What is an escrow or impound account?

impound account pays taxes

To many first-time homebuyers, one of the most confusing parts of the process is sitting across from the closing agent, who is tossing them pieces of paper from a huge stack, quickly explaining what each one means and asking for signatures. From real estate transfer documents to loan documents to title documents there are, what seem to the newbie at least, hundreds of pages to sign.

Who can retain all of that information? So, at some point during the ensuing weeks and months, when everything settles down, don’t be surprised if you wonder when your property taxes are due. After all, you’ve just laid down a huge chunk of money to buy the house and you naturally want to make sure you can pay the taxes.

Think back to that closing agent and recall the words “impound” or “escrow” account. Then, breathe a huge sigh of relief because the tax bill has been paid, and will be paid in the future, through the impound account held by your lender. If you have one, that is.

What is an escrow account?

Your lender may refer to this account as an “escrow account,” “impound account,” or even an “escrow impound account.” Whatever it’s called, it’s an account the lender sets up to ensure that certain expenses for the property are paid, and on time.

These expenses include homeowners insurance and, yes, property taxes. Basically, any bill that, if not paid might result in the forfeiture of the home to an entity other than the lender, will be paid from the impound account.

Do I have to have an impound or escrow account?

The great majority of lenders will require that these bills be paid using an escrow or impound account. Although this set-up benefits the lender financially, there is a huge advantage for the homeowner (not having to worry about and budgeting for the monthly payments for these items) as well.

In fact, many financial advisors recommend that homeowners who don’t have impound accounts with their lenders request one.

How an escrow account works

Your mortgage payment consists of a set of smaller, individual payments, known as PITI. These include:

  • Principal – The part of your check each month that goes to paying down the loan’s balance (the principal). This part of the payment starts out small (painfully so) and increases over time.
  • Interest – This is the payment to the lender for lending you money. Because you pay this off before the principal is fully paid, less of your payment will go toward interest and more toward the principal as time goes on.
  • Taxes – Property taxes are typically, but not always, included in the impound account. If they’re not, it’s up to you to make these payments. Check with your lender or servicer if you’re unsure. If you have a government-backed loan, however, you most likely have funds for tax payments included in your impound account.
  • Insurance – Hazard insurance is a lender requirement and since the lender wants to ensure the safety of its investment, the payment for the policy will be included in your monthly mortgage payment.
  • Mortgage Insurance – If you have a government-backed loan, the mortgage insurance premium (similar to PMI) will be included in your payment.

Here’s an example

Suppose that your property tax bill is $1,000 per year — $83.33 of your monthly mortgage payment is dedicated to pay that bill. If your homeowners insurance premium is $1,034 (the average premium across the United States, according to the National Association of Insurance Commissioners), then an additional $86.17 a month is tacked on to your mortgage payment. So, your mortgage payment will include payment for these two items, plus interest on the loan and on the loan’s balance.

Check your mortgage statements every month to see the balance of the escrow account. Federal law requires that your lender or servicer review your account annually to ensure that you’re paying the right amount. If you’re paying too much, you are owed a refund. By the same token, if you aren’t paying enough, you’ll be required to pay more.

If your lender didn’t require an escrow impound account, you can ask for one to be established. Especially if you’re on a tight budget or find it challenging to save for future expenses, an impound account acts as a forced savings account out of which very important bills are paid.

Tips to Remain Sane While Your Home is For Sale

keep your house clean while its for sale

In a perfect world, the entire family pitches in every morning to clean last night’s clutter and mess before heading out to work/school. In the real world? Not so much. But when your home is on the market, it’s important that you strive to get as close to that perfect world as possible. A hassle? Oh, yes. Crazy making? Indeed. But we have some tips to help you retain some of your sanity until the house sells.

Start with a clean slate

A deep, deep clean, fresh paint – you’ve no doubt heard it all before. Whether it’s to set the foundation for staging or just to make the home presentable for the market, there’s no getting around the fact that to get what you want for the home, it must be incredibly clean. If you can’t get the job done by yourself, or with help from friends and family, hire someone to do it for you – it’s that important.

The next step in the process of readying the home for the market is, again, a familiar one: depersonalize and declutter. This is the ideal time to pre-pack for the move after the home sells, which, in turn, gives the family less “stuff” to have to pick up before showings.

One of the best places to start is in the children’s room. Pack up some of their toys, especially those with a lot of pieces (LEGO® sets come to mind). You don’t necessarily need to seal those boxes. In fact, if you don’t, you can rotate toys as they tire of the current inventory.

Go through the house with a mission: seek and remove anything you don’t use on a consistent basis. Box it up and move it out.

Keep it clean without losing your mind

The home is clean and it’s free from clutter. Showings will be a piece of cake, right? Not so fast – you still need to live in the home and, if you have a family, they do to. This means you’ll need to keep on top of the ongoing messes that living in a house creates.

Sure, it sounds easier said than done, but if you create a plan, it will be a lot easier than if you don’t. Each family member should have routine tasks that they perform every morning before they head out for the day. This includes making their beds, picking up any messes they made the night before, ensuring dirty laundry is in the proper place, wiping down the counters in the bathroom after their morning showers and loading the dishwasher.

Evening chores may include sorting and putting away mail and other clutter that has accumulated since day’s end.

The big jobs, such as mopping and vacuuming the floors, cleaning sinks and toilets and folding laundry can be assigned to family members on alternating days. If everyone knows what they’re supposed to do, they’re far more likely to buy into the plan.

Last-minute minute showings

So, what happens if you get a request for a showing between those times that you clean? You know, when you are actually using the home to live in? Ah, homeowners are a crafty bunch and we’ve collected some tips from our clients that are not only rather funny but realistic as well.

“With four kids in the house we go through a lot of laundry,” a client tells us. “There’s usually piles of it scattered through the bedrooms and in the laundry room. I just race through the house, grab it and dump it in the washer and dryer where nobody will see it.”

Others have told us they use laundry baskets or boxes to grab clutter and then put it in the trunk of their car. Yes, even dirty dishes.

When a potential buyer is within an hour of being on your doorstep, prioritize your cleaning tasks, because some are more important than others.

  • Pick up clutter. If you don’t have time to put it away, take it with you.
  • Wash dishes or load them into the dishwasher.
  • Empty all the trash receptacles in the home.
  • Ensure that bathroom counters are free of toiletries and wipe them down. Hang fresh towels and close the shower curtain and lower the lid on the toilet.
  • Vacuum
  • Straighten the linens on the beds.
  • Straighten the sofa cushions and pillows.
  • Open all window coverings to let the sunshine in.
  • Turn on all the lights in the home, even in the closets.


Should your home look perfect when buyers come calling? Sure it should, but there may be times, such as with last-minute showings, that it won’t be. Don’t stress about it. As long as it is pristinely clean and relatively tidy, you’ll be fine.

4 ways to furnish your new home for less

furnish your home for less


Between the down payment and the closing costs for the mortgage, homebuyers aren’t left with a whole lot of money. Yet, there are still movers to pay and, quite possibly, appliances to purchase and minor fixes to perform.

So, how will you furnish the new digs – especially if you can’t stand the thought of dragging your mismatched furniture from your rental to your new, yes-indeed-I-own-this home? Many of our first-time buying clients aim for something between buying new and keeping the old, so decide what’s worth keeping and then list what you’ll need to purchase.

And, lucky you, we’ve put together a list of places to help you furnish your new home for less.

“Used” means you’ll save money

“Used” doesn’t necessarily mean “nasty.” Especially if you’re a fan of DIY anything, how a piece looks when you first see it may have no resemblance to what it will look like after you work your magic.

If you’re not particularly handy, you may find it more of a challenge to envision a piece of furniture’s possibilities. Before you go shopping, take a stroll through online sites that deal with DIY furniture makeovers – Pinterest is an ideal place to start. The photos alone will open your eyes to the possibilities, whether you do it yourself or hire a professional.

A good rule of thumb is to focus your attention of the furniture’s style, instead of the torn or dated upholstery. Of course anything from a smoker’s home or with pet odors should be passed by – some odors are impossible to remove. Here are 4 tips to get you started shopping for your new home, on the cheap.

1. Estate and garage sales

Both garage and estate sales offer bargains when it comes to purchasing used home goods. Estate sale prices are typically higher than those you’ll find at garage sales, but the merchandise is often more high-end and well maintained.

Check Craigslist for listings of garage and estate sales near you. You may also see signs posted around the neighborhood.

2. Consignment stores

Consignment stores are the middle men (or women) between the owner of the goods and the buyer. Sort of a for-sale-by-owner situation with the benefit of the consignment store owner offering a showroom and taking on the drudgery of the sales process. Yes, the store owner receives a portion of the sale proceeds, so bargains are often hard to find in these stores.

Do a Google search for consignment stores in your ZIP code and pay them a visit. You can find the occasional bargain so don’t count them out in your search for “new” furniture and home goods.

3. Thrift shops

Thrift stores can be hit or miss on the quality of merchandise offered. The good news is that prices are quite low at thrift stores such as Goodwill Industries, Salvation Army and Habitat for Humanity’s ReStore.

An alternative to thrift shops, especially if you’re looking for something unique to apply your DIY skills to, are salvage yards. Again, Google is your friend when seeking these out.

4. Online shopping

Craigslist is the granddaddy of inexpensive home furnishings and, the best part is that it’s local. You’ll find home goods scattered throughout the many categories on Craigslist, but start in the “For Sale” section. From there, drill down to the “Free” link. You never know what kind of interesting bargains someone is willing to part with for free.

Below the free section you’ll find a link to the site’s furniture listings. Dealer merchandise is lumped in with consumer items but you can select whether or not to show those by using the information on the left side of the page. You can also search by item name so you don’t have to scroll through listings for everything but headboards, or whatever it is you’re looking for.

Other sections to check include the Antique and Household sections, further down the list.

eBay offers furniture and other household goods but, unless the seller is local, the shipping charges may take an otherwise bargain-priced item out of the running. Thankfully, the site has a way to filter your search by miles from your ZIP code. For instance, type “headboards” into eBay’s search box and scroll down the page until you find “Item Location.” You can also limit your search to those items with free shipping.

Etsy is a fun site that sells a lot of interesting handmade items, especially home accessories. Using our headboard example again, type “headboard” into Etsy’s search box. Then, on the left side of the page, under “Refine your Search,” you’ll find the option to “Shop Location,” and a “Choose a Custom Location” link to refine the search even more.

Sure, we’d all love to furnish our new homes with furniture and accessories from the high-end stores, but new houses frequently zap our reserve funds. Shopping frugally allows you to make big, dramatic changes to your new home’s décor without breaking the bank.

How to Get Rid of Tobacco Stench in Your New Home

Selling a home that reeks of tobacco smoke is quite the accomplishment and that you purchased it makes you one brave buckaroo. The accolades don’t help, though, when you come home from work, open the door and the stench hits your nose.

The good news is that 20 percent fewer Americans smoke cigarettes now than they did in 2005 and at this point, smokers represent only 17.8 percent of the population, according to the Centers for Disease Control and Prevention.

The bad news is that you fell head over heels for a home in which one of these Americans lived, and smoked. Cigarette smoke sticks to everything, from the carpets and walls to the entire HVAC system. If it were cheap and easy to remove, trust us, the seller would’ve done it. Instead, you inherited the stink and the toxins that cigarette smoking left behind. Let’s take a look at ways to get rid of the gunk.

Start with the walls

You’ve no doubt done your online research on the subject and you’re armed with a bottle of vinegar and water. Guess what? It doesn’t work. What just might work on the walls and the ceiling is a mixture of one part of chlorine bleach diluted with five parts of water.

NOTE: Never mix bleach with anything but water. Combining chlorine bleach with ammonia or certain other products is especially dangerous because it creates a toxic gas.

Perform the cleaning on a day when the kids are in school because bleach is especially nasty on developing lungs. Open all the windows before you start and don a pair of chemical-proof gloves. If at any time during the process you feel woozy or you start coughing, go outside and get fresh air.

Scary, right? If you wear a breathing mask and protective gloves you should be ok. Use a sponge dipped in the solution to scrub the walls and ceiling. Rinse the sponge repeatedly to ensure you aren’t reapplying the residue back to the surfaces.

If you prefer not to mess with bleach, try TSP — although it, too, comes with warnings. Before you decide, read Bob Villa’s pros and cons.

If you have a large home, you may want to hire someone to help you or, better yet, to do the whole job.

Cover it

Once the walls are clean you’ll need to seal them with primer and the best primer to block cigarette smoke residue is KILZ. It will seal in the stink and set the walls up for that gorgeous paint you’ve been dying to slap on them.

Get rid of odor holders

There are a few other areas of the home that need your attention. Anything made of fabric needs to be ripped out and tossed. This includes carpet and draperies included in the sale. No matter how many times you shampoo that carpet the smell will cling. It’s most likely penetrated the padding under the carpet as well.

Remove the HVAC registers and toss them in the dishwasher. If they still aren’t clean, soak them in extra-hot water and your favorite cleaning product (I like ammonia for sticky residues but remember not to mix it with bleach). You may need to use an old toothbrush to get into the slats. While they’re soaking, peer into the ducts to see if there is dust, as that is an odor magnet. If so, clear it out.

Did you know that grease also absorbs odors? That’s not just stale food you smell in the kitchen and the range hood is probably the culprit. Look under it – especially at the small mesh filter. If it’s caked with grease, it’s probably another source of the tobacco smell in the home.

You have two options here: try to clean it (easier said than done), or buy a new filter (the big home improvement stores sell them for as little as $10).

Hopefully, you’ll be painting the kitchen as well, so the KILZ and lovely new paint will get rid of what’s left of the stench.

The air you breathe – and smell

Getting rid of the HVAC filter and installing a new one is a no-brainer, but what about the rest of the HVAC system? If someone was puffing toxic fumes in the home for a number of years, and the fumes were sucked into the system, it’s only logical that the various components might need to be cleaned as well. This, of course, calls for a professional, but here’s what we were able to learn.

If you turn on the unit and smell tobacco the residue may be clinging to the evaporator coil (if you have one), the blower fan, around the heat exchanger, plenums, and grille boots. A professional can take a look at these components and clean them, if necessary.

Finally, you’ll need to clean woodwork and glass. This means all of the cabinetry (don’t neglect the insides of drawers and cabinets), mirrors, windows, light fixtures and ceiling fans. If all else fails, you may need to sand and stain the cabinetry in the bathrooms and kitchen and any wooden built-ins.

If the smell lingers, despite your hard work, you may consider using an ozone generator. Before you do, please consider the facts in this article from the U.S. Environmental Protection Agency.

Cigarette smoke is insidious and will creep into every crack and cranny in the home. Getting rid of it isn’t impossible, but it will take time.

2 reasons NOT to sell your home “as-is” and what to do if you must


We can think of several reasons why a homeowner would consider selling a home with problems, marketed in “as-is” condition. The most obvious, of course, is that there’s no money to perform the required work. This frequently happens in probate sales where the heirs inherit a home in need of work but lack the funds to put the home in market condition. As well, folks who need to relocate quickly for a job often just want the house off their hands so they can move on with their lives.

Although we understand why someone may need to sell a home as-is, we believe our clients need to know the possible ramifications of doing so. Let’s take a look at two reasons you might want to reconsider your decision to sell your home “as-is,” and what to do if you absolutely must.

1.You’ll have fewer qualified buyers if you sell as-is

When your home is advertised as a fixer, which is what most as-is listings are, you’ll partially drain the pool of buyers who can buy your home. For instance, since FHA-backed mortgages require that certain repairs be made before they’ll ok a loan, your buyer pool won’t contain many first-time buyers.

Then, those who are getting a conventional loan may be getting out of the pool as well since many conventional lenders balk at lending money for a home that needs significant work. Many conventional lenders will insist that certain items, such as a roof in need of replacement, be taken care of.

Then, there’s the fact that most buyers just don’t have the money to repair a home after moving in. Although your low price will attract the tight-budget buyer, the reality of the financial outlays after closing may prevent them from proceeding with a purchase.

Your buyer pool now contains mainly cash buyers and most cash buyers are investors – the most real estate savvy homebuyers. They’re out for a bargain and if you hope to sell your home at all, you may end up taking an offer for far less money than you’d imagined.

2.You won’t make as much as you hope

Today’s homebuyers say they want a home that they can move right into, stick their toothbrush in the holder in the bathroom and enjoy their new digs. So, why would a buyer want your home? When you consider this question, there can be only one answer: A buyer would want your as-is home because it’s cheap.

Depending on the extent of needed repairs, you will have to list your home for less than nearby homes that are in better condition. As mentioned earlier, a low listing price will bring out investors and everyone else looking for a bargain. Be prepared to get beat up over your price, regardless of how low it is, and to sell it for less than you’d hoped.

It’s quite possible that it may be more cost-effective in the long run to make the necessary repairs so that you can list at a higher price. This is something you should speak with your accountant about.

If you must sell as-is

We understand that certain home repairs may be financially out of the question for some sellers and they simply must sell the home in its current condition. Here are 3 tips to help:

Stage the home

Appearance matters more in real estate than most other industries. With attention to increasing the home’s curb appeal and some fresh paint and a good scrubbing inside, even the worst home will look better.

Most buyers will decide whether or not to view your home while shopping online, so paying attention to cosmetics makes for compelling listing photos. Sure, they’ll know that there is something wrong with the home (“as-is” advertises that), but if it looks ok, the perception will be that whatever is wrong with it can’t be that bad. Getting more people to view the home in person is the name of the game when it comes to selling quickly and for more money.

Consider a pre-sale home inspection

Sure, you have a good idea of what’s wrong with the home, but there may be more, or less, than you imagine. A pre-sale home inspection will give you the definitive answers you need and will go a long way in showing potential buyers that you’re earnest in your desire to be completely honest about the home’s condition.

Plus, if you supply the buyer with the inspection results before accepting the offer, you’ll be able to weed out those that will eventually back out, after they have their own home inspection.

Disclose everything

Protect yourself by disclosing all known issues concerning the home and the neighborhood. Yes, it feels as if you’re betraying yourself, but disclosure is important if you want to avoid running afoul of the law and winding up in court. Disclose Every. Last. Thing.


Congrats on the new home – let’s get that home office set up

As you get close to closing on a new home thoughts tend to turn from dollar and cents, contracts and contingencies to furniture, paint colors, appliances and other décor. If you work from home, it will be important to get the office set up immediately so we’ve put together this handy guide to get you up and running quickly.

Location and size

And here you thought you’d heard the last of “location, location, location,” right? Unless you live alone, which room you’ll use for your home office, however, is important to your productivity. If you are easily distracted, find a spot that’s as removed from the rest of the home as possible.

When scouting around the house for the ideal office location, notice how much natural light each room receives. The best choice would be the room with the most natural daylight, which will help you focus and remain productive, according to a study published in the Journal of Clinical Sleep Medicine.Exposure to sunlight provides “a profound way to improve office workers’ productivity and health,” claims the authors.

Ensure that the room you choose is the right size to accommodate your daily work activities and your storage needs. If you’ve found a room in a suitable location and it gets plenty of natural light but lacks storage, consider adding built-ins with cupboards and shelves.

Finally, if you hope to take the home office tax deduction you’ll need to ensure that your office is distinctly separate from the personal spaces of the home. Sure, it’s ok if you use the dining room for your office as long as you don’t also eat there. Keep this in mind as you decorate the office as well – if an item shouldn’t be in an off-premise office, it shouldn’t be in your home office either.

Getting wired

Determining your tech needs should be high on the list of things to do in advance of moving in to the new house. First, figure out what you require in a home network (the basics, of course, include a broadband modem and wireless router), but you may also need to connect other devices and depending on what you do for a living you may need a dedicated land-line telephone and perhaps cable TV service. If you’re fortunate to have some smart devices in the home, you’ll need to consider a home automation hub, cloud storage and more.

All those cords and wires can be distracting so shop for storage or camouflage solutions as well.


While it’s important to have as much natural light as possible, depending on what you do for a living you’ll want to add additional lighting as well. Look for lighting solutions that will help reduce eye-strain. The experts at Remodelista suggest thinking of your office lighting as “akin to dressing for a climate with changeable weather–it’s all about layering.” Use one light to illuminate the entire office and then start layering in other fixtures according to your typical daily tasks, from filing to working on your computer.

These solutions can include everything from desk lamps to sconces to floor lamps, depending on your needs.


Furnishings are highly personal, even in an office setting. Since you’ll be spending most of your time at your desk, however, let’s start there. Will you stand or sit? With all of the recent studies claiming that sitting is killing us, many are switching to stand-up desks, so this is a valid question. And, since you have the luxury of planning your ideal office right now, it’s something to consider.

Thankfully, if you can’t decide whether to sit or stand, you don’t have to – there are desks designed to allow you to do either. The bottom line with furnishings is that you’ll need to decide what you require and then ensure that the furniture will fit in the room (along with the storage solutions you’ve chosen).

Aside from a desk and chair, you may need filing cabinets, shelves, display space (if you see clients in the home) and more. Hopefully, you measured the room while you accompanied the home inspector (or any other visit you made) so that you can get this hammered out before you move in.

TIP: Do not use your credit card or any other type of credit to furnish the office or any other room in the home before closing escrow. Your lender will likely perform what is known as a “soft pull” of your credit just before closing. If your finances have changed in any way since you applied for the mortgage, your loan may not go through (at the last minute), which makes all thoughts of designing a home office for this home moot.



What You Need to Know About Fall Home Sales

Good for you if you deliberately sat out the summer madness that is inherent in the current housing market. If you’re serious about buying a home, you’re hopefully about to save a huge gob of money.

There’s another new housing market study out that confirms some well-known facts (for instance, “home prices peak in June and July”) and some tidbits that real estate consumers may not know.

Of course, it’s a no-brainer that homes sales tend to drop during fall and winter, but did you know that home prices do the same? Indeed they do — a nationwide average of 3 percent which is a reduction of more than $7,000 (based on the current nationwide median existing home price). Remember, all real estate is local, so your “mileage” may vary.

Let’s take a look at a few more reasons why shopping for a home in the fall may just be one of the best decisions you’ve ever made.

You’ll get a better deal now

RealtyTrac, a real estate data analytics firm, studied more than 30 million home sales dating back to 2000 and found that homebuyers get the best deal in October. In fact, the study finds that the average sales price in October, nationwide, is 2.6 percent lower than average market value. Coming in behind October, the best months to buy a home, according to this study, are December, January, February and July.

The worst month to buy a home? April homebuyers, according to the RealtyTrac study, paid 1.2 percent more than estimated market value.

It’s a better time for first-time homebuyers

Move-up buyers – you know, all those folks you were competing and losing against just a few months ago – are in their new homes. In fact, one of the big real estate information services recently announced that the market consists of mainly first-time buyers right now. When you aren’t competing against someone who has more money than you (in the form of the proceeds from their current home), you’re on a more level playing field, and that’s always a good thing.

This isn’t to say you won’t still need to act quickly when you find a home you want to purchase, because you will. But overall, your competition is in the same boat as you.

Sellers are motivated

Less competition among buyers make sellers nervous. They want out of the home, hopefully before the winter holidays, so they’re more motivated to negotiate. While you should still come in with your highest and best offer in a seller’s market, we can be a bit more flexible in the contract’s terms. This is something we can discuss when the time comes.

The whole industry is idle so you’ll get more and better attention

From home inspectors to lenders to title companies and even movers, business takes somewhat of a breather in fall, so your deal will get more attention. The same can’t be said for winter, when the holidays role around and most folks involved with the home sale process take time off.

Vendors offer year-end deals

Air-conditioning techs and pool companies, especially, are entering their slowest time of the year so they offer big savings on their services and the homebuyer who needs these services is the beneficiary.

Shopping conditions are more pleasant – and helpful

Unlike shopping for a home in winter, in autumn you can still catch a glimpse of where the perennials are planted and learn how the deciduous trees in the landscape look when they have foliage. And, unlike summer home shopping, you won’t be sweating as you schlep from home to home.

It may not be this pleasant next month, however as we slip out of daylight savings time, the rains begin and temperatures begin to chill.




How to Get a Mortgage if You’re Self-Employed


From how we’re expected to file our taxes to a lack of paycheck stubs to sometimes wild swings in income, the self-employed are a different breed. Applying for a mortgage when you lack W-2s, doesn’t disqualify you; you’ll just need to work harder to meet the higher burden of documentation required of the self-employed.

According to a study commissioned by one of the large real estate aggregator sites, the self-employed earn 81 percent more money than other borrowers but receive 40 percent fewer mortgage loan quotes. Let’s take a look at some of what this group of homeowners need to know when applying for a home loan.


The lender will want to see your past two years’ tax returns (and all accompanying schedules) to prove your income. Recently released Fannie Mae guidelines may allow a borrower with only one year of tax returns so speak with your lender if you’re in this situation. With the two years of returns, the underwriter will typically add the two adjusted gross incomes and then divide the sum by 24 to arrive at your average monthly income.

The problem with this is all those expenses we use to reduce our taxable income. After calculating them on Schedule C, guess where that reduced income figure goes? That’s right — in the “Adjusted Gross Income” column on your 1040. So, even if you make a decent income, it won’t look like it on your tax returns.

The solution to this is painful. “If buying or refinancing a home is in your three-year plan, don’t write off every business expense you can write off,” Patrick Ruffner, vice president of mortgage lending at Chicago’s Guaranteed Rate mortgage company tells US News.


Next, the lender will look at your debt-to-income ratios (DTI) to determine how much you can safely afford to borrow. The two ratios they look at are the “front-end,” which should not exceed 28 percent of your income and the “back-end,” which needs to be 36 percent or less of your income.

Although the required ratios are outdated on this page, it will tell you how to determine your DTI. It’s important to note that the DTI ratios aren’t set in stone and lenders often approve borrowers with back-end ratios of up to 43 percent, according to BankRate.com.

Lower your DTI by either paying down debt or raising your income. Easier said than done for the self-employed, right?

Make your application more attractive

If you think about the situation from the lender’s perspective, it’s a bit easier to understand why they are skeptical of the self-employed applicant. Businesses have slow periods; how will the applicant pay the mortgage payment without a steady paycheck from an employer?

It’s up to you to sweeten the pot and to make your application more palatable to a lender and there are several steps you can take to accomplish this:

  • Raise your credit score – pay your bills on time and don’t apply for new credit
  • Lower your DTI – pay down your debts and/or increase your income
  • Come in with a hefty down payment – lenders are more impressed when the borrower is willing to put some skin in the game
  • Downsize your home price range – this is especially important if you have a somewhat low net income showing on your tax returns. It’s much more likely you’ll qualify for a lower-priced home.

3 DIY Décor Tips Guaranteed to Delight Homebuyers

Entryway with gray walls console table with mirror and wood floors. Northwest USA

We don’t blame you for wanting to squeeze every last penny out of the sale of your home. And, aside from just a handful of factors over which you have no control (location, foreclosures or sexual predators nearby, etc), there are some inexpensive cosmetic changes you can make that will appeal to buyers, raising the home’s perceived value.

Even if your home isn’t located in a neighborhood that buyers clamor for, giving it maximum curb appeal will go a long way in getting them out of the car and up to the door.

Let’s take a look at some simple “fixes” you can perform that will ensure that those touring your home fall in love the minute they step through the front door.

1.Create a positive second impression

You know that curb appeal is your home’s first impression. The second? What the buyer sees when the real estate agent opens the door and they step through. If you don’t have an evident entry area, it’s time to create one.

What you use to create this area depends to a large extent on the size. Even the smallest homes, however, have space inside the front door to set a mood, from setting out a simple throw rug and small console table or interesting single chair to getting more elaborate with attractive lighting and accessories. A mirror, by the way, is the ideal accessory for a small foyer as it helps the area look larger.

If you have room, three items you must include in the area are a vase of flowers or healthy potted plant and a table lamp. Then, keep the area clutter-free while the home is on the market.

Next, stand in your foyer and take a look around for anything that appears dated. If it can be seen from the entryway, such as that 1970s light fixture in the hallway, it needs to be updated.

Need ideas? View the foyers at architectureartdesigns.com, RealSimple and Pinterest.

2.Bathrooms matter

Bathrooms and kitchens frequently make or break real estate deals. The former can be a particular turnoff if not updated, staged and kept impeccably tidy. Luckily, it costs far less to give bathrooms a bit of pizzazz than kitchens, so let’s get to it.

If you have a shower curtain, replace it. If you have glass shower doors, clean them. Now, those are the no-brainer basics. To glam it up a bit will require a bit more money and elbow grease.

  • Paint
  • Change out the linens to match or contrast with the shower curtain.
  • Purchase a new faucet for the sink
  • Sheet mirrors are boring, so if you have one, and don’t want to replace it, consider framing it.
  • Strip “Hollywood” style lighting screams “DATED!” so leave some money in the budget to replace it with something more contemporary. Consider placing sconces on to each side of the mirror where they don’t cast as harsh a light as they do when placed overhead.


One of the best sources of inspiration for bathroom updates and staging is Pinterest and you’ll find ideas for doing so on the cheap at This Old House.

3.Do pay attention to the small stuff

The warning from home stagers to “depersonalize” and “declutter” doesn’t mean leaving the home devoid of all personality. Accessories are an important aspect of reaching out to a homebuyer’s emotions and, if chosen carefully, may raise the perceived value of the home to those buyers.

A home’s accessories include everything from throw rugs and art work to the pulls and knobs on cabinets. The latter is a good place to start adding back in a bit of character to the home.

Then, choose a color that you’d like to make primary – perhaps a soft blue in a piece of artwork or a color from your upholstered furniture. Then, use that when choosing accessories. For instance, purchase soft blue pillows for the sofa or candles or a vase in that shade. Sprinkled subtly around the room, these accents bring balance to the area, according to Tracy Kay Griffin, former designer for HGTV’s “Get it Sold.”

“We use lots of coffee table books, add curated collectibles to bookshelves, toss market baskets onto chairs, hang original art and use only real plants to give buyers the impression that someone actually lives there,” she adds.

Don’t Neglect This Fall Home Maintenance Chore

It’s hard to consider that in just a short time we’ll be bundling up for another winter but it’s on its way and there’s one fall maintenance chore that should never be neglected: Winterizing outdoor irrigation systems and faucets. The time to do so is upon us, so if this is your first autumn in your new home, we’ll walk you through the process.

Start with the faucets

1.The hose and splitters can trap water and cause the faucet to freeze and break. This is why it’s important to disconnect the hose and the splitters early – in case we have an early freeze. Drain the water from the hoses and store them in a dry place so that they don’t become brittle. A large plastic garbage bag makes a handy and appropriate winter storage container.

  1. Next, check the faucets for leaks around the spout and the handle. If the leak is happening at the handle, try tightening the packing nut first. If that doesn’t work, you may need to replace the washer behind it. You’ll find a video walk-through of the process at TodaysHomeowner.com.
  2. Shut off the water to the faucets and then turn on the faucet. This will drain whatever water is left, again helping to avoid a broken pipe. If you can’t isolate the water line to the faucet, use additional insulation, which we’ll discuss in the next step.
  3. Even if you’ve drained the faucet, install a cover to further protect it from freezing. These are available at large hardware and home improvement stores.

Let’s move on to protecting the irrigation lines

PVC pipes have a tendency to crack and break when they freeze so it’s important to blow out your irrigation lines before the first freeze. It’s not hard to do but you’ll need some tools, a 100 psi air compressor and eye protection. Don’t neglect the latter – using compressed air can be dangerous.

Blow out the irrigation lines before the first freeze. Now, this isn’t a challenging project but it does require some equipment you may not have on hand, such as a 100 psi air compressor. Should you decide to tackle the job on your own, here’s a walk-through:

  1. Shut off the water to the irrigation system. If you can’t isolate the line, contact a plumber.
  2. Use a screwdriver to open the release valve, allowing air into the system. If you have flow sensors, remove them.
  3. Choose the release valve furthest from you and use the compressor to force air into it. It should only take a few minutes to blow all of the water out. Close the valve and continue on with each subsequent valve, closing each one when it’s finished.
  4. If your backflow system has ball valves, allow them to remain about half-open so that any leftover water to get out in a freeze.
  5. Open the release valves at the lower end of the lines to release any water that may still be trapped.

Keep safety in mind

The experts at Hunter Industries provide homeowners with the following warnings:

  • Wear appropriate eye protection. Hunter suggests that ANSI (American National Standards Institute)-approved eye protection is best.
  • Don’t allow the air pressure to exceed 80 psi for PVC pipes and 50 psi for polyethylene pipes.
  • Stand away from irrigation system parts while you’re pressurizing the system with air.
  • Don’t use the backflow or pump to blow out the system. First do the blow-out then drain the pump or backflow.
  • Don’t forget to close the manual drain valves when you’re finished.


If you don’t feel you can handle the job on your own, call a local lawn care company and let the professionals handle it.