Hope Leitner, Realtor®, CRS

Debt-to-Income ratio is a tool that lenders use to qualify buyers for a mortgage and is an important factor in determining loan approval.   It provides an indication of the amount of debt that a potential borrower is obligated to in relation to how much income they have. Total monthly debts are determined by adding the normal and recurring monthly debt payments such as monthly housing costs, car payments, minimum credit card payments, personal loan payments, student loans, child support, alimony, and other things. By dividing the monthly income into the monthly debt, you arrive at a percentage of the monthly income.   Lenders actually look at two different ratios commonly called the front-end and the back-end. The front-end ratio is the proposed total house payment including principal, interest, taxes, insurance, mortgage insurance if required, and homeowner association fees.   Lenders generally don't want these expenses to be more than 28% of the monthly gross inco...

Ideally, each party will pay their own closing costs associated with the purchase and the sale of a home, but they can be negotiable based on lender requirements and market conditions. The fees are usually paid at the settlement and will be itemized on the closing statement.   Buyers should be aware of them before contracting for a home.   If a mortgage is involved, the lender will want to verify that the borrower has ample funds available at closing to pay for them. Buyer's closing costs can range between two to five percent of the sales price.   The real estate agents should be able to give you an estimate of what a buyer can expect.   The most accurate estimate will come from the lender at the time the loan application is made. They may or may not include other fees that will be charged to buyers by the title or escrow company. Buyers are required to be provided a standard Closing Disclosure form at least three business days before the loan closing date. ...

Mortgage assumptions have not been a practical matter for the last 30 years because mortgage rates have been on a steady decline.   Even if the seller had a rate lower than the current rate, the new purchaser must qualify to assume the loan.   In the case of conventional loans, the lender has the right to increase the rate to the current rate which neutralizes the reason for assuming the loan.   This change took place in the early 1980's when lenders added due on sale provisions so lower rates could not be assumed. FHA and VA loans can be assumed at the existing rate with the provision that the purchaser qualifies for the loan.   This could be an advantage if the rate on the loan to be assumed was lower than the current mortgage rate for FHA or VA and the buyer is going to owner-occupy.   Unfortunately, investors are prohibited from assuming FHA and VA loans. Besides the obvious advantage of a lower rate which would have a lower payment, the closing costs ...

Vacation home sales are up 44% year-over-year according to the National Association of REALTORS® based on sales during the July to September period.   Not only are the number of units up, but they are also selling faster than in previous years. On a national basis, 72% of existing vacation homes closed in October were on the market for less than one month. The increased desirability and affordability of vacation homes, according to the National Association of Realtors, seems to be influenced by the pandemic and low mortgage rates.   The ability to work from home seems to be contributing to this increase.   Freddie Mac reports the average commitment rate for a 30-year, conventional, fixed-rate mortgage decreased to 2.83% in October compared to the aver commitment rate for all of 2019 which was 3.94%.   There may also be a safety factor involved with these decisions to purchase vacation or second homes.   Contagious diseases flourish more in highly pop...

Information is brought to you by Hope Leitner Berkshire Hathaway HomeServices California Properties Does your fridge feel like a disaster zone whenever you open it? Does it have a lingering odor with a source you can’t quite find? Below are a handful of hacks to keep your fridge fresh and organized. Build a basket system.  Just like a well-organized closet, your fridge should have a place for everything. While you may be skilled at stashing your produce in the produce drawers, grab plastic baskets and use them for separating your leftovers, dry goods, liquids, condiments, animal products and more. Pro tip: Place items that need to be used fast in a basket, so you always know what edibles you should prioritize consuming or tossing. Take inventory with dry erase.  Did you know the front of many fridges work like dry-erase boards? Here you can take inventory of your items, so you never run out of milk again. Line the shelves.  Grab plastic mats and line your shelves with the...

 

A home inspector is another key professional involved in a real estate transaction.   Many times, the sales contract will have a provision that allows the purchaser to have inspections made to discover issues that are not readily apparent or have not been disclosed by the seller. It is important to have a qualified individual perform the inspection.   Regardless of whether a license is required, buyers should ask about the inspector's experience, training, years in business and if they are familiar with the area and type of property involved. Membership in professional associations can indicate an inspector's commitment to education and training.   References from both customers and agents are helpful and may be more meaningful.   You are encouraged to call the references, especially, if you are concerned about any specific areas. Errors and Omission insurance is intended to cover mistakes made during an inspection.   It would be good to find out if the in...

If you are making a particular meal for the first time, it is essential to have a recipe so that it turns out the way it should.   Knowing the ingredients and preparation can guide you through the process. Buying a home is really no different than making a new recipe.   There are certain things that need to be done, many of which should occur in a particular order to save time, money, effort and disappointment.   Your first inclination may be to start searching the Internet for homes and schedule some showings or possibly visit open houses.   Even though this is very gratifying, it shouldn't be done until you have gone through the preliminaries. Buying a home for the first-time implies you haven't been through the process before and even though, you may have a rough idea of what needs to be done, selecting the right agent in the beginning will give you the benefit of years of personal and professional experience that can help you avoid some of the common mistak...

We are all spending more time at home and will probably need to continue to do so for a while longer.   Depending on the makeup of your family, your home is now a home office, a gym, a virtual classroom and considerably more meals have been prepared in your kitchens in the past six months than normal. Some businesses have undergone a metamorphosis that has shown them that maybe they do not need the big commercial spaces for their employees.   They realize that they can be just as productive with their work force offsite which will cut expenses. If this scenario sounds familiar, it may be worth exploring what moving would look like for your situation.   To analyze the options, you will need to know what your home is worth and what the net proceeds will be after selling it. You will need to know what homes are available with the amenities you are looking for together with the prices and mortgage money.   Depending on the interest rate on your current mortgage, th...

Selling a home and buying a lower priced home that meets your current needs can be to your advantage in an "Up" market like the current one with low inventory.   The advantage is that you can maximize the price for the home you're selling and not have to reinvest it all in your replacement. Just to illustrate the point, let's say there is a 10% premium in the sales price of a home currently.   If you're selling a home for $750,000, it would be $75,000.   If you replaced the home with a $500,000 home, the premium would be $50,000 which means you're $25,000 ahead. Let's further assume that your home is debt free so that when you sell it, you have a large cash equity.   Instead of paying cash for the replacement home, get an 80% loan at today's low interest rates and reinvest the proceeds to supplement your retirement. You may be able to get as low as a 2.5% mortgage and earn significantly more on the proceeds in other investments. Home prices are...

Cutting the price will generally bring buyers of anything out of the woodwork that were not serious before.   Some renters could easily lower their monthly cost of housing by half or more by purchasing a home with all the financial benefits that come with it. The most obvious thing in today's market is that the mortgage payment could be less than the rent the tenants are paying.   With mortgage rates hovering around 3%, this is a major factor of the savings. The two other major contributing factors are appreciation and amortization of the mortgage, neither of which benefit tenants continuing to pay rent.   According to the FHFA House Price Index, home prices rose 5.4% from July 2019 to July 2020.   There were 400,000 less homes on the market during the summer of 2020 than the previous summer which is influencing appreciation. With each payment a homeowner makes on their mortgage, a portion is used to reduce the principal amount owed.   This is like a savin...

Banks are concerned about making loans that will be repaid not about making loans that are tax deductible for homeowners.   It is good business for the bank but how is the homeowner supposed to know? Most homeowners and potential homeowners are aware there are tax benefits associated with ownership.   For instance, mortgage interest and property taxes have been deductible expenses from federal income tax since it was enacted in 1913.   The current law provides that homeowners can deduct the interest on Acquisition Debt which is the amount of debt incurred to buy, build or improve a first or second home up to $750,000.   The amount of acquisition debt decreases as payments are made and it cannot be increased unless the additional funds borrowed are used for capital improvements. It is not uncommon for a homeowner to refinance their home for any number of reasons.   It could be to get a lower interest rate that would lower the payments or remove mortgage ins...

The concern today when putting your home on the market should not be whether you'll get a contract; it's whether you are going to recognize the majority your net proceeds without any unnecessary delays. What you realize from the sale of your home has to do with maximizing the sales price while minimizing the sales expenses.   Interestingly, the buyers will be trying to minimize the price they have to pay for your home and possibly, have you pay some of their expenses. Taking a few pictures with a cell phone and putting a sign in the yard may be enough to get a buyer but successfully selling a home in today's market requires expert marketing and expert negotiations.   Marketing begins with the preparation of the property to optimize the first impressions it makes to potential buyers.   A skilled professional can make recommendations that can help the home sell for the most money and in the shortest amount of time.   Cleaning, painting, depersonalizing, removing ...

Just like buyers should be pre-approved before they begin to look at houses, Sellers should have their home pre-approved.   The reasons are similar: appeal to the "right" buyers, discover issues with the home early, improve marketability, increase negotiations position and close quicker. For the seller, there are few things that need to be done before the sign goes in the yard and definitely before prospective buyers see the home.   The first is to understand that once you decide to sell the home that it needs to appeal to the broadest base of buyers and that means depersonalizing your home. Once the home is sold, you will need to pack your things for the new home.   Think of this as starting the process early.   Get moving boxes and make decisions on what you intend to give away or discard in each room and closet.   Identify and pack those items before the home goes on the market. This will be the first wave of making your home more marketable. When your ...

More and more homeowners are employing smart home technology within their homes.  It may start with a video doorbell or lights and progress to other devices.  The smart-home device market is rapidly growing and Forbes research expects it to grow from $55 billion in 2016 to $174 billion in 2025. The popularity of these high-tech features will require a few additional steps to consider when selling a home.  The seller should determine which items will and will not stay with the sale of the home and identify them in the listing agreement. Confusion can arise when a home's marketing mentions its smart-home technology and is unclear if a piece like the hub, which is easily considered personal property but is integral to the working of the system.  Some might consider it an accessory and others a component. A smart home can contain multiple technology devices connected to the Internet that allow them to be controlled or accessed from computers, tablets or most commonly, on...

  Why Pricing Your House Right Is Essential In today’s real estate market, setting the right price for your house is one of the most valuable things you can do. According to the  U.S. Economic Outlook  by the  National Association of Realtors  (NAR), existing home prices nationwide are forecasted to  increase 4.7% in 2020  and  4.1% in 2021 . This means experts anticipate home values will continue climbing into next year. Today, low inventory is largely keeping prices from depreciating. Danielle Hale,  Chief Economist  at  realtor.com ,  notes : “Looking at the sheer number of buyers, low mortgage rates, and limited sellers, the strength of home prices–which are now growing at the highest pace since January 2018–makes sense.” When it comes to pricing your home, the goal is to increase visibility and drive more buyers your way. Instead of trying to win the negotiation with one buyer, you should price your house so that  dem...

  Information is brought to you by Hope Leitner Berkshire Hathaway HomeServices California Properties How FICO 9 May Increase Credit Scores How medical debt and other collection items are tallied in a credit score is changing, potentially increasing the credit scores of millions of people. Called the FICO 9, the new credit score changes how medical collections are treated from non-medical changes, such as credit cards. A medical debt will now damage a credit score less than paying a credit card bill on time, for example. FICO 9 came out in 2014, but the improved credit scores could just now be coming to fruition for many consumers because it can take a few years for banks and other lenders to implement the new system. The new FICO 9 score should give responsible borrowers better access to credit and lower rates on existing credit once the changes are accepted by the industry. Part of the thinking behind the changes is that for many people facing medical debt collections, it isn’t s...

  Information is brought to you by Hope Leitner Berkshire Hathaway HomeServices California Properties How to Lower Your Homeowners Insurance You’ve probably seen thousands of ads for Geico or Aflac on television talking about the latest savings you can get for car insurance. But how often do you see companies talking about lowering your home insurance?  Probably not regularly. Obviously, people know they need home insurance. But typically, those who own homes don’t understand the policies the same way that they would their car insurance, and that’s why many people pay more than they need to. Typically, a policy will cover the actual dwelling and some of the other structures on the property, such as a fence, garage and driveway. Personal property is also usually covered, and regularly covers the contents inside the home, although there will be a higher cost for high-value items like jewelry or antique paintings. Thankfully, there are some steps one can take to lower their homeo...

Information is brought to you by Hope Leitner Berkshire Hathaway HomeServices California Properties What Couples Should Discuss Before Retiring Compromise is an important part of marriage. From deciding how much to spend on a new living room set to what to watch on TV tonight, compromise is constant. It can also be a big part of retirement conversations. While agreeing on the financial and logistical issues around retirement is great if you can get there, chances are, there are some aspects of a life together without work that will be a compromise. Getting on the same page before retirement can make it a lot easier. Here are some topics couples should talk about before retirement: When to Retire Do you both plan on retiring at the same time? Maybe one person wants to wait until age 70 to receive the most Social Security benefits, while the other wants to collect them when they’re first eligible at age 62. What Are Your Retirement Goals? Each person may have different dreams of what ret...

  Buyers Are Finding More Space in the Luxury Home Market A year ago, additional space and extra amenities had a very different feel for homebuyers. Today, the health crisis has brought to light how valuable more square footage and carefully designed floorplans can be. Home offices, multi-purpose rooms, gyms, and theaters are becoming more popular, and some families are finding the space they need for these upgrades in the luxury market. The  Institute for Luxury Home Marketing  (ILHM)  explains : “With quarantine concerns still top of mind for many luxury buyers, we see large, sprawling estates making their comeback. For instance, the last six months have seen a resurgence in the buying of mega mansions and estate-size homes – specifically properties that offer space (both inside and outside), separate home offices, gyms, and private amenities such as swimming pools, yoga studios, and recreation rooms.” This was not the case at this time last year, as the most recen...