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Buying a home at any stage of life poses financial considerations and challenges to overcome. Buyers at the start of their careers tend to lack financial capital, while those more advanced in their careers have retirement savings and other financial demands to consider, and retired buyers have a smaller monthly income than those with regular pay checks. Each phase of life requires its own approach to mortgage strategy and below you can find some home buying and financial planning tips to help you make the correct decisions when it comes to your mortgage.

There are three basic principles to consider when mortgage planning.

Closing Cash

Almost every mortgage requires a down payment that ranges between 3 to 20 percent of the properties price. However, closing costs are also required in any home purchase and usually range between 1 to 3 percent of the home price. These costs include escrow fees, taxes, etc.

Monthly Outgoings

As well as monthly mortgage payments, as a home owner you will have to pay for insurance, property taxes, utilities and maintenance and home repair costs.

Equity

The equity of your home is the percentage of the property’s value that is not financed. Increased property value of your home and paying down mortgage loans increases the equity of your property.

These three factors have differing affects on mortgage planning depending on the stage of the buyer’s life.

First Time Buyers

Buyers early in their careers have less savings and access to funds for a down payment. Putting a 20 percent down payment on a property results in smaller monthly costs, but this is often not an option for many first time buyers. A 3 percent down payment is much more feasible and can be a way to make the first step in home ownership.

A 3 percent down payment on a home that costs $250,000 is $7,500, whereas a 20 percent down payment is $50,000. The difference is in the costs of the monthly payments of the mortgage. A $7,500 down payment on a 3.5 percent 30 year fixed rate mortgage would result in monthly payments of around $1,600, inclusive of mortgage, taxes and insurance. A down payment of $50,000 would result in monthly costs of around $1,203.

A 3 percent down payment has monthly costs that are $397 more expensive but requires $42,500 less in upfront down payment. Remember that closing cost will also need to be considered on top of a down payment, on a $250,000 property they would range from $2,500 to $7,500.

 

Mid-Career Buyers

Monthly costs are often a key consideration for mid-career buyers as saving for retirement and college tuition for their children can add to monthly expenses.

Using the same example of a home that costs £250,000, a mid-career buyer is left with same decision of paying an extra $397 a month and save $42,500 in upfront costs or a $50,000 initial down payment and lower monthly costs.

By going for the lower down payment the buyer would have monthly costs of around $1,600, and after tax deductibles would have a monthly cost of around $1,312. Potential buyers can then compare the monthly cost of $1,312 with the cost of similar rental properties in the area.

By comparing the rent vs. buy scenarios you can evaluate whether buying a property offers the opportunity to conserve cash and increase assets. Financial and mortgage advisers can help you find the right balance between monthly costs and maintaining cash liquidity.

Retiree Buyers

Buyers that are retired or late in their careers have to factor in living on a lower monthly income. Home owners that have equity in their property but a small monthly income from savings or pensions have several options to utilize the value of their home.

A reverse mortgage enables home owners to release equity from their home in to a monthly cash income.

A home equity loan allows the owner to release cash from their property in a similar way to a traditional loan. The cash is released in one lump sum and requires monthly payments.

Selling the property and a buying or renting a cheaper home enables the release of cash.

A home buying or mortgage plan requires preparation and research. Like any other investment plan, home ownership planning is more profitable when started earlier. As a home owner pays off their loan, and as the property value rises, the buyer’s equity of their home increases.

The home buying experience that is usually portrayed in advertisements generally seems to concentrate on families and couples. But nowadays, only 40% of first time home-buyers are married, down from 52% in the late 1980s.

The process of purchasing a home for a sole-owner might be similar to that of anybody else, but there`re several slight differences in how a single home buyer may approach the home buying experience.

Below are 5 ways you can make your solo home hunt a success.

 

Find your real estate agent

Do not choose the first real- estate agent you get in an online search. You should try posting a query on social media so that you can get insights from your family and friends. You should look for positive real estate agent reviews that might comment on buying alone vs. as a couple.

Once you find several real estate agent options, you should meet with all of them. You will want to ask them a lot of questions — do not let them be the ones doing all the talking.

 

Read up on your resources

So you’ve met with several real estate-agents and found the right one for you. Wonderful! But having a great agent doesn’t mean you shouldn’t read everything on your own as well.

Do not depend on your real estate agent alone to explain all the details of the home buying process. The agent probably will, and should, but it is your job to be the informed buyer. Check out online resources or go to the library so that you can learn about the various home buying programs or find out more on your rights as a buyer.

When you are deciding how much you’re willing to spend on a home, you should also take into consideration all the recurring expenses that come with owning a house. You should think beyond closing costs and mortgage payments – include expenses like home repairs and maintenance.

And if you are feeling nervous about the likelihood of you being turned-down for a loan due to the fact that you are purchasing on your own without any help, try not to be. Although, do remember that qualifying for a loan on one income might mean buying a smaller house, it doesn’t mean you cannot buy. In-fact, banks aren’t allowed to treat potential home buyers differently based on their marital status.

Singles purchasing a house on one income can consider getting an FHA loan, since borrowers that have a good credit can qualify for a small down-payment.

 

Select the right kind of home for you

Are you searching for a home you can grow into? Or do you want to buy a small starter house that you can later rent out? Whatever your present and future home requirements, know that you have many options regarding the kind of house you buy.

Purchasing a townhouse or condo might leave you with a lower-mortgage, but you should not forget about the possible storage fees and homeowners association dues. And although a smaller house means that there’s less for you to maintain, your home still needs regular maintenance.

 

House hunt with confidence

Pursuing home ownership on your own does not mean you’ll have to decide everything by yourself. Bring 1 or 2 of your friends who’ve recently bought a house and who you know can give honest feedback.

If you are planning on moving to the suburbs so that you can get more home for your buck, also consider if you would be happy living a reasonable distance away from your favorite spots. Try commuting to-and-from your potential house, favorite restaurants and shops, and even work and your friends’ homes. If you find out that it is a tad-too far for comfort, you should narrow down your home search.

 

Make an informed offer

If you are purchasing as a singleton, you might not have somebody with you to help you determine how to negotiate or what to offer. This is where searching for and getting the best agent for YOU will serve you well. Consider talking to your real estate agent about how the offer might stack-up against the recent sales in the area and the possible concessions you might get from sellers.

Whether you have just began to consider purchasing your first house or you are newly single and it’s the first time you are purchasing on your own, these 5 steps will make sure you are a savvy and smart solo buyer.

In an ideal world, nothing external will influence your home’s value. As long as the market is on your side and you ensure that the place is in spick-and-span condition, you should not have any problem selling above or at the listing price- right?

Just do not forget about your neighbors….

One bad apple can make selling your house a struggle. In reality, there will always be the late-night partiers, the hoarders, the non-stop dog barkers and the just plain lousy, rude neighbors who can easily throw off a sale. According to the Appraisal Institute, they may even cause the value of your home to decrease by as much as 10 percent. If you have a neighbor living next door that fits one of the above descriptions, it could easily put a wrench in the house selling process.

Most neighborly disputes do not have a legal solution. Your best option: a smile, a diplomatic conversation and crossed fingers. At times the remedy, sadly, is decreasing your asking price and getting the heck out of Dodge.

And once in a while, the law does have your back.

Here are 3 common kinds of horrible neighbors-and advice on how you should handle them when your home is for sale.

 

The neighbor who wants your home

If your neighbors want to expand their property, they may have an eye on your home and no fears about shooing-off the competitors. For example, a vindictive neighbor who is desperate to purchase your home, may conveniently make himself/herself available to answer questions every time somebody pulls in to see the house.

How to deal? You can sell your house to the neighbors, but if they are expecting a neighborly discount (or they’ve turned you off with their bad behavior), you should sit them down for an open conversation: They are not getting the home. If they continue to scare potential home buyers, you should consult an attorney. You might have a case to sue them for libel- but you should expect the road to success to be full of twists, turns and unexpected detours.

 

The neighbor with a bad attitude

Maybe your neighbor is just a miserable guy, keen to make you, your family and the entire block equally miserable.

These less than savory attributes can make your house a nightmare to sell. Eventually, you might be forced to sell the house to an out of state buyer who will not know why you’re selling and isn’t bothered to speak to anybody about the neighborhood.

However, hoping that your buyer does not do due diligence might not be an option. You should work with the other residents of the neighborhood to solve the problems – they may be willing to band together and approach your miserable neighbor.

Whatever you do, ensure that you consult your attorney and agent about what you should disclose, particularly if you are dealing with potentially criminal elements. This depends on your state, and your realtor can give you more details.

 

The neighbor who trashes the neighborhood

Not everybody keeps their home perfectly clean, and you would be surprised if you expect as much- even from the good neighbors. But when disheveled becomes unmitigated disaster, selling your house can be quite a nightmare.

For example, you might share a driveway with a neighbor who does not make any effort to make the path look acceptable, has dead, rusting vehicles in their front yard, or a no trespassing sign that states that their house is protected by Smith & Wesson.

However, there is nothing legally-objectionable here. You may have a case with the vehicles or the other junk on the neighbor’s property—take photographs, document the state, and get in touch with the local or municipal authorities. Nonetheless everything else is just bad manners.

Unfortunately, many neighbor disagreements are quite difficult to solve in the legal system. Nearly all lawsuits involve the payment of money damages for tangible harm. Many neighbor disputes aren’t about cash, but trying to correct the behavior.

If you are dealing with a real problem house – such as a home filled with fraternity brothers who like to party 24 /7, or worse, your first step should be talking with the homeowners association and the neighbors, if possible. The association may offer to clean up debris, mow the lawn, or take other essential action under their bylaws.

From when the Federal Reserve increased rates for the first time in nearly a decade, in Dec. 2015 to mid-Feb. 2016 mortgage rates decreased to the lowest level in 3 years. We carefully examined why the mortgage rates would decrease after a Federal increase, and since the downward mortgage-rate trend is continuing, here’s a refinance-reference guide.

 

2016 rate outlook and recap

Rates decrease when economic insecurity causes investors to purchase safer bonds and sell riskier stocks. When the bond prices increase on this particular buy, the bond rates (or yields) decrease.

This is what has been occuring in 2016 as non-United States economic weakness has led to international investors to purchase the safety of United States mortgage and Treasury bonds.

In Dec. 2015, 30 year fixed-rates were approximately 4 percent on conforming loans, 4.125 percent on high balance conforming-loans, and 3.875 percent on jumbo loans. Since then the bonds have rallied, and as result rates on the above loan tiers have decreased by as much as 0.5 percent and that translates to lower monthly-payments as follows: $ 85 lower on a $ 300,000 mortgage, $ 170 lower on a $ 600,000 mortgage, and $ 253 lower on a $ 900,000 mortgage.

The savings alone is strong-rationale for getting a refinance, and the rates could decrease even further within the next several months if non-US weakness continues. However, even in the downward rate trend, the rates increase and decrease along the way.

 

Factors causing a 2016 refi boom

Refinances are not only about rates. They are also about property, income and asset eligibility.

During previous post crisis rate dips, most refinances were derailed due to the fact that people owed more money than their houses were worth, the income was disrupted or down and the lender guidelines were unusually tight.

Now the United States economy is quite supportive of the refinances, with increasing or stable house prices, low-unemployment of 4.9 %, income trending-up, low inflation assisted by a sharp decrease in oil-prices and the lender guidelines are more flexible than in any other post crisis rate dip. The current refinance rates are less than half the historical average of 8.35%.

Reasons to refinance

The most apparent reason why you should refinance is for you to get a lower monthly payment and rate, but there`re several other refinance objectives you should consider:

• Shorten your loan pay-off period. For instance, you could easily go from a thirty-year loan to a fifteen year loan that has higher payments and lower rates because you pay the loan off within half the set time -but when rates decrease, payments on 15-yr loans become more achievable.
• Access cash – A “cash-out” refinance enables you to access the equity of your home for your other financial objectives, like funding home improvements or retirement investing.
• Consolidate debt – If you qualify, you’ll be able to roll non housing debt such as car loans, student loans and credit cards, into a house refinance. By doing this you will be able to improve the credit score, and convert that non tax deductible debt into a tax deductible debt.
• Eliminate a second mortgage or mortgage insurance – If you purchased your house with less than 20% down using a second mortgage or mortgage insurance, and the value of your home has risen to the point you now have 20%-equity, a refinance can get rid off of a second mortgage or mortgage insurance.

 

Credit score impacts of rate shopping

Credit-scoring-models know that people shop around for mortgages, as a result having more than 1 mortgage related credit run will not reduce your credit score. As long as you are able to finish shopping in fourteen days.

 

Select a lender early

A rate-quote is based on the refinance closing in a given number of days- normally 30 to 60 days – and longer-rate-locks have higher interest rates. Hence you should select the lender you would like to work with early enough, and also get them the needed documentation so that they’re able to perform on the shortest (and as a result cheapest) possible-rate lock timeline.

 

Required documentation

Even if you are able to refinance with the lender you have worked with previously, federal laws need them to bring up to date your asset, employment, income, and debt-documentation for a new loan.

 

Your house must qualify

Apart from you qualifying for loan, your house must also qualify. An appraisal report should ascertain that your house is worth enough so that the refinance works, and the lenders may require certain repairs before the loan closing — such as, water related safety or damage issues like loose railings.

If you are the owner of a condo, it will be dependent on certain requirements. You should ask the lender to inform you about the condo requirements well in advance of locking the refinance.

 

Handling your 2nd mortgage

If you have a 2nd mortgage you are planning to leave in place, the 2nd mortgage holder should agree to the refinance terms prior to the closure of the refinance. This is needed even if you’ve a HELOC (Home-Equity-Line-of-Credit) with a zero-balance. This may end up adding time to the mortgage , and, longer-rate locks have higher interest rates.

 

Cost or no cost refinance?

Refinance viability is about how it takes the monthly savings from the refinance to repay the refinance closing costs ($ 2,000 to $ 4,000, depending on the market). However, if you paid so that you can refinance, and then rates decreased more, you would risk losing money.

So when the rates are decreasing, you can decide to do the no -cost refinance. The rates will be a little higher on the no cost refinance, but then you aren’t wasting the closing costs if you decided to refinance again soon after due to the fact that the rates decreased.

Your lender can assist you in determining the best path you should take based on your rate market expectations and profile.

 

When you should lock your rate

Prior to locking a refinance, you should find a suitable lender to pre-approve you using your home value estimate and full documentation so that you can be certain you are being locked on the timeline and program the lender can work with. If your refinance or pre-approval is ready, it is easier to lock-rates low at a moment’s notice- as rates increase and decrease on the trading days.

 

What you should do if rates decrease after you have locked your rate

Rates change every day, and if rates decrease after you have committed to your rate-lock, the lenders have re-negotiation policies which allow you to capture a section of the drop.

For instance, if rates deceased by 0.25% after your rate-lock commitment, the normal lender renegotiation policies will allow you to decrease your locked-rate by 0.125%.

Spring is almost here, and soon it will be home selling season. You will only get one chance to make a good first impression in real estate and if you want to stand out from the competition, maximize your sale price and sell quickly, your house needs to go on the market in tip top condition.

As soon as the listing of your home goes live, the days on the market start ticking. In the current Internet age, with easy access to a lot of up to date information, home buyers will definitely punish any seller whose house has been on sale for many months. If you cannot make the effort to ensure that your home is in its best condition, you should hold-off on listing it.

Prepping the house rarely occurs within one weekend. It takes thoughtful planning and time. If you are planning to sell your house this spring, below are a few steps you should take now.

 

1. Inspect

It might seem counter intuitive to spend your cash on a property inspection, but you should know about the condition of your home. If there`re issues – big or small – you should address, it’s better to know about them early enough so that you can either account for them with a lower-listing price or remedy them before going to market.

The last thing you want is for the home buyer to discover flaws once they`re under contract. For example, the inspection enable’s you to know about your home’s nearly-dead furnace or bad roof now instead of being surprised later. You’ll get stuck paying more under these conditions than it would cost you to resolve the issues now.

 

2. Stash

As you are preparing to sell your home, you should think of it as an investment and begin to look at it through the eyes of the market and the potential buyers. When you are trying to sell your house, the less is more approach applies.

Put away personal items and big furniture. Put away or store all the things you will not be using until you move into your new house. In the kitchen, you should make space in the cabinets for the items you’ll want to use every day, but will want to put them away for the showings.

 

3. Improve

It is quite common for home sellers to make cosmetic-improvements before they list their homes. Bathrooms and kitchens sell your house. You should plan to have the grout in your bathroom cleaned and have some of the walls of the home painted so that you can give it a fresh look. By doing this, you also enable the potential buyers to more easily imagine how they can adapt the rooms to their requirements.

You should also take color down a notch. You may like your lime green bedroom, but it might sour the buyers. Paint the walls a neutral color which will appeal to a wide range of home buyers.

Consider painting kitchen cabinets, cleaning rugs or refinishing hardwood floors. If you are planning to list your house in the spring, you probably already have a good local estate agent helping you by now. Get their advice and ask for referrals to do the work. There are lots of inexpensive contractors who can help spruce up your home quickly.

 

4. Research

Today’s home buyers have research in their DNA and most of them will investigate all they can. You should check with your local building department and make sure that there are no unresolved issues with your house.

Verify that the property records reflect your house accurately, and prepare to remedy any inconsistency. Ensure that your title-report is clean, and talk about the potential disclosure items with your real estate agent. Banks will not lend if there`re unresolved issues, and you do not want to have to jump through hoops at the last minute. By conducting your researching now, you will be able to be a step ahead of the home buyers.

The sale of your house is probably one of your largest financial transactions. You should get a real-estate agent on your side early, and also make a list of the tasks you have to complete before listing your home this spring. Now is the right time to have these discussions. A good strategy and some smart planning will ensure a profitable, quick and painless home sale.

Buying a home is an emotional experience – it can be exhilarating, thrilling and even stressful. When the time comes to sign the paperwork, don’t be surprised if you feel butterflies in your stomach, or even nauseous. You are likely making the biggest financial decision of your lifetime; hence it is perfectly normal to feel anxious about buying a home.

Nevertheless, do not let uncertainty about the mortgage process keep you on the sidelines. The tips that have been clearly explained below will help you feel more prepared for home ownership.

According to a recent survey, most consumers have the wrong ideas about what it takes for someone to qualify for a mortgage. Most consumers believe that the requirements are more strict than they actually are, When they were asked about the crucial mortgage qualification criteria (like debt to income ratio, down payment percentage and credit score), approximately 50 percent of the consumers provided an invalid answer or selected “do not know”.

This means that there are many eligible home buyers sitting on the sidelines because of misconceptions about the mortgage process or anxiety about being turned down for a loan. To be certain you are ready to purchase a house, and ease any anxiety you might have about the whole process. Below are five suggestions that will help you to ease your home buying anxiety.

 

1. Learn all you can about mortgages

In the recent years mortgages have changed a lot as investors and lenders make changes reflective of the American households. For instance, several adults in the household might be working and making their contributions to the household budget.

Some of the mortgages allow lenders to consider the income that is generated from the other household members when qualifying a borrower. In addition to that, some home buyers might qualify for zero down options, including VA loans (guaranteed by the United States Department of Veterans Affairs) for service members, veterans and the surviving spouses, and the United States Department of Agriculture loans for low to middle income borrowers in qualifying rural areas.

According to the Census Bureau’s American Housing Survey, use of both types of loans is on the increase, particularly among first time buyers.

 

2. Talk to an expert

Don’t know your credit score or how you can save? No problem. The United States Department of Housing and Urban Development (HUD) sponsors various counseling agencies all around the country that offer free or low cost pre purchase counseling that will help you to understand the terminology you will hear from the lenders and be able to assess your financial situation.

The work of home credit counselors is to demystify this important transaction by educating the individuals who go to them, so that when they decide to purchase a home, they know what issues they should look out for and what questions they should ask.

 

3. Explore down payment assistance

According to NeighborWorks America, a national-nonprofit community development organization that is based in Washington DC, 70% of adults in United States are not aware about the down payment programs that are available for middle income home buyers in their community,.

The percentage might even be higher since, in most areas in the United States there`re dozens of homeowner education options and down payment assistance programs.

 

4. Compare mortgage quotes

According to research conducted by Economic & Strategic Research (ESR), only one third of home buyers shop around for a mortgage. That is usually at a later stage of the process, meaning that they might be missing out on saving money.

As infrequent and large as the mortgage transaction is in the financial lives of most people, borrowers might end up not getting the best deal by opting to not shopping around. Getting a great deal can enable borrowers to sustain their mortgage even in the case of unexpected decreases in income or increases in expenses.

 

5. Consider long term costs

As any home buyer knows, there are costs you can anticipate, for example; your home owners association fees or monthly mortgage.

There could also be unexpected costs down the road, such as paying for a new roof for your home. Home owners should set aside 3 % to 5 % of the value of their home each year to use for improvements and repairs. You will want to tuck the money away so that you do not become stressed when something goes wrong because things can, and will, go wrong.

Managing money can be challenging enough on your own. You should take into consideration the following points before merging finances with your significant other.

Whether you have recently moved in with your significant other or you are a newlywed, you there’s a lot to decide about the best way you should handle your household finances. Figuring out how you will divide grocery shopping, laundry duties and other everyday responsibilities is a no-brainer compared to the momentous question of your finances.

Most people find that dealing with the financial issues that arise as a result of living with their partner can be quite bewildering. Your incomes becomes one and the debts pile together to form what could possibly be a colossal undertaking. In reality, discussing the finances can be one of the most difficult aspects of marriage.

If you are thinking about merging your finances, below you’ll find some of the pros and cons you’ll need to consider.

 

Pros

Teamwork

If you are on the same page, with your short and long term financial goals synced-up, and financial priorities fully-aligned, there is nothing more fulfilling than knowing that you are in this together through a complete financial union.

By merging all your liabilities and assets, you are both looking beyond your personal needs and wants, and ultimately making the commitment to prosper or fail – together, as a unit.

 

Simplicity

When you are living together or married, you and your significant other share many expenses together, like mortgage, household items, food, utilities, etc. (especially if you have established a budget). It makes a lot of sense to keep the cash that pays those bills in one account that you both fund. Additionally, merging your loan accounts, like credit cards, can help you secure other loans in the future.

And if you are both making timely, consistent payments, both of your credit scores will improve. If you had kept the credit account separate, only one of you would have the benefit of a higher score that could hurt you later when you apply for additional credit.

 

Taxes

Without a doubt, filing separate returns might be advantageous in some circumstances. (For instance, if one spouse has high medical bills and is able to meet the deduction threshold by considering only his/her income.)

However, for some couples, merging finances and joint filing will help save time, and can result in substantial savings. This is particularly true in cases where one spouse earns a higher income than the other. Since the joint tax filing brackets are double the married-filing-separately brackets, more of the income of the higher earning spouse will be taxed at a lower-rate. Normally, filing a joint-tax return is advantageous for couples that do not have excessive personal casualty losses, medical expenses or other itemized deductions. Talk to your accountant for more information about how you can minimize the tax bite.

 

Cons

Attitudes

Some couples might not agree on certain issues, such as creating a saving/spending plan, setting their retirement goals, or even the amount debt they should carry. After all, opposites really do attract, and in most relationships, there’s, in fact, a saver and a spender.

If your financial philosophies do not align, and you are merging your financial life with somebody who has very different habits, systems, expectations, goals and ideals, this can bring challenges and unwanted relationship conflict.

 

Dependence

If you have been managing your cash on your own for many years and have been to some extent successful in doing so (from selecting your 401K funds to planning a vacation to setting a budget) you might not want to give up your financial autonomy.

Certainly, there might be more book-keeping for you to do if you decide to keep your finances separate, and choose more of a mine/yours/ours account type arrangement (this is commonly referred to as the “three-pot system”), but it might ultimately give you the comfort and independence you desire.

 

Disentangling

Nobody plans to have an unsuccessful marriage, but life is full of surprises. You may be in la-la land now, but what will happen if the relationship fails in the long run? Bank accounts, joint mortgages and credit cards, can be quite hard to separate, even with a formal court ordered divorce decree.

Technology is making the process of getting a home loan more efficient than ever before, but can it remove the paper trail completely?

Advances in technology have essentially re-invented TV, music, mobile phones and most other industries in the past 10 years. Currently advances in technology are finally starting to modernize the mortgage process.

As the tech savvy millennial generation prepares to purchase their first homes, some experts say  they will gravitate toward digital tools. Furthermore, recent home buyers tend to have higher income and a more-educated background than in the past, this means that they are more likely to shop on the internet (and probably apply) for mortgages online.

Is it truly possible however, to have a 100% digital mortgage?

 

Elucidating the digital mortgage process

The 2 biggest misunderstandings of digital mortgages are, you can easily get a mortgage with just the click of a button, and that you will not have to give as much documentation.

When you stream a movie or song or make a video call, you are really pushing a button-or-two. However, a mortgage is still an important financial transaction that requires a comprehensive analysis of your whole financial life, as a result you will have to put-in some effort – even when the process is sped up.

One of the factors that played an important role in setting-off the 2008 financial crisis is reduced documentation on mortgages, this is due to the fact that lenders needed less and less employment, income and asset verification for approval.

Then the opposite occurred for many years after the financial crisis: lenders would give seemingly never ending checklists of the needed documentation to authorize and close the mortgage.

Nowadays, you still have to provide the same amount of documentation, but technology makes the whole process a lot easier.

For instance, today you can answer questions about employment history, credit and residency in an online form. Just 2 years ago you would have had to write, sign and then send the letters to answer in an acceptable manner.

And currently you can give permission to your lender so that he/she can obtain tax returns, pay stubs and bank statements from the sources instead of assembling and then sending all the documentation yourself.

 

What you can do digitally versus what you cannot

The federal laws that were created after the financial crisis require the lenders to ascertain (with all your documentation) that they have verified that you are able to repay the mortgage before you take it out.

To do this, the lenders have to follow 8 loan approval factors that are federally required. Consequently if a digital process does not satisfy all the parameters for any reason whatsoever, you can be certain that your lender will send you follow up checklists requesting you to provide more documentation.

If you originally applied online, documentation and follow up checklists mighty be requested and given online, or through email. The process used by every lender is different, and your lender will give you specific instructions.

 

The process is different depending on loan type and size.

For instance, if you are applying for a conforming mortgage up to $ 417,000; you have been a straight-salary employee (that’s, receiving no commission or bonus) at a big company for over 2 years; you use an online service to file your taxes; and you have online accounts with various financial institutions, then the digital-mortgage process will most likely be quite easy. You apply online; permit your lender to get your tax returns directly, pay stubs and bank statements on your behalf; and then run a credit report. Your documentation will then be analyzed, and an automated-loan approval will be run. If have a setup such as this, you can be approved within 10 – 30 minutes.

On the contrary, if you are applying for a mortgage that is more than $ 417,000; you are self-employed with several income sources; you’ve had a tax adviser prepare your taxes manually; and you do not have internet accounts with all the financial institutions necessary, then the digital process will need more human intervention by your lender and yourself. You will apply online and give the same authorizations as explained above, but you will have to assemble and submit most of the documentation yourself, and you will likely see follow up checklists as the lender reviews the file manually and approves your file – because loans that are more than $ 417,000 are normally not qualified for automated approval. The whole process can take several hours or even days.

 

How many lenders offer digital mortgages?

Currently, the digital revolution is still making its way through the mortgage industry. You may get outstanding advice and service and amazing technology, but not all lenders have adopted both so far.

As more lenders embrace the digital processes that have been described above, the decision you’ll make as a mortgage shopper will depend on whether you would like to run the entire process yourself, on the internet, or if you would like an adviser to assist you in-person along the way.

Because purchasing a home is a large – and normally intimidating – financial decision, great advice is likely to still remain at the fore-front of the mortgage industry. Consequently, if you want the efficiency that’s offered by the digital process plus great advice, it is best to begin by finding a good local lender and then interview them about the digital mortgage options that they offer.

You want a cottage by the sea, a chalet by a ski run or a lodge in the woods. But vacation homes are quite expensive, and most of us don’t have the time to care for a second home in addition to our primary residence? So, here is an idea: Split the financial obligations with a family member or friend!

Buddying up sounds great on paper, but purchasing a vacation home with family and friends can be risky. After all, if things do not go well, it can spell the end of your friendship. Not to mention you may end up in a legal battle over the home. After all, you might already be commonly renting a vacation place with said friends or family. Or you could take turns using the house, so you don’t actually overlap.

Still, this approach can also turn into an express lane to disaster if you don’t navigate the relationship with care.

Do not panic! Before you sign on the dotted line, here are some important questions to protect your finances and also leave your ties of friendship or family intact.

 

TIC or LLC?

Ownership of property by 2 or more parties who are not married- friends, relatives (it makes no difference) can be setup as a limited liability corporation (LLC) or as a tenancy in common (TIC). And while setting up an LLC will entail hundred dollars in additional fees and a tad more paperwork. A limited liability corporation can make it easier to give away or sell an interest in the vacation home and you are treated like an individual for tax purposes, but with the extra protection of a corporate liability shield. An operating agreement will be drafted to establish the obligations and rights of the members in the LLC.

Why this is important: Under a tenancy in common, somebody who’s injured while in your shared vacation home can sue you and the other co-owners for all you are worth. Additionally, due to the fact that you own a house with somebody else, you’ve less control over who can be allowed to enter the house. So if your nephew wants to celebrate his high school graduation with a blowout party on your vacation home, and somebody steps on a broken glass, it can come back to bite you. This is much less of a risk if you choose an LLC.

 

Who is responsible for what?

Another reason why you should set up a limited liability corporation instead of a tenancy in common: Limited liability corporations are normally required by law to have an operating agreement. You should have an attorney draft an agreement which clearly explains everybody’s ownership interest.

That ratio, be it 80:20 or 50:50, will determine how costs like real estate taxes and insurance are divided. The agreement should also clearly explain who the manager of the vacation home is, capital improvements and how the maintenance of the home is going to be paid for and performed. The agreement gives the owners a guideline so that everyone knows- before they own the place -what the parameters are.

You can think of it as real-estate prenuptial agreement, it’s there to ensure that things run smoothly and head off resentment at the pass. Otherwise any under discussed issues- like who is supposed to close up for the season or even clean out the gutters – can quickly and easily turn emotional.

 

Who gets which holidays and weekends?

People purchasing a house together should ask themselves if the other owners plan on being at the house at the same time, or alternate in using it, since vacation homes normally have a prime-time of just a few months.

Normally, everyone wants to go to the vacation home at the same time of the year, during school breaks for example. If the owners do not talk about this in advance it can lead to everybody showing up at the home on the same day- which isn’t exactly the tranquil vacation home you have always dreamed about.

If you decide to split, you should work out an annual schedule in advance and also consider rotating who gets the major holiday weekends. You should also agree that swaps and changes can be made but only with the permission of all the parties involved.

 

To rent or not to rent?

From time to time your vacation home is going to be unoccupied no matter how many co-owners you have. If you are a neat freak and do not like strangers sleeping in your bed, you’ll not want to rent your vacation home. However, your brother might want to make some cash by renting out your shared vacation home.

You should hammer out whether you are going to rent out the vacation home so that you can generate income when you are not there. If all the parties agree to rent the vacation home just ensure where you are purchasing will allow that. Some communities do not allow short term rentals.

 

What happens if somebody wants out?

You should have at least one discussion about how long everybody wants to be on-board and what happens if one of the co-owners wants to sell. Giving the other owners right of first refusal if you want to sell your share is a way to reduce conflict. You should think about if you can afford to buy out a co-owner or if you’ll be able to cover the extra maintenance costs and mortgage in the event somebody wants out.

 

In tough real estate markets, buyers might take a gamble on a home that’s not listed. Here is how you should handle an out of the blue offer. It is the unexpected envelope in the mail or knock on the door. A complete stranger says he/she wants to buy your home, and for a wonderful price.

It’s even quite common for an old friend of an acquaintance to approach you about their desire to buy your home. Getting an unsolicited offer for your house can feel a little odd.

What are you supposed to do when you get an enticing offer from a home buyer when your house is not even on the market? It occurs more often than you would think, and it is helpful to carefully consider all your options, whether you have thought about selling your home or not.

 

Why does this happen?

While you go about your day to-day business and enjoy the comfort of your home, able and ready buyers are eager to be home owners. In most areas of the country, the inventory for houses is still at record lows.

Quite frankly, there simply are not sufficient options for home buyers, so they are forced to think outside the box. Some of the zealous home buyers decide to take matters into their own hands, and mail letters to houses in the neighborhoods they desire and hope for a winner.

 

What should you do?

If you do not have any desire to sell your home, do nothing. However, some homeowners will want to hear what the home buyers want to say, and others may seriously take into consideration an off-market offer.

Your first step is just to listen. You will want to first vet the prospective homebuyer over the phone so that you can ensure that they are serious. Often, real estate agents will search for expired listings and reach out to the owners in an effort to drum-up some business for themselves. It is a way they accumulate real estate properties to sell.

You should ask the prospective home buyer how long they have been searching, if they have already made other offers, and what are the areas they desire.

You should then ask the homebuyer why they decided to select your house. A homebuyer who mails an offer directly to you and only you most likely really wants your house, as opposed to the home buyers who send postcards to fifty people.

Hear them out and try to better understand their experience in the market, possible price or terms and motivations.

You will most likely have to show them the house. If they seem serious, you can take that step. You should however be cautious when letting a total stranger into your home.

 

Enlisting a real-estate agent

If you used the assistance of an exceptional local real estate agent when you bought your house, you may want to engage them again at some point.

Although sellers and buyers dream of completing a deal and saving cash on real-estate commissions, it is normally a better strategy to first consult with an experienced and honest agent. A good real estate-agent looks out for the long-term relationship, and being the adviser to an off market sale is also in their best interest.

Most real estate agents will help in an off-market deal for a reduced commission, because they do not have to prepare and show the house for several weeks or months.

 

Off-market deals might not pan out

These deals do not at all times come to fruition for a wide variety of reasons- frequently, it is because the seller isn’t motivated enough to let the house go.

And in almost all off-market deals, there is a struggle over the last few 1000 dollars – and that conflict frequently keeps the house sale from happening.

The home buyer wants to be given a discount, due to the fact that they know the seller is not paying a real-estate commission. The seller wants the market-value because the house is worth what it’s worth. Both the buyer and seller want to benefit from the real-estate commission savings.

In many cases, if the home buyer wants to purchase, they have to pay the price quoted by the home owner. The homeowner has what he/she wants, and buying off the market is, in some ways, a good opportunity that they have to pay for.