ‘green’ keywords in listings

Building codes address safety and structural integrity, but they generally don’t deal with energy efficiency, comfort or indoor air quality, says Jeff Bogard, president of R.E.A Homes LLC, a custom home building company in St. Louis, Missouri.

For clues to high performance in those areas, watch for listings that mention a third-party green certification, a recent energy audit or energy-efficient upgrades.

But not all certifications will appear in listings, because not all sellers think to include them, says James W. Mitchell, founder of Renewablue, a home energy consulting firm in Fort Collins, Colorado. If energy efficiency is on your wish list, always ask the seller or listing agent about a particular house.

2. Consider an eco-savvy agent

When hiring an agent, ask if he or she has experience with energy-efficient homes or relevant credentials. The EcoBroker designation or the National Association of Realtors (NAR) Green Designation are two options.

NAR Green designees are educated about what makes a home healthier and more efficient. This allows them to “provide opportunities, guidance and hopefully vendors that understand green-building science,” says Melisa Camp, a member of NAR’s Green Resource Council Advisory Board.

3. Request past utility bills from the seller

You can ask for utility data during the shopping stage or as a provision in the sales contract. Past bills will help you understand the actual cost of ownership.

4. Consider an energy-efficient mortgage

Some homes are less efficient simply because today’s energy standards didn’t exist when they were built. If the house you fall in love with is an energy hog, an energy-efficient mortgage, or EEM, can help.

Available as a conventional, FHA or VA loan, an EEM “wraps the expense of energy-efficient improvements into the homeowner’s mortgage payment,” Mitchell says. It’s probably the only time borrowing more saves you money, he says. In time, the energy savings could completely offset the extra cost. Not all lenders offer EEMs, so ask about availability when shopping for a mortgage.

If you are interested in speaking with an experienced Realtor in Palm Beach County that can help you buy or sell a home, give me a call! 

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