Shannon – Page 67 – Easy Agent Blogs

Is it time for a closet makeover?

If you’re digging through sweatshirts and turtlenecks to reach your tank tops and shorts, it’s time for a closet makeover.

It’s like eating an elephant

The job is much easier, especially for those of us who tend to procrastinate, by taking one bite at a time. Schedule an hour every week to put a dent in the mess that you call a closet and, before you know it, the job will be done and getting ready to go somewhere may end up taking half as long.

You’ll need a clean slate

The first step to a truly made-over closet is to clean it out, completely. Pile the clothes on the bed and find a spot on the dresser or floor for the shoes, scarves, ties and other accessories. You are now presented with a clean slate, akin to Aristotle’s tablet “ . . .on which nothing has been written.”

Assess the space

How’s the paint looking? If you find yourself squinting to ensure that those slacks are really black and not navy blue, not only should you consider new lighting, but a fresh coat of light-colored paint as well.

Make that paint glossy and you’ll feel like you hit the exacta; the highly-reflective sheen offers better visibility in the confines of a closet. Consumer Reports offers a list of its top-rated paints on its website.

Next, decide what goes where and make a list of needed items, such as additional shelving, boxes, bins, hanging shoe racks or furniture (if space permits) and lighting.

Speaking of lighting, you don’t need to be an electrician to change out the lights in your closet. LED options include battery-powered lights in a variety of shapes and styles and are a snap to install. Some even include motion sensors. Get lighting ideas online at decoist.com, bobvilla.com (check out the brilliant LED-lit closet rod!) and Pinterest.

Sort and purge

Remember all the stuff you removed from the closet? Now it’s time to sort. You’ll need to make several piles – items you’ll put back in the closet, items to put somewhere else and items to throw away or donate.

The second category includes all those weird things that end up in the closet, such as borrowed clothing (time to return it), shoeboxes stuffed with receipts, bills and other paperwork, electronics (fax machine or printer, for instance) and sports equipment, such as your tennis racket.

The third pile should include anything that doesn’t fit. Yes, that weight-loss diet is a worthy goal, but if you’ve tried it before and are still hanging on to the size 6 jeans in hopes they will someday fit, consider moving the jeans to the “donate” pile.

Those items with missing buttons, broken zippers and holes in the seams? How long have you hung on to them, promising to have them repaired? You’ve managed to live this long without them, so consider tossing them in the trash or donate pile.

Fill it back up

Now you’ll get to use all the nifty organizing equipment you purchased. Designate a place for everything and return those items to their place in the closet.

This means that shoes go on the shelves, rack or hanging bag you purchased, scarves go in the bins or baskets and nothing – absolutely nothing – ends up on the floor. This is especially important if you’re organizing the closet in preparation for a home sale.

Organizing experts offer several ideas on where to place your clothing within the closet. Some say to put those items you wear most often front and center. Others recommend hanging like-items together, for instance, group all of your shirts in one spot, pants in another. Others suggest grouping your clothes by color.

Need ideas? Visit hgtv.com, instyle.com and pinterest.com.

What’s lurking in your home’s plumbing system?

While the surgeon general hasn’t taken up labeling water heaters as possibly harmful to your health, they may be. In fact, any of the many components that make up a home’s plumbing system are rife with the possibility of breeding Legionella pneumophila, the rod-shaped bacteria responsible for Legionnaires’ disease, according to a report at usnews.com.

The bacteria

Legionella is found naturally in freshwater environments, according to the Centers for Disease Control and Prevention (CDC). It most often causes disease, however, when it grows in “human-made water systems,” such as hot tubs, swimming pools, ice-making machines, landscape water features, water heaters, showers and faucets.

Stagnant warm water (at a temperature between 68 and 120 degrees Fahrenheit), that contains sufficient biodegradable compounds, is the condition that most favors growth of the bacteria, according to a study by the American Society for Microbiology.

Furthermore, temperatures of 90 to 105 degrees are the ideal range for the bacteria’s growth. Rust, scale, “and the presence of other microorganisms can also promote the growth of LDB,” warns the experts at the U.S. Occupational and Safety Health Administration (OSHA).

“It will grow anywhere in the piping system where conditions are favorable for growth,” Ron L. George, president of Plumb-Tech Design & Consulting Services in Michigan tells, U.S. News’ Devon Thorsby.

The disease

Legionnaires’ disease, a lung disease and specific form of pneumonia, is tricky to diagnose because it presents with flu-like symptoms. It is particularly deadly to smokers, those with compromised immune systems and those in poor health. Although the large outbreaks get all the media attention, OSHA estimates that between 10,000 and 50,000 Americans are hospitalized each year for the disease.

Those who come down with Legionnaire’s disease were exposed to the bacteria by inhaling airborne water droplets that contain the bacteria (such as in the shower) or drinking water contaminated with it.

How the bacteria reaches your home

The water crisis in Flint, Michigan was a wakeup call to the entire country: don’t assume that your tap water is safe.

Thorsby warns that “Federal water conservation bills passed beginning in the 1990s have slowed the speed of water [to our homes], making travel time from a treatment plant to the end of the line longer. It went from as quickly as two days to as long as two weeks, in some cases . . .”

Why is this slowdown a problem? Municipal water systems purify water with chlorine, which decays quickly, diminishing by the time it reaches your home. If the chlorine content is negligible at this point, water in the lines “ . . . could become more vulnerable to picking up contaminants from pipe corrosion, interruptions like water main breaks and other incidents that could introduce toxins into the water,” Thorsby cautions.

How to protect yourself

The best way to ensure that Legionella is destroyed is by controlling the temperature of your water heater, according to OSHA. Set and maintain the temperature at 140 degrees.

Of course, this temperature introduces the danger of scalding, which can be minimized with the use of thermostatic mixing valves, according to the experts at Plumbing and Mechanical magazine. “Replacing standard faucet and shower fixtures with thermostatic mixing valves may allow a homeowner to maintain hot water at 140-degree F from the water heater to the mixing valve, but deliver water at a lower temperature to reduce the risk of scalding.”

Next, you’ll need to eliminate the bacteria’s food sources, such as scale and sediment. Something as simple as replacing your electric water heater with a gas model takes care of this requirement, according to the magazine. Not only do electric water heaters tend to have lower temperatures than their gas counterparts, but their heating elements are typically located on the side of the unit. Gas heaters, on the other hand, heat the water from below the tank, where sediment builds up, thereby destroying the bacteria’s major food source.

If that doesn’t convince you to ditch the electric water heater, consider a Canadian study of 211 homes, 178 of which had electric water heaters. The study found that 69 of these homes, or 33 percent, harbored Legionella. None were found in the homes with gas water heaters.

Regardless of which type of water heater you have, it needs to be drained and fully cleaned (not just flushed out) once a year.

Buying a vacant home?

Foreclosure and other vacant homes are perfect breeding grounds for Legionella. Since the plumbing system hasn’t been used, the water in the heater has been stagnant and, most likely, not hot enough to prevent the bacteria’s reproduction. The same holds true for the pipes in the system.

NSF International, a product testing, inspection and certification organization in Michigan, recommends that vacant home buyers flush the plumbing system with “superheated” water. In fact, they recommend that all homeowners perform this flush once a month.

Set the water heater thermostat to its hottest setting.
Turn on the water at each tap and allow them to run for 30 minutes. “If your water heater doesn’t have the capacity to flush all taps simultaneously (most home water heaters don’t), flush one or two taps at a time for 15 minutes, beginning with those closest to the water heater and ending with the farthest taps,” the experts at NSF recommend.
Run the dishwasher and washing machine at their hottest settings.

Don’t forget to lower the temperature after the flush’s conclusion. NSF cautions that “only nonsmokers in generally good health” perform the flush, that children and those with compromised immune system leave the house during the procedure and that the flow from each faucet should be regulated to avoid splashing.

3 reasons to think twice about looking at for-sale-by-owner homes

The housing market is moving at warp speed, with homes that are in decent condition and priced right flying off the market in a matter of days. When it will end, nobody knows.

One thing that is certain is that the percentage of homes on the market being sold by owner sits at around eight percent, nationwide. So, after being mortally wounded in the bidding wars, many buyers are tempted to pursue FSBOs – pronounced “fizzbo,” and short for for-sale-by-owner.

Sure, buying directly from the owner may seem attractive, at first glance. But, there are very real problems that commonly occur when the seller (and the buyer) isn’t represented by a real estate agent. Let’s take a look at three of them.

1. The paperwork

The 2015 National Association of Realtors’ Profile of Home Buyers and Sellers showed that “paperwork” is one of the most challenging aspects of selling a home without an agent. The FSBO’s first challenge is in knowing which forms are required. A Google search of “What forms do I need to sell my house” returns, in fact, 118,000,000 results.

The online discount brokers aren’t all that helpful when it comes to the proper forms, either. In fact, one of the largest offers only a purchase agreement. So, what happens when a FSBO buyer wants to amend that agreement with a demand for repairs? What form will the seller and buyer use and where will they get it?

The next challenge FSBOs claim they have with the paperwork is understanding it. Unless the seller is a lawyer or a real estate agent, or has a deep understanding of state law, this is perfectly understandable. These may look like “forms,” but each one is a legal document and, naturally, filled with legalese.

This lack of understanding leads many FSBOs to make assumptions about the documents’ meaning and about his or her responsibilities. Buying a home is a huge financial investment – be overly cautious about assumptions made by a legal and real estate novice when buying something as expensive as a home.

2. The money

During the FSBO purchase process, you’ll require the services of an attorney. It’s just far too dangerous to proceed without professional consultation. So, from the outset, buying a FSBO is going to cost you far more than were you working with a real estate agent – whose services don’t cost the buyer a dime – to buy a home.

Then, there are three additional seldom-considered financial pitfalls when dealing with a homeowner directly. The first is price. While coming up with a list price is easy, determining what buyers will actually pay for a home is a bit trickier and most homeowners haven’t a clue as to the true market value of their homes.

Even if the homeowner has decided to employ the services of an online discount broker or a for-sale-by-owner company, there’s no guarantee that he or she will have accurately priced the home for the market. In fact, since many of these companies aren’t helmed by real estate professionals, there’s a very real possibility that the homeowner received bad advice and that home you’re contemplating making an offer on is overpriced.

“There are a lot of variables that come into play when determining the list price of a home including local inventory, interest rates, average market price for comparable homes, appraisal value and the sellers’ personal and financial objectives,” Steve Udelson, President of Online Real Estate at Altisource (which oversees Owners.com and Hubzu) claims in an article he contributed to forbes.com.

Now, in all fairness, Udelson admits that he is not a real estate professional Yet, if his customers follow his advice, they may end up overpricing the home. And a homebuyer who lacks representation may just end up overpaying for it.

The truth is, the list price of a home should ideally match, or come close to, it’s current market value. This value has little to do with the asking price of currently listed homes, local inventory and interest rates, and nothing to do with the “ . . . sellers’ personal and financial objectives.”

It has everything to do with what a willing buyer will pay for the home. The proof of that amount of money is reflected only in recent sold prices of comparable homes.

That information, by the way, isn’t easy to come by without a real estate professional’s access to the Multiple Listing Service statistics. And, no, what you see on the big aggregator websites is not typically taken from the MLS and is rarely accurate.

So, how will you know that you aren’t overpaying for the home?

Then, there is the common assumption among homebuyers that, since the seller is saving money by not having to pay a real estate commission, he or she will pass some of that savings on to the buyer.

According to studies by the National Association of Realtors, the number one reason a homeowner decides to go it alone is to “save money.” Sharing the savings with the buyer rather defeats that purpose, don’t you agree? So, no, don’t count on getting a discount.

Which brings us to the third financial pitfall: closing costs. Do you know how to negotiate with the sellers to have them pay for all or part of your closing costs? Do you know the maximum amount your lender allows the seller to pay on your behalf? How will you word the purchase agreement to make the request?

3. The integrity

Nationwide, sellers have a duty to disclose the presence of lead-based paint in homes built before 1978. But there are other, state and locally mandated disclosures required of sellers as well. The most significant of these is the disclosure outlining any material defects concerning the property. The proviso to this disclosure is that the seller is only required to disclose items that are within his or her knowledge.

In the hands of an unscrupulous or ignorant seller, this may be seen as an opportunity to “fudge” on the details. Sellers represented by professional real estate agents, on the other hand, are warned that anything less than complete honesty is not in their best interests.

If it’s too late, and you’ve fallen in love with a FSBO home, take the following precautions:

Get everything in writing.
Do not sign anything until you’ve run it by your attorney.
Deposit your earnest money deposit with a neutral third party (ask your lender how to set this up) – never give it to the seller.
Never waive the home inspection and be willing to pay for additional inspections if conditions warrant.
Ensure that the seller actually owns the home and that no-one else has a claim to it by ordering a title report.

Protect yourself before looking at FSBOs by communicating with your real estate agent. He or she can approach the homeowners to determine if they are amenable to paying the agent’s commission. This way, you are represented and protected, and at no cost to you.

The down payment isn’t the whole enchilada – here’s how much cash you’ll need to buy a house

The real estate industry has done a bang-up job on letting consumers know they’ll need some cash when they purchase a home. Typically, it’s the down payment that’s mentioned. Seldom are closing costs brought up so they end up a major surprise for homebuyers.

Between the two of those huge chunks of money are other cash outlays you’ll need to consider.

Earnest Money Deposit

You found the home you want to buy and you and your agent structured the perfect purchase agreement. In it, you’ll find a section dealing with your earnest money deposit (EMD). Your agent will list the amount you are paying and where it will be held.

So, what is this? There are several functions of an earnest money deposit. First, it shows the seller that you are serious about pursuing the purchase. After all, he or she will be taking the home off the market. This “skin in the game” evens the playing field. The seller takes a gamble by removing the home from the market and you put your cash on the line with the possibility of losing it, under certain circumstances.

The amount of money used for your EMD varies according to several factors, including what type of market you’re in (in fast-moving markets, a larger-than-normal EMD may entice the seller to choose your offer).

Typically, it’s 1 to 2 percent of the offering price. In May of this year the median home price in the U.S. was $345,800, which would mean an earnest money deposit of between $3,458 and $6,916.

Down Payment

When the seller accepts your offer, your lender will request that you wire them your down payment funds.

Down payments are expressed as a percentage of the purchase price of the home. For example, using our national average home price, you will need $69,160 for a 20 percent down payment, $34,580 for a 10 percent down payment, $17,290 if you are required to come up with a 5 percent down payment and $12,103 for a 3.5 percent down payment.

Down payment percentages depend upon the loan you’ll be obtaining. Conventional loans generally require 20 percent down and the best choice if you hope to avoid paying a monthly private insurance premium.

Other loans, such as those through FHA or Fannie Mae, require significantly less for the down payment, while the VA and USDA require no money down.

Closing costs

This is the part of the process that catches far too many homebuyers by surprise. Closing costs are all the fees required of everyone who helps you purchase the home. From your real estate agent’s commission and appraiser’s fee to the title company’s research and issuance of a policy and, of course, the lender’s fees. These fees add up – fast – so it’s important to compare closing cost estimates from several lenders. It’s also important to understand which costs are negotiable.

It’s not unusual for closing costs to amount to 2 to 5 percent of the loan amount. Using our average home price mentioned above, with a 3.5 percent down payment, the loan amount will be about $333,697. Closing costs would be anywhere from $6,674 to $16,685. As you can see, closing costs, if not prepared to pay, can come as quite a shock to homebuyers.

3 Ways to reduce closing costs

1. You can reduce a portion of your closing costs by closing as late in the month as possible. Lenders charge interest in arrears, meaning that when you make a house payment, you are actually paying for last month’s interest (and the coming month’s principal). When you close escrow, the lender will have calculated how much interest you owe from the date your loan was funded to the end of the current month.

For example, if you close on your new home on August 15, you’ll pre-pay the interest due from August 15 until August 31. September’s interest isn’t due until October 1, when you will make your first house payment.

Reduce the pre-paid interest charge by closing at the end of the month.

2. You can eliminate the need to pay all or part of your closing costs by requesting that the seller contribute. The seller gets to write that amount off as a tax deduction and you get to skip the closing costs, so it’s beneficial to all parties.

3. Ask your lender if you can include the closing costs in your loan. Yes, there will be a charge for this but it won’t be nearly as large as the immediate outlay of cash necessary to pay closing costs.

Despite what many first-time homebuyers think, the down payment isn’t the whole ball of wax when it comes to cash outlays when you purchase a home. It’s important to determine exactly how much cash you’ll need to purchase a home so that you can budget for these expenses.

3 Low-Cost Tips to Increase your Home’s Curb Appeal

If you need to sell your current home before buying that adorable bungalow you’ve had your eye on, you have your work cut out for you.

Getting your house ready for the market requires work — cleaning, de-cluttering, repairs and maybe even paint.

Those are just the interior tasks; the exterior may need some attention as well. You’ve no doubt heard about curb appeal – you may even have some ideas on how you might go about adding some to your home to help it sell quicker and for top dollar.

The problem is that when one is not just selling a home but also purchasing another, money can be tight. Read on for three low-cost tips that you can use to boost your home’s curb appeal.

1. Lighting

Outdoor lighting gives a home more than curb appeal – it provides safety, ambiance and a dramatic but warm welcome. Experts at Better Homes and Gardens suggest that if you do nothing else outdoors, light the pathways and the trees.

When deciding where to place lights, don’t neglect the most important areas. These include:

Walkways
Steps
Patio/Porch
Driveway
Water features

While inexpensive solar lights that you just stick into the ground are fine, they don’t cast the amount of light that other fixtures do.

If it’s in your budget, consider LED lighting. The lights last for as long as 100,000 hours, according to the experts at Whitmer’s Lighting in Ohio. They also tolerate wicked weather better than other forms of lighting.

Whitmer’s also mentions three different types of lighting schemes.

Down-lighting – Giving the illusion of the moon shining on the landscape, this type of lighting is achieved by placing the lights overhead, such as in a tree, and facing downward.
Up-lighting – This style of lighting is more dramatic in that the lights are pointing directly at a feature in the landscape.
Cross-lighting — Whitmer’s claims this type of lighting is best for eliminating unwanted shadows. It involves placing lights both in front and in back of the element you want to highlight.

Most homebuyers will view your home during daylight hours, so snap some photos of the home’s well-lit evening look and leave them out where potential buyers can see them.

2. Use container plants

Even if you can’t afford to purchase mature shrubs and trees for the front yard, you can still add plants. Container plants can add just the pop you need, especially if you choose ornamental pots and use them to hold plants with colorful flowers or interesting foliage. Consider creating a vignette on the front porch or back deck or line the walkway or driveway with the potted plants.

To keep it interesting, vary the size and design of the pots as well as the design’s height. Use plant stands toward the back of the vignette to raise plants in shorter pots.

When planting, use the “Thriller, Filler, Spiller” concept of planting to create additional interest. This design technique calls for three different types of plants in one pot.

Thrillers are tall, striking plants, such as ornamental grasses or cannas. These are the stars of the container and are typically planted in the back or in the middle of it.
Fillers are the plants that you’ll stick around the thrillers. Rounded or mounded plants are ideal fillers. Consider petunias, coleus or dusty miller.
Spillers are the trailing plants you’ll want to put at the edges of the pot so that they can spill over the sides. Suitable spillers include bacopa and nasturtium.

3. Green up the Lawn

Improving your lawn is one of the least expensive curb appeal projects to tackle. Take care of dead patches by raking them and then adding seed or grass plugs to fill in the bare spots.

Apply weed and feed to get rid of the weeds and fertilize the turf. Keep the lawn well-watered and mow it to the mower’s highest setting during the marketing of the home.

If your lawn is in bad shape, consider installing sod before putting the house on the market. The average cost of sod installation, nationwide, is between $1,041 and $2,690, according to homeadvisor.com.

3 ways to avoid home catastrophes while you’re away on vacation

Call it the “Murphy’s Law of Home-Buying” if you will, but there’s a good chance that shortly after you move into your new home the water heater will die. It may trickle as it gives up the ghost or it may gush, but for some reason, these contraptions choose this time to self-destruct. We in the real estate industry see it a lot.

Then, there’s the “Murphy’s Law of Vacations.” Yes, we’re making these up, but they should be better known. This one says that “if anything can go wrong in your house while you’re on vacation, it will.”

Even the president of Quality Home Improvements, Inc., in Kingwood, Texas agrees. “If you’re going to have a leaking [main water] supply line, it’s going to happen while you’re away,” Fred Spaulding tells Popular Mechanic’s Brett Martin.

It’s summer vacation time, so let’s look at some ways to pay homage to Mr. Murphy’s key principle: always plan for worse-case scenarios.

Getting back to that water main

Sure, most water main breaks occur in winter, when frigid weather freezes pipes. But, “Hot, dry weather can also take a toll; ground shifts and the increased volume and pressure can also stress water mains” cautions the experts at the Cape Fear Public Utility Authority.

Mains constructed of iron are the most conducive to leaking, and most of these water mains were installed in homes built before 1980. Iron cracks, especially with temperature changes.

Extreme temperatures aren’t the only things that may cause a leak in the water main. Soil erosion around the main may cause it to leak or break. Corroded pipes and those that are older than 60 years fail frequently and intrusion from construction work or homeowners (such as striking the main with a shovel) can also damage the water main.

It only takes a small leak to wreak havoc on your home. A leaking water tank in the attic can ruin whatever is in the room under it quickly, even from a small leak. Then there’s that water heater.

Prevent water damage while you’re away by closing the main supply valve to the home. The location of the shut-off valve depends a great deal on the type of home you live in. It could be in the basement, garage or a number of other places. Ask your plumber if you’re unsure of how to find it, or “ . . . look for your water meter, it should be nearby,” advises the Family Handyman. Visit his site to learn how to turn off the valve.

Air conditioner: On or off?

Leave it on. Sure, it makes sense that you’ll save more money on your energy bill if you turn off the HVAC system before leaving town, but the money you save may eventually be spent to fix damage caused by the home overheating.

Air conditioning not only cools the air, but removes humidity from it as well. A hot home interior can cause condensation to form and that, in turn, can cause a rash of problems, according to the pros at Santa Fe Air Conditioning and Heating. These include warped wood floors, doors and furniture, peeling paint and mold. “For optimum comfort and for the health of your home, the humidity in your house should be no higher than 50%,” they say.

Set your programmable thermostat to 85 degrees for the duration of your vacation and to your favorite cooler temperature, set to kick in the day you are to return, or the evening before.

Manual thermostats, unfortunately, should also be turned up to 85 degrees while you’re away. Perhaps a neighbor can be talked into lowering the temperature before your homecoming so you don’t come home to an oven.

Vacays mean unplugging – in more ways than one

Ok, so maybe you don’t consider a high power bill catastrophic, but some of us do – especially when we weren’t home to get the benefit of the power usage. So, if you’re among us, it’s time to unplug.

Still have a cable box for the TV? According to Mother Jones’ Kiera Butler, “The EPA estimates that your box setups use about 500 kilowatt-hours per year, as much electricity as your fridge.” While you may not be leaving town for a year (lucky you if you are), you should still unplug it before your vacation. No word, however, on how much power your Roku stick uses.

Don’t just put your computer to sleep while you’re gone. Unplug it completely. Monitor, router and modem too.

The bigger your TV is, the more power it gobbles, according to Butler. “Flat-screen TVs use about twice as much power as their smaller cathode-ray counterparts,” she claims.

Unplug game consoles, DVD and Blu-ray players as well. Hopefully you have all of your electronics on surge protector power strips so one switch will kill the power to all of them. If you won’t be taking your phone charger with you, unplug it. Do the same with small kitchen appliances, such as the microwave oven, coffee maker, food processor,

If your washer and dryer have digital displays, consider unplugging them as well.

Don’t forget the security measures you’ll need to take before you leave as well. Safewise offers a handy guide on its website.

Then, when all the preparations are complete, you’ll need a vacation from your vacation preparation!

Psst: Millennials, come on out – it’s time to buy a home

Quick! What’s the number one reason that so many millennials aren’t getting into the housing market? No-brainer, right? It’s all about that stubborn student loan debt they racked up.

In fact, a recent study by the Federal Reserve claims that the 12 million millennials in their 30s with student loan debt, owe more than those in their 20s. The average student loan balance for the former sits at slightly more than $34,000 and most of you are, or were, grad students, according to U.S. News and World Report.

Your debt and your income and why they matter

The most common reason a borrower is turned down for a mortgage is because he or she has what is known as an unacceptable “debt-to-income” (DTI) ratio. And, millennials are the largest group of would-be homebuyers who walk away from a pre-approval session with a big, fat, rejection.

Lenders naturally want to know that lending you the money to buy a home doesn’t expose them to risk. While there are many types of tests and statistics to help them figure this out, the DTI is the granddaddy of them all.

After you drop off your tax returns, pay stubs, bank statements and all the other documents the underwriter wants to see, he or she will determine your DTI two ways, a so-called front-end and a back-end DTI.

The latter involves dividing the amount you pay for total recurring debt every month by your gross monthly income. To get a mortgage in the past, this figure would typically need to be no higher than 36 percent. We say “typically” because Fannie Mae would consider a DTI of 45 percent under certain circumstances (high credit scores and reserves, for instance).

To determine the front-end DTI ratio, which represents the percentage of your income you will have to put toward housing expenses, the lender will determine the total amount of your expected housing expenses and divide it by your gross monthly (before-tax) income. Hopefully, the result will be no more than 28 percent.

But wait – that’s about to change

So, you used Fannie Mae’s online calculator and figured out that your DTI is 50 percent. Does that mean you should kiss your home-ownership dreams aloha? Nope. Not any longer.

In early June of 2017, Fannie Mae announced that it will now accept a backend DTI of up to 50 percent for loan applications submitted, after July 29 of this year, through its new version of Desktop Underwriter (DU).

Not to get all technical on you, but DU is a software program that uses algorithms to weigh a loan applicant’s risk factors. Some borrower files aren’t DU eligible (for any number of reasons) but many are. Hopefully, you are among the latter because if you require manual underwriting you will fall into that dratted “don’t-lend-money-to-anyone-with-a-DTI-higher-than-36-percent” pile.

Why the change? Are they crazy?

Remember the housing market crash? Of course you do. In its aftermath, an interesting study was published that found that while most borrowers who defaulted on their loans because they were underwater on them and couldn’t make the payments, a small percentage of underwater borrowers – 35 percent, according to a September 2010 University of Chicago Booth School of Business study — simply “walked away” from their homes and their mortgages. These people became known as “strategic defaults,” and further study of them produced surprising results.

Strategic defaulters tended to have high credit scores, didn’t use credit often and when they did, their balances were lower than the other group of underwater borrowers and they rarely exceeded their credit limits. In other words, these folks were the quintessential ideal credit risk.

Fast forward to 2017 and a new Fannie Mae study finds that borrowers with a 50 percent DTI are much better credit risks than previously assumed. The study looked at more than 15 years of statistics and data from borrowers with back-end DTI ratios between 45 and 50 percent. Many of them had decent credit scores and the default rate was quite acceptable.

Steve Holden, Fannie Mae’s VP of single-family analytics said that they were seeing a lot of other factors, aside from a borrower’s DTI ratio, in the data that make this group of borrowers more attractive. These included the borrowers with hefty cash reserves (at least 12 months or more) or a willingness and ability to come in with a higher down payment. And many of these borrowers are millennials, just like you.

So, if you’ve been sitting at the home-buying station, feeling derailed by student loan debt and a less-than-ideal debt-to-income ratio, it’s time to buy your ticket and catch the train before interest rates become the next culprit that keeps you out of your dream home.

Building a home? Go green and ensure its future value

In all the excitement of choosing your lot, your appliance package and all the other extras that go into buying a new home, something important may fall through the cracks: your new home’s future resale value. Sure, it seems a bit early to be thinking of selling when you haven’t even moved into the home, but you should be thinking about just that.

Someday you will sell this home. If you think about that now, as you’re customizing it to your specifications, you may just be able to protect its market value. Let’s take a look at ways to incorporate “green” features into your new-construction home – features that buyers clamor after.

What the future has in store

Now, you don’t need a crystal ball to foretell what buyers of the future are going to be looking for as they shop for homes. New home builders come out with an annual list of in-demand features and, year after year, some of the same items appear on that list. But, we have a secret we’d like to share.

Green homes are the wave of the future. Connected homes are too. Combine aspects of both of these trends into your new home customization, and you will have one popular listing when it goes on the market in the future. Imagine your home, with energy-efficient features or total-home connectivity listed for sale next door to a home that lacks these features.

The home’s location matters

Your green choices start – where else – at the beginning. The location of the home within the new home community can actually boost the future value of the home. You’ll want to choose a lot that will allow your home to be oriented so that it takes full advantage of the sun.

“Design the home so that frequently used rooms, such as the kitchen and living room, are on the southern side,” suggests Nick Gromicko and Ben Gromicko, of the International Association of Home Inspectors (InterNACHI). This allows the home’s occupants to enjoy the warmth of the sun in the winter.

Situate your patio or deck on the south side of the home as well. Then, have your builder put those rooms you don’t spend a lot of time in, such as the laundry room and garage, on the north side of the house, “where they will act as buffers against cold winter winds,” according to the Gromickos.

When it’s time to sell the home, even this rarely considered technique, and that fact that it helps lower energy bills, can be used to powerfully market your home.

Keep the bad stuff out and the good stuff in

Stop leaks and drafts with the appropriate insulation in your new home. Air sneaks into the home in a variety of ways — in the attic, from the duct register, around recessed light fixtures and around the plumbing vent stack.

All of this leakiness wastes energy, thus increasing costs to the homeowner. Sealing the home with the right quality and amount of insulation can stop this.

Old-style insulation was made of fiberglass, which has been linked to respiratory problems. A safer form of insulation, made from green materials, includes cellulose.

Typically manufactured from recycled newspaper, cellulose has the same benefits of fiberglass without the health problems. It’s also tougher than fiberglass, according to Michael Freeze of Popular Mechanics. Best of all? It’s inexpensive.

Heating and cooling

ENERGY STAR qualified HVAC systems can save homeowners more than $115 dollars a year on their energy bills. This is an expensive undertaking, however, in an older home with less-than-efficient insulation. The leaks will need to be sealed before installing a new system.

The beauty of buying a new home, however, is that you can insist on an energy-efficient system as the home is being built – and insist that it is installed according to EPA standards or it may end up costing you instead of saving you money.

Appliances

ENERGY STAR-rated appliances made the top of the “Most Wanted” list compiled by the National Association of Homebuilders (NAHB). A whopping 94 percent of homebuyers chose this category as essential when shopping for new homes.

ENERGY STAR is a program from the U.S. Environmental Protection Agency (EPA) that promotes the adoption of energy efficient products, services and practices. To earn the ENERGY STAR certificate a product must be tested by a third party in an EPA-recognized lab.

Stock your home with energy-efficient appliances to ensure that it’s the belle of the neighborhood real estate market when you decide to sell it in the future. Not only will you increase the home’s value, but you’ll save money in the meantime.

“ENERGY STAR-qualified clothes washers and refrigerators are about 20 percent more energy efficient than standard models, and ENERGY STAR-qualified dishwashers only use about 5.8 gallons of water per cycle or less—older dishwashers purchased before 1994 use more than 10 gallons of water per cycle” claims the United States Department of Energy.

Windows

Remember the NAHB’s “Most Wanted” list? ENERGY STAR certified windows proved to be essential to 89 percent of new home buyers. These windows lower energy bills by an average 12 percent, nationwide, according to the EPA.

In dollars and cents, this translates to a savings of between $125 and $379, on average, for a typical home, according to EnergyStar.gov.

Baby, it’s hot outside: 5 ways to keep your home cool and save big bucks this summer

The weather folks are saying that residents of the eastern U.S. can look forward to warmer-than-average early-summer temperatures, while those in the west will have “well-above average” temperatures come mid-to-late season.

Don’t even get us started with summer weather in our nation’s southwest. Suffice it to say that there, the sun is white-hot and even the sky is sweaty.

Summer brings flip-flops, tank tops, shorts, swimsuits, picnics, camping and sky-high power bills.

Learn how to handle the heat with these tips for keeping cool indoors without breaking the bank.

1. Turn it off when you’re not home

Sounds like one of those “duh” statements, right? The Energy Information Administration, however, finds that fewer than 4 percent of us turn off our central air conditioning when nobody will be home.

Air conditioning systems reach peak efficiency when they operate for long periods, according to the experts at Lawrence Berkeley National Laboratory. Shutting off the system when you leave in the morning and then turning it on when you return home “ . . . will use less electricity than the unit would use cycling on and off for short periods to maintain the set temperature” while you’re away.

If the house remains unbearably hot while the unit is working to get to a comfortable temperature, they suggest investing in a programmable thermostat. This way you can set it to start the a/c before you get home.

2. Circulate the air

Fans don’t necessarily cool the air, they circulate it. As the air moves over your skin, it lowers your body temperature, sometimes by as much as 6 or 7 degrees Fahrenheit, according to the folks at Climatic Heating and Cooling in Virginia.

Saving energy (and money) by using ceiling fans involves setting the air conditioner’s thermostat to a higher temperature while the fans are in use and turning off the fans when nobody is in the room, according to Kristi Brodd of Advanced Energy.

The longer you use the ceiling fan with the A/C thermostat raised, the more you’ll save. The fan will cost you about a nickel every 12 hours, according to New York Times’ Michael Tortorello. The higher thermostat setting will save you about 10 percent (for each degree you raise it) on your cooling costs.

3. Maintain the a/c system

Even the most energy-efficient air conditioning system won’t lower your cooling costs if it’s not maintained routinely and properly.

A dirty filter, for instance, can cause reduced air flow and the unit will need to work harder to cool the home. The more inefficient the system is, the more power it requires which leads to skyrocketing power bills. According to the U.S. Department of Energy, a clogged filter causes the a/c system to use from 5 to 15 percent more energy.

Other routine maintenance you should perform includes:

Ensure sufficient airflow around the unit’s condenser by cutting back shrubs and other foliage to at least 2 feet.
A dirty condenser coil can increase the cost of cooling your home by 35 percent, so ensure that it remains clean. If you aren’t sure which part of the unit holds the condenser, check out this nifty diagram at yourdallashandyman.com. And to learn how to clean the coil, watch this YouTube video from the Entergy Corporation.

Clean the floor registers periodically so that they remain dust-free.

4. They’re called “window coverings” for a reason

An easy way to keep the heat out during a hot summer day is to keep the window coverings drawn over the windows.

The Department of Energy suggests purchasing reflective blinds, because “ . . . when completely closed and lowered on a sunny window, highly reflective blinds can reduce heat gain by around 45 percent.”

Drapery can block the sun and heat, provided the fabric is closed weave and medium-colored. Buy them with plastic backing and you’ll reduce the amount of heat coming through a window by 33 percent, according to the DOE. They also suggest that you hang your drapes as close to the windows as possible and let them fall onto either the windowsill or the floor.

Reflective films on the glass in your windows are also a brilliant way of blocking summer heat but their effectiveness depends on the size of the window, which direction it’s facing and whether or not the window has interior insulation. The DOE suggests that you will get the most savings by applying the film to west- and east-facing windows.

5. Let Mother Nature lend a helping hand

Strategically placed trees help conserve energy and reduces energy bills, according to the Arbor Day Foundation. In fact, you’ll save up to 35 percent on your air conditioning costs by planting large trees on the west, east and northwest sides of your home. The Foundation also suggests planting a shade tree over your air-conditioning unit to keep it cool as well (but don’t neglect cleaning up the leaves and other debris that may clog the condenser).

If a couple of mature trees aren’t in your budget, consider providing only 17 percent shade over the house. According to Beau Brodbeck of Auburn University and Jean-Philippe with the University of Tennessee, you’ll save $10 a month on your power bill. Add another 33 percent shade and you’ll save $20 a month.

Finally, the Department of Energy suggests that something as simple as a “ . . . trellis with a climbing vine can shade a home” and help save money.

So, go ahead — throw on a pair of shorts and a tank top and slip into those flip-flops because you’re ready to take on the summer heat.

6 reasons your competitors are beating you in the bidding wars

It’s Sunday evening and John and Mary Homeseller and Anita Deal, their real estate agent, are sitting at the dining room table, ready to confront a pile of purchase agreements. The Homesellers were smart to listen to Ms. Deal’s advice and decided to entertain all offers simultaneously, rather than have them trickle in, piecemeal.

It’s a hot market, and the Homeseller’s own an attractive home, priced right. One of these offers will win the day. Which one? And, why is your offer the one that didn’t? What does your competition have that you don’t?

They have loan preapproval

Even a suspicion that you may have trouble qualifying for a mortgage could cause the seller to eliminate your offer from consideration. Your competition took the time to prepare for the war by seeing a lender and going through the pre-approval process.

They may have even gone so far as to request a letter from the lender stating that they’ve completed the underwriting process and they’re ready to go, pending the home appraisal.

Benjamin Franklin was right. “By failing to prepare, you are preparing to fail.”

Their offer contains an escalation clause

Suppose Mr. and Mrs. Homeseller are asking $250,000 for their lovely home. Since your competition knows there will be multiple offers, their aim is to submit the cleanest, strongest offer possible.

So, their real estate agent, I.M. Best, writes the offer at full price with an escalation clause stating that Mr. Best’s client will pay $2,500 more than competing offers up to a specified maximum – an amount his client is comfortable paying.

In essence, this buyer’s offer will increase incrementally up to that maximum. Is this a smart move? There are two schools of thought — yes and no.

Those who think it’s a wise move say that the strategy shows that you are earnest in your desire to win the home. And, in fiery real estate markets, the strategy grabs most sellers’ attention.

The naysayers feel that buyers may get carried away and place the maximum bid higher than they can live with should they win the bidding war.

If you aren’t comfortable with an escalation clause, your agent can request that your offer be held in backup in case the accepted offer falls through. It happens frequently in multiple-offer situations. In their frenzy to win the battle, many buyers make irrational offers that they can’t fulfill.

Your offer has too many contingencies

Think about the scenario we painted at the beginning: Mr. & Mrs. Homeseller and their pile of offers. Unlike kids in a candy shop, they and their agent will scrutinize every line of every offer, down to the smallest detail. While we may not know exactly what their hot buttons are, we do know that they want top dollar. So, naturally, the offering price will be the first place in the contract they look.

After that, they will scrutinize the terms of each offer. How many contingencies is each buyer requesting and how long do they want to be able to take to fulfill them? Are there any deal-breaker contingencies, such as the buyer needing to sell his or her current home before consummating this deal?

Offers with too many demands and lengthy contingency periods will most likely end up at the bottom of the pile.

The competition that wins the home won’t ask the seller to buy him a home warranty, pay for closing costs or get nit-picky on the repairs he wants the seller to either make or pay for.

They have more cash than you

Cash is just as much, if not more so, “king” in real estate as it is in any other financial transaction. The all-cash buyer has an enormous advantage over buyers who need financing to buy the home.

If you can’t pay cash for the home, a larger down payment will be attractive to the seller as will proof that you have the funds to close the deal and the cash reserves to make up the shortfall if the appraisal is too low.

Some sellers are impressed with a large earnest money deposit and that strategy just might give you an advantage in a bidding war situation.

They did their homework

You most likely lost the bidding war because your competition outsmarted you. They hired the right real estate agent who painstakingly researched current market value in the neighborhoods so their clients knew exactly how high to bid and when to stop.

The agent took the time to speak with the listing agent to find out what the seller’s hot buttons are – what their motivation is for selling and what the buyer could do to help the seller reach his or her goals, and then structured the offer to purchase accordingly.

For instance, suppose the seller is hoping to be able to rent back the home for a month or two after closing while he closes on his new home. This is valuable information for the buyer to be privy to because her agent can structure the offer to allow the sellers to remain in the home after closing, as tenants. In particularly hot markets, some buyers even offer the seller a reduced rent during the rent-back period.

They’re faster than you

If you’ve missed out on any number of homes by not being among the first to view them, you understand that time is of the essence in a sellers’ real estate market. Sure, it’s challenging to create spaces, especially at the last minute, in a busy schedule to tour homes for sale, but it’s a must if you hope to be competitive in a multiple-offer situation.

Your competition has signed up on their agent’s website to be notified of new listings as soon as they hit the market. Their agents are on top of their game by vigilantly seeking listings that fit their clients’ criteria.

Like any battle, it’s incredibly hard to win a bidding war against an equally matched foe. Hone your tactics and strategy and enlist a battle-hardened real estate agent and the chances are good you’ll prevail.