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Sabrina Delapasse

REALTOR

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10 Tips to Successful Home Buying

5/18/2017

1. Research Is The Key To Discovery

Home sellers won't call you with an offer to buy a maintenance-free home with a wonderful mortgage. You have to find the gems yourself! Only by reading available materials, talking to friends and experts, and spending time looking at different homes, schools, and neighborhoods will you end up with your American dream. Avoid the nightmares by learning how best to buy and maintain a home.

2. Make A Plan And Get Pre-Qualified

Every important decision needs to be clearly thought out. Developing a home buying plan can help you focus on the important factors and organize the entire process. You may even want to use a binder with sections on house hunting, home financing, service providers, etc. Loan pre-qualifying helps you determine the home price you can afford and presents you as a genuine prospect to the seller. A lender typically uses the 28% formula (your monthly mortgage can't exceed 28% of your monthly income) in approving your loan. Planning your actions and getting pre-qualified will keep you out of the panic mode and allow you to take advantage of opportunities. A thorough plan will save both time and money!

3. Value, Value, Value

The days of 10-30% annual appreciation have passed. Homebuyers in the 1970's benefited tremendously from what seemed like ever appreciating home prices. Nowadays, you're looking at slow growth while guarding against the possibilities of falling prices, skyrocketing ARM rates and corporate layoffs that can dramatically affect your home values. The classic rule of buying the worst house in the best neighborhood still applies. If you buy with an eye towards improvement, you can customize the home to fit your needs. The saying, "make money buying a home, not selling one," should keep you focused on the long-term importance of the purchasing price.

4. Create A Top 10 List Of Amenities

When shopping for a home, list the features (fireplace, fenced-in yard, new appliances, etc.) that are most important to you in deciding on which home to buy. Establishing "your criteria" early on will save time shopping for inappropriate homes and may keep you from buying a home on a whim. As detailed in Tip #3, your top reason for buying a home should be the value you are getting. Some of your top 10 amenities should logically be sacrificed if an incredible value is available.

5. Fixed vs. Adjustable Rate Mortgages

Adjustable rate mortgages have an initial fixed rate, which is followed by a period of adjustment intervals during which the rate adjusts based on the performance of several key indexes. Typically the initial fixed rate on an ARM is slightly lower than the comparable rate of a fixed rate mortgage.

Fixed rate mortgages allow buyers to take out a long term loan without having to worry about changing interest rates or monthly payments. Most fixed rate loans are offered in either 15 or 30 year terms.

Most buyers will be well served by a fixed rate loan, but each situation is unique. While ARM loans have become less popular in recent years, they can still be a viable option for some buyers - especially those who plan on selling again in the short term.?

Whichever loan you choose; make sure that you scrutinize all the closing costs. If you are required to have a mortgage escrow account and private mortgage insurance, make sure you understand the terms and cancellation procedures (your Real Estate Agent has publications to assist you). Also, make sure there are no prepayment penalties so that you can utilize an accelerated mortgage plan. A good mortgage reduction plan can save you tens of thousands in interest costs, and shorten your loan term, with only small extra principal payments. If you experience negative changes in your job, health, or marital status, you can revert to the standard payments in your mortgage contract.

6. Sign A Contract That Protects You

Make sure that the contract you put on a house allows you to arrange financing, inspect the home and negotiate any problems that you uncover. Ensuring that the contract you sign will minimize potential legal battles will let you swim in your new pool with your family and neighbors instead of with the sharks.

7. Put Yourself In The Seller's Shoes

You are about to make one of the most important decisions that will affect both your life and the life of the seller. If you take time to understand the reasons the seller bought the home, their reasons for selling, and the home improvements they have or have not made, you'll be in a better position to evaluate the home and negotiate a better deal. In the end, the home buying process excludes the professionals and comes down to the individuals buying and selling the home. A closer look at the seller may help you in deciding whether and for how much to buy a particular home.

8. Develop A Mortgage Shopping Chart

One of the biggest decisions to make before putting a contract on a home is how to finance the purchase. There are 10,000 lenders competing for your mortgage business. The days of simply walking into the community bank and negotiating with the loan department manager are over. Today, you can apply for a loan over the Internet or even use a mortgage broker to shop for your loan with hundreds of lenders. When choosing a lender, you want to avoid apples to oranges contrasts by comparing fixed rates to fixed rates, not fixed to ARM's. Create a chart that lists different types of loans, fees, and at least five mortgage providers (including a mortgage broker).

9. Get A Quality Home Inspection

Although it is hard to believe, more people pay for inspections before buying used cars than when making the biggest investment of their lives - their homes. Paying for a qualified home inspection before you buy a home isn't just spending "a little extra" for peace of mind; it's absolutely essential for anyone who doesn't want to spend thousands of dollars for repairs.

10. Peace Of Mind: Home Protection Plans

To protect both you as a buyer, as well as the seller, it is a good idea to purchase a home protection plan.? What exactly is it? A home warranty, or home protection plan, is a service contract, normally for one year, which protects homeowners against the cost of unexpected repairs or replacement of their major systems and appliances that break down due to normal wear and tear. A negotiable contract between the buyers and sellers which does not overlap or replace homeowner's insurance policy, this type of warranty can save the new homeowner lots of headaches, as well as put seller's fears to rest. The warranty covers mechanical breakdowns, while insurance typically repairs the related damage. For example: if a hot water heater burst and destroyed a wall in your home, the warranty would repair the water heater and your insurance would pay to fix the wall.

What to Know About Taxes when Owning a Home

4/3/2017

Taxes are just a part of home ownership, but it is an important part. Here are the top 7 questions often asked about taxes and home ownership.

1. Can property taxes be deducted?

Property taxes on all real estate, including those levied by state and local governments and school districts, are fully deductible against current income taxes.

Mortgage interest and property taxes are deductible on a second home if you itemize. Check with your accountant or tax adviser for specifics.

2. How are property taxes configured?

Property taxes are what most homeowners in the United States pay for the privilege of owning a piece of real estate, on average 1.5 percent of the property's current market value. These annual local assessments by county or local authorities help pay for public services and are calculated using a variety of formulas.

3. How does home mortgage tax deductions work?

The mortgage interest deduction entitles you to completely deduct the interest on your home loan for the year in which you paid it. Mortgage interest is not a dollar-for-dollar tax cut; it reduces taxable income. You must itemize deductions in order to do this, which means your total deductions must exceed the IRS's standard deduction.

Another point to remember is that the amount of interest on your loan goes down each year you pay on your mortgage (all standard home-loan formulas pay off interest first before significantly paying into principal). That's why paying extra on your principal every year can help you pay off your loan early.

4. What is an impound account?

An impound account is a trust account established by the lender to hold money to pay for real estate taxes, and mortgage and homeowners insurance premiums as they are received each month.

5. Are points deductible?

If you are a buyer, and you or the seller pays points, they are deductible for the year in which they are paid only. You also can deduct any points you pay when you refinance your home, but you must do so ratably over the life of the loan. Consult your tax or financial advisor.

6. Are there tax breaks for first-time buyers?

Many city and county governments offer Mortgage Credit Certificate programs, which allow first-time homebuyers to take advantage of a special federal income tax write-off, which makes qualifying for a mortgage loan easier.

Requirements vary from program to program. People wanting to apply should contact their local housing or community development office.

Some things to keep in mind:

  • Some credit may be claimed only on your owner-occupied principal residence.
  • There are maximum income limits, which vary by locality and family size.

You must be a first-time homebuyer, which means you must not have had any kind of ownership interest in a principal residence during the past three years. This restriction may be waived, however, if you are buying property within certain target areas.

Allocations must be available. A local MCC program may have to decline new applications when it runs out of funds.

7. Are home improvements deductible?

What you spend on permanent home improvements, such as new windows, can be added into your home's cost basis, or amount of money invested in a home, which reduces capital gains when it comes time to sell. Capital gains are determined by the difference in price from the time a home is purchased and the time it is sold, minus the cost of any permanent improvements.

However, the 1997 tax changes virtually eliminate the capital gains tax for most homeowners (the exemption is $250,000 for single homeowners and $500,000 for married homeowners.

Still, it is worthwhile to save all receipts for permanent home improvements just in case. They also can be useful documentation when it comes to marketing your home when you sell.

 

7 Questions to ask when looking at a Fixer-Upper

3/20/2017

1. Is it smart to even consider a fixer-upper?

It depends. Distressed properties or fixer-uppers can be found anywhere, even in wealthier neighborhoods. Such properties are poorly maintained and have a lower market value than other houses in the neighborhood.

Many experts recommend that before you make such an investment, first find the least desirable house in the best neighborhood. Then do the math to see if what it would cost to bring up the value of that property to its full potential market value is within your budget. If you are a novice buyer, it may be wiser to look for properties that only need cosmetic fixes rather than run-down houses that need major structural repairs.

2. Is there a tax break for a fixer-upper house if it is considered historical?

Qualified rehabilitated buildings and certified historic structures currently enjoy a 20 percent investment tax credit for qualified rehabilitation expenses. A historic structure is one listed in the National Register of Historic Places or so designated by an appropriate state or local historic district also certified by the government.

The tax code does not allow deductions for the demolition or significant alteration of a historic structure.

The U.S. Department of Housing and Urban Development's Section 203 (K) rehabilitation loan program is designed to facilitate major structural rehabilitation of houses with one to four units that are more than one year old. Condominiums are not eligible.

The 203(K) loan is usually done as a combination loan to purchase a fixer-upper property "as is" and rehabilitate it, or to refinance a temporary loan to buy the property and do the rehabilitation. It can also be done as a rehabilitation-only loan.

Plans and specifications for the proposed work must be submitted for architectural review and cost estimation. Mortgage proceeds are advanced periodically during the rehabilitation period to finance the construction costs.

For a list of participating lenders, call HUD at (202) 708-2720.

If you are a veteran, loans from the U.S. Department of Veterans Affairs also can be used to buy a home, build a home, improve a home, or refinance an existing loan. VA loans frequently offer lower interest rates than ordinarily available with other kinds of loans. To qualify for a loan, the first step is to apply for a Certificate of Eligibility.

3. Are there special loans for fixer-uppers?

If you need a home loan to buy a "fixer-upper" and remodel it, look at the U.S. Department of Housing and Urban Development's Section 203(K) loan program. The program is designed to facilitate major structural rehabilitation of houses with one to four units that are more than one year old. Condominiums are not eligible.

A 203(K) loan is usually done as a combination loan to purchase a "fixer-upper" property "as is" and rehabilitate it, or to refinance a temporary loan to buy the property and do the rehabilitation. It can also be done as a rehabilitation-only loan.

Investors must put 15 percent down while owner-occupants are required to come up with only 3 to 5 percent. HUD requires that a minimum of $5,000 be spent on improvements.

Two appraisals are required. Plans and specifications for the proposed work must be submitted for architectural review and cost estimation. Mortgage proceeds are advanced periodically during the rehabilitation period to finance the construction costs.

4. What are building codes?

Building codes are established by local authorities to set minimum public-safety standards for building design, construction, quality, use and occupancy, location and maintenance. There are specialized codes for plumbing, electrical and fire, which usually involve separate inspections and inspectors.

All buildings must be issued a building permit and a Certificate of Occupancy before it can be used. During construction, housing inspectors must make checks at key points. Codes are usually enforced by denying permits, occupancy certificates and by imposing fines.

Building codes also cover most remodeling projects. If you are buying a house that has been significantly remodeled, ask for proof of the permits involved before you purchase to avoid future liability for fines.

5. How do I find a good contractor?

While hiring contractors recommended by friends is usually a safe route, never hire a construction professional without first checking him or her out. If your state has a licensing board for contractors, call to find out if there are any outstanding complaints against that license holder. Also, call your local Better Business Bureau to see if there are any complaints on file.

If you are satisfied with the answers you find there, interview the contractor candidates. Ask what kind of worker's compensation insurance they carry and get policy and insurance company phone numbers so you can verify the information. If they are not covered, you could be liable for any work-related injury incurred during the project. Also be sure that the contractor has an umbrella general liability policy.

If they pass the insurance hurdle, next check some of their references. A good contractor will be happy to provide as many as you want.

Finally, don't let yourself be rushed into making a decision no matter how competitive the market may seem. Also, never pay a deposit to a contractor at the first meeting. You may end up losing your money.

6. Is remodeling worth the price and time?

Remodeling magazine produces an annual "Cost vs. Value Report" that answers just that question. The most important point to remember is that remodeling a home not only improves its livability for you but its "curb appeal" with a potential buyer down the road.

Most recently, the highest remodeling paybacks have come from updating kitchens and baths, home-office additions and extra amenities in older homes. While home offices are a relatively new remodeling trend, for example, you could expect to recoup 58 percent of the cost of adding a home office, according to the survey.

7. How do I look for fixer-uppers?

You can find distressed properties or fixer-uppers in most communities, even wealthier neighborhoods. A distressed property is one that has been poorly maintained and has a lower market value than other houses in the immediate area.

Ascertaining whether the property you're interested in is a wise investment takes some work. You need to figure what the average house in a given area sells for, as well as what the most desirable houses in that area are like and what they cost.

Some experts suggest that buyers who take this route try to find a "cosmetic fixer" that can be completely refurbished with paint, wallpaper, new floor and window coverings, landscaping and new appliances. You should avoid run-down houses that need major structural repairs. A house price that looks too good to be true probably is. A smart buyer will find out why before buying it.

The basic strategy for a fixer is to find the least desirable house in the most desirable neighborhood, and then decide if the expenses needed to bring the value of that property up to its full potential market value are within one's rehab budget.

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